transcript%20gea%20cmd%202014 tcm11 25493

Company Name: GEA Group

Company Ticker: G1A GR

Date: 2014-10-13

Event Description: Capital Markets Day

Market Cap: 6,244.36

Current PX: 32.439

YTD Change($): -2.161

YTD Change(%): -6.246

Bloomberg Estimates - EPS

Current Quarter: 0.550

Current Year: 1.776

Bloomberg Estimates - Sales


Current Year: 4532.550

of 39

Capital Markets Day

Company Participants• Unidentified Speaker• Robert Spurway, Managing Director, Global Operations• Donat Muller, Investor Relations• Jurg Oleas, Chief Executive Officer

Other Participants• Unidentified Participant

Presentation

Donat Muller, Investor RelationsGood afternoon. My name is Donat Muller, Investor Relations of GEA. Let me express a very warm welcome to all ofyou. It is probably the biggest crowd we've ever seen at the Capital Markets Day, probably all to the location.

Let me quickly mention again why we moved the event to today. You've probably understood when you saw the pressrelease a couple of hours ago. We said in July but probably if you tell to talk about business as usual without yetknowing what the savings from the reorganization, what amount to, what it all meant in terms of bottom line targets,which you'll hear more about today and decided to shift it to later point when we would have all that information.

Very big thank you to Bloomberg, who sort of agreed to host us here. I'm really stunned by the sort of technicalfacilities and capabilities of this set-up. So, thank you very much for having this event here today. As a matter ofhousekeeping, let me quickly address some points in the agenda. Our CEO, Jurg Oleas will give you for the first timean overview of the entire strategic transformation which in its last cornerstone led to the reorganization we areconceding at the moment.

And after that, we are very pleased to having accept to come here today. Robert Spurway, Senior Executive of Fonterrais going to give an account of their view of the development of dairy markets, which I know, I've had the discussionwith some of you, is of high interest to you and given some recent volatility in dairy or dairy powder prices, what doesit actually mean to our customer industries in terms of cap expense.

Now today, you have the chance to actually ask here questions to Robert directly, he has permitted questions at aboutquarter to four. After a coffee break, our CFO, Helmut Schmale will then explain in some more depth to the numberswhich have already been put out around noon today, given account of the possibility of the targets we put out and alsoexplain something on capital allocation priorities and M&A criteria.

Our CEO, Jurg Oleas will then summarize these sorts of key takeaway points for today and our board members will beavailable for chat after the event. Thank you very much.

We now start with an introductory film. (Video Playing) (4.50-5.30).

Jurg Oleas, Chief Executive Officer



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Yeah. Good afternoon, ladies and gentlemen. A warm welcome also from my side for this Capital Markets Day here inBloomberg. And we are very excited to present to you our fascinating company and from where we are taking GEA asof today into the future. I will go a little bit backwards to see from where are we coming, then I will explain to you thestrategic roadmap GEA 2020. I will explain you the ARTE framework as we call the four pillars of our new strategy.

And as a consequence of that, the new structure of GEA, the organizational structure, we are aiming to support and topull this ARTE strategy. Back in about 2012, we did ask ourselves in the second half of 2012, where we want toreposition GEA. I think it's very wise to reinvent in group's [ph] purpose every five to 10 years in order to be fit tomove and to not stay too much time on one track. So, in the Executive Board, we spent money in workshops in thesecond half of 2012, trying to identify where do we want to drive GEA into the future.

We think that then we derived the so-called about 14 strategic criteria's of new GEA must have so for new GEA all thebusinesses of the new GEA should have and on which businesses we want to align GEA for the future. With, havingmade that portfolio analysis as you already know, we then concluded that the majority of the so-called heat exchangerbusiness which we own, we still own it. Today it doesn't fit best-in-class this new GEA. Therefore mid of last year wedecided and we did announce that we will decide HX [ph] and as you know, we will close that transaction by end ofthis month.

Then at the same time, once we did this portfolio check, we also said okay and now what are the new core applicationsof GEA. We decided for several reasons, and I will explain that much more in detail in the next slides to focus GEAreally on the food business as much as we can and as much as it's reasonable. We also decided that we want to expandthe know-how of applications, end to end applications to serve our customers not only with machines and singletechnologies and solutions, but also full applications.

And last but not least, once we have decided that application strategy and we have released it end of last year inDecember, we then said and now it's the time to question-mark the current structure of GEA. We said to ourselves thatwe need to have a new structure where we can harvest much more definitive's [ph] in between the now core businessbecause we are not going to do any more major divestments. I would not exclude smaller divestments by majordivestments, so if the time has come then, that we say it's we are going to melt this existing core business so closelytogether that we can harvest efficiencies and at the end of course costs.

And to give us a new structure which prepares ourselves for the future and that's what I'm going to explain in the nexthour. Once again, if you look backwards about 11 years, this group from where it did come, we had, as some of youmay still remember we had chemical business, we had trading business, we had mining business, et cetera. Back inabout the year 2000 we then decided to separate ourselves from the smelter business, from the chemical business, fromstill some remaining trading business, boiler business et cetera. We, a bit later decided to step out from the plantengineering business, from the methanol business, the ethanol business, the large project business, et cetera. That wasalso, if the aim to de-risk the company, because we say that projects taking more than five, six, seven years in the futurewill becoming more and more risky.

We then had about nine divisions. As you see from the second part of this housing, we then decided with so-calledsome project taking opportunity of the recession coming after the Lehman collapse that we once again realigned theorganization into at that time five segments. We put a lot of Heat Exchanger business already at that time under theumbrella of the newly then formed segment Heat Exchanger, maybe already feeling in the stomach that let's isolate thatbusiness, let's have a separate very close look at it, because maybe in the future it should be part of the GEA. And wemade some acquisitions and as you know and this is on the right side, we then decided to really divest HX.

Now what are -- what way it goes [ph] guardrails to define the new strategy. As I said, we defined about 14 strategiccriteria's for a new GEA back at the end of 2012. So one guardrail was that we wanted or that we want to be a leader intechnology that we want to have leading position in high-end technologies and innovation.

And that does not only mean machine, it also means up to now very popular in the stage algorithm, software, intelligentmachines, intelligent process controlling and this type of things, because we said, we want to step out a bit from justbeing a pure excellent machine, machining company doing nice machines and technologies we want to have integrated



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

solutions, innovative solutions in order to have a decent market share and preferably to be driving the market by havingthe leading market share.

We also said that we want to be in attractive niche markets where we can be, where we have the opportunity to be thenumber one in the world. And we scanned a lot of markets that we did see that for example in oil and gas, in marine, inpower, in many, many other in infrastructure, construction, et cetera, we cannot be or it would be unwise to believe thatone day we will become number one. But we did realize that we have good ingredients to be the number one or two inthe food processing industry. There is a large company as you now besides us Tetra, but besides Tetra and at least on astock listed companies GEA already is today the largest company delivering solutions and machines for the foodprocessing industry.

So we looked much more in depth into this food processing industry and we realized that that is very muchinnovation-driven, that there is very short cycles were innovations are going only in the food processing industry andwe detective that as a very positive thing for GEA.

We also wanted to be in a business or position GEA into an area where cyclicality large cycles are not playing thatmuch overall. As you know, there is the power market, et cetera, with sometimes has huge cycles going between peaksand peaks 200% and take you maybe six, seven years. And we analyzed the food industry, the part where we cancontribute something, we did see that there -- yes, there are of course cycles, but they're much smaller, much morepredictable and there are many small cycles between olive oil, yogurt, milk powder, wine, brewery, et cetera, which arecounter balancing each other. So that gave us the impression that something very positive for GEA.

Then we also said and there we still have some weaknesses. I'm going to talk about that later. To be a real globalleader, we still are very Eurocentric and have a good position in some parts of the United States and in China, but restof world we are still running behind what we want to be and we're going to address this. We also said in our strategiccriteria's back in 2012 that we want to be in a business where service business, the aftermarket, plays a dominant rolefrom a quality point of view, from delivery standards, et cetera, and we also realize that the food business as it is a quitea delicate complex business offers quite a high level of service opportunities.

And then of course as I just mentioned, we looked at the portfolio. We scored all our business more than 30 or 35businesses we were in with these criteria's much more in detailed as I just explained, so what is the position of foodindustry, what are the cycles, what are the type of customers, et cetera, et cetera in that business. Let me come also tothe customers that also gave the food industry quite a high score, because we did see it's a difference where you have asa customer (inaudible) or similar companies or you have as customers Nestle or for example Fonterra or these type ofcustomers. There are different customer industries and we said, we would like much more to be suppliers for this partof the customers and not so much for other part of customers.

We then were aware that once we will execute the strategy one day, we will need a new structure for GEA that we willneed a different operational model in order that it make sense to have milking equipments, spray dryers, pumps andvalves, separators, et cetera, in the same unit. And we were aware, but we said we will address that once we havefinished our strategy.

A very important role did play, the generation of cash flow. We said to yourself that wherever we want to position thenew GEA, it should be an area where GEA is able to generate cash flow, means decent margins, low CapEx, lower thanaverage working capital and that's in combination as you all know generates strong cash flows. Because we said thatwe want to be independent, we want to grow, we want to finance our growth from our own operational cash flow,therefore, we need this cash flow and we -- as you already know one and a half years ago, two years ago, we alreadyhave one of the first measures, we established so-called cash flow drivers, which is part of -- large part of the bonussystem of the incentives of our top 200 or 300 managers.

We also wanted to have a good balance between cash flow and risk. As I mentioned, we looked carefully at largerprojects and we said to ourselves that we want to slowly, slowly step out from larger projects, because we felt, andunfortunately I must say, we were right. Already two years ago that the world is going to become much moreunpredictable as it used to be.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Nobody -- two years ago or two and a half years ago, nobody would have thought about the crisis in North Africa andMiddle East so-called Arab Spring. Then a very critical situation we have faced now all in a sudden between Ukrainianand Russia, now we have (inaudible) things which nobody knows what's going to end up finally, et cetera. So almostevery half a year we have now a new global crisis. And we said, we cannot avoid this crisis, but one important thing forGEA is to de-risk the profile of GEA, means to have exposure of maximum one and a half years, because one year, oneand a half years is more or less predictable in this times compared to projects we had in the past in the businesses wewere with three, four years where things are really difficult to predict.

So in a nutshell, this let's do the conclusion which you'll see on this chart here on the left side, we decided that we wantto be in the customer industry where quality, precision, hygiene, even up to a degree of aseptic standards play a vitalrole, flavors, et cetera, for our customers, you see on this picture, some examples.

But we also, as I just mentioned, we said we want to be substantially go down with the risk exposure of larger, morecomplex projects. We did decide at that time not to take any more turnkey project risks or we are not involved in sealed[ph] structures, in infrastructure for the customers et cetera. Because we are also telling to the customers, that's not ourcore competence. Our core competence is to supply a spray dryer or a pump and the valve, bring them together tosupply automation control, intelligence system behind them in order to process the food, but it's not our core businessto do cement buildings, concrete buildings, et cetera. So that was the vital saying that I'm very happy that we did -- thatwe recognize that about two years ago, because in the volatile uncertain world we are today, I'm happy that backboneof our business is EUR50,000 here, EUR100,000 there, duration may be two, three months, then things are verypredictable, we could react very fast.

For example, when the Greek crisis started two and a half years ago, we could react fast when Russia and Ukraine hasstarted to become hot topic, et cetera. Whereas if you are in large projects, you cannot just withdraw. If you have alarge project in Russia or Ukraine, you cannot just tell the customer listen I don't like this situation, I'll walk in our way.So by lowering the duration of our projects by limiting the scope, I think we are well positioned with GEA for highervolatilities. And what I just said, on the right side, you see that we try as much to focus on what we really consider ourcore competence is delivering applications, systems, technologies, components, machines, solutions, but not turnkeyconstruction things.

Now what do we like or why did this food industry when we made this kind of a scoring model, why did its scores arehigh? We understood that there are different drivers behind it. One driver is the ongoing urbanization of this world.Urbanization means rural people living on farms move for different reasons to the larger agglomerations to the citiesand starts to live there. So less and less rural people has to feed more and more urbanize people living in large cities.

And just to give you an example, if one would want and this is not from GEA sources, it's our officially availablesources. If one would try to feed the city of Shanghai, the conventional way just by harvesting potatoes and tomatoeson farms, you would need a surface as it's pointed out here, which is the upper third part of Germany, just as anexample. And everybody, every child understands that this is impossible. So how to close to gap? There is one -- onlyone way is processing food, taking -- making the maximum of the content of food of the proteins, the vitamins and allthe things.

On the left side of this chart, you can also see that there is an expectation that the urbanization in emerging market isgoing to grow very, very fast. It's going to almost double until the year 2015. Urbanized people, they consume food indifferent ways, they consume convenience food. And convenience food is not just pizza, the frozen pizza, I learnedones from a gentleman from Nestle that he even calls the Espresso nice machine, you may use in the morning asconvenience food. Because he said in the old times you had to mill your coffee then to brew it, et cetera, now you justput this nice tap in it and you have it, that's what they call convenience food. So the more urbanize people, the moredemand is for processed food.

So that was one of the key elements, why we said the food industry for our future gets a high scoring. Then we foundout that there is a second element into this, and when you have good times household -- every household, they spentfood for their babies, for the pet, for the cars, for the computers, for holidays, et cetera. But when a recession comes orif father or mother gets unemployed, then people start to save. And we have investigated and seen that in most cases



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

where they start to save is on holidays, on computers, on cars, but not on food and especially not on baby food.

So we learned from our customers. And they have told -- shown us this with many statistics that the last thing where ahousehold saves, if they have to save, is the baby food. And funny enough to second last is the pet food, and all the restcomes. That's by the way why money of our big customers like Mars or Nestle, they have a big branch of pet food andbaby food, because -- just because of this chart here.

What we also like about the food industry is that it's quite amazing how the branded food suppliers like the Mars(inaudible) et cetera, that they try to sell and to deliver one quality per brand around the world irregardless how thechocolate is being harvested or coffee, it should have always the same flavor.

And if you -- some of you who are in my age, you remember that 30 years ago if you ate a Mars chocolate bar, it stilltastes the same thing if you buy today. It's always the same. And customers would be shocked if they go and a Marschocolate bar and all in sudden it tastes differently, dry or more wet or I don't know what, more crispy, et cetera. Sothese customers they have to make sure that irregardless where they produce, what type of chocolate they get fromSouth America or from Africa, the output has to be constantly the same. Because if they don't do that, they risk thevalue of their brand.

And having said that, we also look -- what happens if for example just taking here a separator who -- which thismachine can separate either wastewater in the marine industry, et cetera, from engine cooling, et cetera. If it fails, in theworst case, the ship has to stand still and has to wait for replacement. If such as a separator in the milk industry failswhen it produces milk ingredients for yogurt or a milk drink, yogurt drink, whatever, you know what happens then. Ifsomething goes wrong then, if some bacterias come in, if the content is not as predicted, there's a chain reaction on that.And that chain reaction even leads that -- our customers face the risk that their brand value goes down.

So here you have two separators. One separator works, for example, in a cargo and it breaks down, and no one in theworld notices this, nobody reads this in the newspapers. It's just the carrier who may suffer and may lose couple ofhundred thousand dollars because of the downtime.

If the same separator in the food industry fails or doesn't work properly, then you have this world here, and we knowthis world, big headlines, even if people are not killed, the headlines are incredible. And this then has tremendouspressure on the brand value for our customers, their share -- even has reaction on the share price. As you can see shareprice in McDonald's if there was rumor that something was in their food which shouldn't be there. So that's quite adifference between the food industry and other industries.

And we have investigated this a lot. And we learned that it has much to do because the humans they swallow the food,so it goes into their body. That's why people are very paranoid when it comes about quality of food. We had the horsemeat scandal in Germany two years ago, nobody died. It not bad the horse meat, but people just got paranoid. AndNestle and many others, they have to drop millions of pizzas, millions of ready (inaudible) et cetera. What this means isfor us and this is interesting part for GEA is that precision, quality means incredibly lot for our customer. And we saidthat's where we want to be a supplier, and that's much more interesting business than many other industries.

We carried out just in summer this year a worldwide customer survey also in order to align our strategy and the newstructure, we decided to get input directly from our customers. So we did ask about 3,400 customers many, manyquestions, a lot of interesting information came out, and we'll use that in our new structure and so called Fit for 2020.

But one thing to the point I just made was quite exciting. When the customers were asked one of the many questionswas what are the top three criteria's for you to decide to buy from GEA or from somebody else, or to buy in thisindustry. What -- and these are mainly the food customers. You can see that about 70% scored machine quality andperformance and price only came way behind as the number two. And that has to do with what I just said, if you buy aseparator, that one separator, I showed you as an example, the previous example may cause 400, 500,000. That's for abig customer not a big investment. But if to separate phase, yes, the major issues and he doesn't want to take the risk.So he said I want to have excellent technology in my aseptic food business or hygienic food business or the flavorbusiness or What so ever and then many other criteria's follow there.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

But you can see that there is huge difference between the other criteria's, the other eight or nine criteria's and thetechnology. So we then laid out the vision for GEA 2020 and we said that we want to become GEA's number onepreference for our customers in the food industry, in the sophisticated process industry not any type of food industry,we are not in the agricultural, in the harvesting food or milling grain, sampling grain packaging or rice business justwondered quality and standards play a high role.

There we want to be the number one. And let me take you through this so-called art framework. That is easy toremember art. It's a nice name but behind art is the future of GEA. A stands for applications. Application means that wewant to know how for our customer in the core applications.

I am going to explain them in a minute from end to end. That doesn't mean that we're going to always sell to thecustomer the whole end to end know how. Many customers have different preferences, they want to have this part ofthe process here. They want to do themselves, et cetera but in many, many customers interviews, the customers theydid tell that for them it would be very nice to have a partner likely here who is able to speak end to end.

Even though they only made by part of it but who understands how from a cow you make a nice soft cheese. You maynot buy the milking equipment or the cheese slicing machine but he wants to sit together with a partner who can tellhim if you have this type of milk, if you treat it this different way you can have different types of cheese or differentflavor consistency et cetera.

That stands for applications. So we want to have this application know how and we then decided by December last yearwhich are our core applications.

This is what I just said as an example here coming from a cow to an ice cream with several steps in between and I thinkin many applications we have already the end to end know how. In some applications we don't have. There are whitespaces in between and that's what we are going to do, we are going to fill step by step those white spots in between, inthose applications where the customers they tell us it would be very nice if you are a partner who can speak from end toend. Our core applications, as I said, there are many, many process in the food industry that we are going to concentrateon those.

We consider ourselves to be one of the leading companies in the dairy industry may be the leading, you never knowexactly but at least a number one or number two and we said our strategy is to defend that position, we are already verystrong. Also in the applications, in the end know how.

In many sub applications in the dairy industry, baby food et cetera. So we want to grow and sell the strong position wehave to we want to grow and become a leading company in the liquids processing means that means peas, orange juice,apple juice, et cetera. Always when it is on the esthetics side.

So we are not in the liquid industry like Coca-Cola, Pepsi-Cola or just heavy on water et cetera where quality, wherehygiene, where bacterias play role, that's where GEA wants to be, fresh orange juice, fresh tea, fresh apple juice, etcetera. Rather new area we are already in some areas in his personal care it's not food industry but we see that veryclose to the food industry.

As you can imagine, many processes of the personal care industry has similarities to the food industry, also thereconsistency of ingredients et cetera play a dominant role.

So we see that as strong room for improvement here. We have decided that that's going to be also one of our coreapplications. Then we are already in animal proteins that means fish, meat and poultry, treatment of those ingredientsbut we want to expand it and be a leading company in animal proteins because that has a lot to do with organization.

The more you have to feed the people in the large cities, the more you have to make sure that the last protein is gettingout from the food because that's important thing to consume for humans. We have a good position in edible oil sincestar and sugar will harness and starts sugar, but we want to become a much stronger.

We want to become the number one company when it comes to application of any kind of edible oil be it olive oil,palm oil, soya oil, et cetera. Then we want to enter. Then we have decided and evaluated stores applications, the



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

confectionery food industry not all the approaching what cookies and soaps especially we did see pizza offers manysimilarities to the other business.

A lot of the cheese, gear machines produced go to the pizza.

Pizza is a character of convenience food and growth rates for pizza and several areas of the world are quire tremendous.Then we want to increase our application know-how in general packaging and in strengthen our competence therethrough acquisitions. And last but not least we want to we consider ourselves already has a good partner for ourcustomers. But we want to invest and to strength much more processed total control of food plant.

I have been told personally by food customers in the meat business, in the (inaudible) et cetera, that one of the biggestrisks in their plants is human beings especially if you have Meat Processing, so any human going in there is a potentialrisk because he might take in bacteria, et cetera. So the more you can manage those plants, fully automate the less riskyou have. Of course you need

less humans and that's quite an exciting business to have automation of this food processing lines.

So here you have the core applications and I would like to give you an example what we mean behind that stat, forexample, the application cheese and as you may have read we acquired last week, the Klokslag , the Dutch companydoing about 30 million sales last year in very specialized cheese making technologies.

So, as you know we are in the milk equipment we are strong milk intake pumps and valves, storage of milk. Coolingthe milk, GEA has a lot of technologies standardizations from separation et cetera, preparing the meal, separatingbacteria, etcetera, pasteurizing the milk, closing units, et cetera. But then so far we did have some white spots and thenext four boxes what so called white spot and then towards the end of the whole process once again we have slicingmachines for any type of packaging machines for our customers.

So we targeted companies who can fill this gap and we found in Klokslag, one of the leading companies having thosetechnology where we already work in the past as partners together to offer this full line and as I just said we may notalways sell this full package from end to end but the customers obviously appreciate very much if they have a speakingpartner who can talk about how to separate the milk, how much fat, how much liquid should be in, how soon we shouldmake the slices, how should we package, is it more efficient to pack 12 or 15 slices, et cetera.

So here is the GEA, the partner and with this acquisition we're going to fill at least this is three so far missingtechnologies.

Yeah, this is what I just said. The Klokslag is for us ideal partner. They have longstanding experience in this. Theyhave good technologies and we know each other very well. So the risk that the integration and such things would notwork as much lower. If you have working already with this company. And as it is often with the case with the smallerapplications is so-called both on acquisitions. They do not have the full power as GEA has to conquer the whole world.Here you have the Dutch company being very strong in Dutch and in Western Europe, but having no footprint in theU.S. and Latin America, where the cheese market is also very strong and you have there a lot of cheese makers. Sotogether with GEA, we usually help this company to expand much faster globally.

Sometimes I'm asked, why only 75% or 80% food content in the GEA machines, and this has to do with the dualapplications, by new [ph] machines to have the dual applications, you can use them in the milk industry, you can usethem in the oil and gas industry and the power industry. And it would be foolish from ourselves to say yes, we havebeen separated for the marine industry, but we don't sell into the marine industry, of course, we sell it to the marineindustry. The difference is that we will not make acquisitions with a very specific marine technology target or oil andgas or power. The acquisitions, which we're going to do in the future or innovations which we're going to do have tocome from the food industry, if there is a dual application, we of course will use that.

I'm going back to the ARTE strategy. The ARTE stands for regions and here we said we want to much more penetratethe world, especially in emerging markets. We want to expand and improve the local presence and we wanted toco-ordinate GEA in the regions, in the countries. And why are those regions so important. Once again here a publiclyavailable source, which says us about 60, I think 65 stock listed local brands. So now we're not talking about the big



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Nestle's (inaudible) et cetera of this world, we're talking about the local brands. So all-stock listed, which have aboutmore than 1 billion sales. They total more than 200 billion sales already in the food industry.

When we talk about the food industry, very often we just think on Mars, on Ferrero and (inaudible) et cetera. But hereis a totally different world and they are growing very fast. If you look on the upper right side, they have been growingin the last three, four years with more than 10%. They have been growing faster than the Mondelez or Unilever of thisworld. And actually it's a challenge for some of those global customers to how to match those local brands, which aregrowing very fast. And they have learnt from the large international conglomerates like Nestle and applying thisbranding thing, these marketing things to their local brands.

So you see from these top 200 not global ones, but once here it is not yet the customer of GEA. I have met recently abig one in Colombia, it's not stock listed. Remember those are only the stock listed ones and then there are many notstock listed ones. On top of that for example, a group in nutrasea, it's called in Colombia owned by familyentrepreneurs doing already more than 1 billion in Colombia, only in food processing industry and believe it or not, weare not yet doing business with that. So there is a huge potential for GEA, but we have to harvest this and that's why weare focusing so much on the ARTE for reaches as one of the ARTE letters.

Another view how you can look at this, if one would say Germany is a benchmark and the number of sales we docompared to the GDP of Germany and we just give that as a reference 100%, then you see that most of the emergingmarkets, we are low below that the penetration of GEA is way below that. I take an example, in Peru, which is a verystrong, very fast growing economy and a very special also in the food processing industry. Peru, we only sell about40% of the level compared to the GDP, as we do it in Germany. So you see that most of the emerging markets here aregreat, which means potential for GEA. We have to address it and we are going to do that.

We come into T4 technologies. Technology means and you have seen from the customer survey, how much customersappreciate technology. And we consider ourselves, we want to be modest, but we consider ourselves that we have goodtechnologies. Nice thing about technologies is that the food industry keeps changing. Statistics says that only in theU.S. every year, take it as an example 2012, 3,500 new process food applications comes to the supermarkets. All ofyour major member did the hype about the Greek you got in the U.S. that may disappear in one or two years and thenthere is another hype there is something different, in this price over such a hype, the Magnum ice cream, many, manyof those things, similar in Germany.

So this change in thing means that the customers are coming to us and asking for new applications doing thingsdifferent. Can you bit more fat, less fat more vitamins in the food et cetera, so that we can sell that let's having morevitamins or less fat for example, the hyper-fructose. Most of our customers are telling us is a tremendous business forthem. They can sell that obviously at the high premium. So that's why they like it so much. And did they come to usand say what kind of technologies do we have to make efficiently lactose to free dairy products et cetera.

But not only that, we also try to constantly innovate on our own trying to learn from the needs from the necessities,which our customers may have in the future and to try to develop from their new technology, new machine et cetera.As an example here, we have every year and innovation contest amongst the GEA development engineers and thisyear's winner was which I think it's a fantastic thing here. When it comes to drying juice, orange juice for example,when you do that by heating it up, that's the conventional way so far. You lose most of the good ingredients by boilingthe orange juice most of the good ingredients, the flavors, the aromas et cetera.

Our engineers have been able to develop process and they have patented that by freezing it and by making the orangejuice powder. You have it in the powder, you makes it in water and you have again fresh orange juice andmeasurements has shown that, it keeps about 80% of the flavor aroma molecules et cetera untouched. So it's a muchmore efficient way to produce powder or granulates of orange juice.

Why do customers produce granulates, because when they export that they do not want to export the liquid, they takethe fresh orange juice, they make granulates export to granulate and they mix it once again with that. So this type ofinnovations are done in-house, by trying to predict what might be the future needs of the customers. We have similarinnovations when it comes to catching the flavor molecules of aroma molecules from coffee et cetera, because that's



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

also always trade-off for our customers in the coffee industry, how much they lose in flavor and the aroma et cetera.

Spray Dryers. This shows Spray Dryer, which we installed for Fonterra, which is the largest running in the world, sofar. And just to give you a flavor that we are not talking here about peanuts. This Spray Dryer produces up to 700 tonsmilk powder per day and that you can imagine what that means the number of trucks is milk trucks arriving every day.So it needs about 300 trucks and I hope not wrong profit. Every day of milk input and I was told once that it needsabout 200,000 to 300,000 cows.

And if you think about 300 trucks loads of fresh milk coming to that plant, that's you can divide that by 24 hours and by60 minutes in incredible number. And it has to work, because if it doesn't work that Spray Dryer then you have an issuethere. Because the milk is being produced somewhere. So the milk has to be taken off.

So GEA is proud that we are always at the forefront when it comes to technology.

On the right side we have Functional Excellence, with that we mean efficiency of internal processes and complexity ofthe organization. And looking at this, that's our current organization, you know the four segments, these segmentsorganize bit in a different way. As a global enterprise you always need a matrix or every segment has soft matrixeswork in a different way, some by technology centers, by application centers, by business units, regional centersetcetera. But as you can imagine, this has some price which you have to pay for it, and thus we now have decided thusthis business which is remaining after the disposal of HX as our core business now we can merge them together, reallymerge them together because we are not going to dispose any of those basis.

Going back and looking at its ARTE footprint, how deteriorates last year when we decided to also go for a newstructure to fit of our current structure, the one I just showed you with the artist strategy. So here we said we want tohave ARTE should be the core pillars of the new GEA with strong backbone in the food industry and how does thisreflect on the current organization. When it comes to applications, the first letter, we are (inaudible) there with thecurrent organization because we do not have a fully reflected organization responsible for end-to-end applications. Wehave it here in pieces there in pieces in the different segments. So that's why we put it's a yellow.

Regions, we consider ourselves rather weak than strong so far as to current organization, because the fragmentedsegments and business units and sometimes even legal entities they have different approaches in the regions and in thecountry and sometimes we have even four different type of GEAs in the country. So that's why we give its red mark.

Technologies, as I just said a minute ago, we consider ourselves to be good in technologies and innovation. We have tocontinue to be that, but we give it here green that on technology side we are already doing fine. On FunctionalExcellence means cost of complexity, SG&A, administration overhead span of controls. We analyzed our currentstructure with what it should be or could be and we give it here at right corner and we said the old structure is not thebest one for this ARTE. So that's why we decided we need a new structure to support this ARTE strategy and whichhelps to push this ARTE strategy for GEA. And that's what we called in fit for 2020 the new structure.

Once again, on the left side, you have the current structure as the segmental, little more simplified here and thesesegments handling the regions in a different way. On the right side, as we announced on the C-day, already some weeksago, the new organization, which we are going to introduce as of Q2 next year, which has two business areas, onebusiness area worldwide responsible for equipment, one for solutions, and a global regional organization and a verystrong centralized Global Corporate Center so called GCC for all the overheads and all these things are going to belocated there. In order to reduce them and to synergize them and then worldwide shared service centers.

This is one level below, the foundation of the whole thing is ARTE, you see here and to do business area, equipmentand solutions, those are also going to be the two business area being reported to be outer world. So when we will comeout on Q2 2015 with the reports we'll report a business are equipment and a business area solution.

What are we going to do in the business area equipment? Well, the name say this, single machines, simple machines,competitive repetitive machines etcetera, whereas on the solutions business areas we're going to do the projectsend-to-end etcetera. And below that we have six regions divided GEA into six regions and below that's the globalcorporate center and the shared service center.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Now let me -- first of all, I come to the savings. We announced that we want to go for at least 100 million savings withthis new structure taking out costs of complexity. We want to have a good decent top-line growth. We want to haveeven lower CapEx level as we have today and we want to hopefully improve working capital. I think we have done, ourpeople have done a good job by taking it down from a level of about 16%, 17% compared to say as to what is todayabout 12%. We would like to take it further down.

The blocks identified for the savings are General Administration, G&A where we see a huge room for improvement forGEA. Due to the new structure by combining of bundling things, then operations includes manufacturing sites andengineering sites and that's sort of block sales and engineer. And on the right side, you know that already that we havetargeted ourselves that we want to save at least 100 million on costs or increase (inaudible) by 100 million and to saveat least 1,000 FTEs.

Now I have been observing often these type of cases in the past that when companies do such a change that theso-called savings, then all in a sudden start to evaporate in the ongoing business. So people say is the savings are there,but I had the currency issues, I have portfolio mix issues, et cetera and that's why I cannot show the saving. So we aredeveloping currently with the teams of very sophisticated process in order to make sure that the savings are really there.

And our mutual understanding with the design team leaders and the design teams of GEA will grow in the ongoingbusiness, if the top line will grow that will bring some operational leverage. So the more volume we'll have, the betterthe margin. That margin improvement is not going to be accredited for Fit for 2020 savings. The Fit for 2020 savingshave to come on top of that operational leverage.

If for whatever reason what we don't care with developed flat for economic environment reasons, et cetera, we want toslightly improve the margin on the ongoing business by just improving our process etcetera and to Fit for 2020 savingswill also come on top. If there would be a moderate decline of the GEA top line we are calibrating the system now thanthe way that then we still have to identify measures to keep the margin and on top again the 100 million savings fromFit for 2020. Of course what we don't talk and I don't believe that if there would be sever macroeconomic war inRussia, some say like that, then we have to handle these things differently.

So we have explained to our teams that we want to have clear responsibilities, who is responsible for how manyemployees FTEs and how many millions that we will have detailed milestone plans and we have detailed plans forFTEs and associated costs with the FTEs. We will not accept any deviations or excuses will not accept as I justmentioned product mix top line developments et cetera. We will deliver the 100 million in 2017 and we will identify allthe cost drivers or there have been identified, so down to the levels of traveling costs and all these things associatedwith the headcounts. The main driver of course is the reduction of headcounts and all the associated cost benefit.

The teams are in place, they are nominated, I don't know why there is a picture missing there, should not be missing. Sothese are all experienced clear leaders who have its -- you can also say it's a change in generation in average those newtop future, top managers of GEA are about 7 to 10 years younger than the existing ones, so they are also doing a changein generation here with the new GEA and therefore I'm very confident that they are very ambitious middle agedmanagers who want to prove that they can change GEA from the old structure to the new structure and by that, fulfillthe ARTE targets.

We have clear design rules for the teams, it means that, for example, they know depending whether their engineeringareas, finance, administration or manufacturing that they have to reduce the span of control or increase, sorry, the spanof control or to reduce the level of operational management levels by two. So we have given as an average to targets toall the units that you have to increase your span of control by two. And you have to reduce the level of managementbetween markets, means customers and executive board by two levels.

As I had just mentioned, we have allocated the targets to the different teams and it's going to be refined. We're currentlymaking a survey along GEA for every employee, who is doing, what is he doing, technical design; is he doing offermanagement, is he doing finance controlling whatsoever, to which percentage and then we are going to give to eachteam very detailed targets on where they have to save how much.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Then the teams when they come with their detailed designs they will have to of course meet the (inaudible) trials, wewant to have the application, focus on applications; we want to have to focus on regions and proof of efficiency when itcomes to complexity and all these things.

And last but not least, very important; they always have to prove us when they come with the detailed designs in thenext coming weeks that customer is first; customer is the most important thing for our future. That's why we made thecustomer survey in summer this year. We have the answers of 3,400 customers. What they like about GEA, what theydon't like about GEA, what they would like to have an improvement from GEA et cetera. So it's almost ideal that thedesign teams each for its parts gets its input.

Additional example; in the future we'll have one country manager per country. One person who represents all of GEAin his area, let's take an example, Brazil. So he will sell from milking equipment with his teams to, I don't know what,yogurt plants et cetera.

Now, we have from the Brazilian customers, we have from this survey a country document which says, in Brazilcustomers they don't like that, they like this very much. They prefer competition, competitors compared to GEA,because of this intact. They don't like so much the price of GEA or they like the innovation whatsoever. We're going togift the future country President of Brazil this document and say when you design your new GEA in your country thatis one of the (inaudible) it's not the only one, but is one of the (inaudible).

One is also that's why we also call it OneGEA is very important where have told this quite intensively our design teamleaders is that we want to have this OneGEA and they have used the example of Microsoft when you are used to usePowerPoint, Excel or Microsoft Word, wherever you are in the world, whatever office you are, you know if you have isa stick and you go to a computer and you have an Excel sheet, you can make it work and you can print it out, you canchange it whether you are in Taiwan or in Mexico or in Argentina, everybody has Microsoft work.

So, I said to my people the idea of this OneGEA is that if you control a works in Mexico for GEA and for whateverreason we may move him into more to Australia that he doesn't have to learn first how GEA works in Australia that hesays, okay, I know the budgeting process, CapEx process, working capital management process, offering process allfrom Mexico and it's the same in Taiwan or in New Zealand. So I'm used to this so that he can be productive very fast.

So our aim is that the GEA employees, the managers were in whatever business they are, in wherever they are that theycan immediately talk on and say I know how GEA works, I know what are the requisites and how to make GEAsuccessful.

Yeah. Here what I just said we want to lower the levels between the market to customer and Executive Board. Todaywe have measured, it's about four to seven, we want to lever it by two levels in the case of seven levels and one level inthe case of four levels. And we want to increase the span of control from our managers across all the managementlayers and that of course, means reduction in complexity and also not only cost, it makes also things much faster,because we're going to be much closer to the customers.

We have announced those things on the so-called C Day. We have today the Capital Market where we are addressingthis once again. We are working the detailed design of the new GEA until end of January. Until end of January, the 70design team members should have finalized the detailed designs and then we start with the implementation. And as wealready said, we do see that on Q2, when we announced Q2 2015, which will be more or less in July next year. It willreport GEA for the first time in the news structure.

Yeah. Thank you very much. This is an overview about this new GEA and what we learned is the new direction, whywe like the food business, what we need to do in the food business and what type of structure we need and how manysavings this new structure and this new organization is going to bring us.

If you may allow me, I would like to welcome Robert from Fonterra, one of our large customers. He is the owner of thespray dryer, which is almost light. And it's a pleasure for us to have you here to talk as Donat said about the dairyindustry. I know that many of you have lots of question about the future of the dairy industry, the milk powder and theimbalance between the different parts of the world and let me welcome you.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Robert Spurway, Managing Director, Global OperationsGood afternoon, ladies and gentlemen. Robert Spurway is my name. I'm the Managing Director of Global Operations atFonterra. And it's my pleasure to be here this afternoon supporting GEA, but also giving you an update on Fonterra andan outlook on the global dairy markets.

I'm not sure why we got that slide. Let us see if we can find the one I'm after. And we've got a few slides missing at thestart. That's okay. I can talk to it. First of all, I'll talk about Fonterra; Fonterra is a New Zealand based cooperative withoperations around the globe.

I want to talk to you about three things today. Firstly, a bit of an overview on Fonterra and then I'll talk about our viewof the global dairy markets and what the outlook for that looks like. And then Importantly, I'll talk about Fonterrastrategy and why that's important particularly in these times of volatility that we're seeing in global dairy markets.

I'll just give these, of course, a moment. Have you got the slide we're looking for, is it? Here we go, good; so that'swhat I want to talk with you about today. So starting with Fonterra; we are the world's largest processor of milk. And ifyou look at our last financial year and we had revenues of just over NZD32 billion and we had earnings, normalizedearnings and they are of fiscal '14 year of just over NZD500 million, NZD503 Million.

We are owned by about 10,500 shareholders as a cooperative. Most of them are the farmers and suppliers in NewZealand. We have market capitalization through our listed fund of NZD10 billion and we have a very strong balancesheet and credit rating. If you look strategically of what we do, we have consumer and food service businesses in keystrategic markets around the globe. I'll expand on that shortly, but across China, Asia, the Middle East, Latin Americaand Oceania, so Australia and New Zealand is our home [ph].

We also have an international farming ventures business, where we are growing our own milk in China directlyinvesting in farms in China. We collect about 88% of New Zealand's milk. That's a market where we collect, onaverage, 17 billion liters of milk per year.

So talking about the example of our factories and our large factories across 100 plants in New Zealand at the momentof the flush of the season, we have a tanker collecting from a farm about every nine seconds and delivering to a factoryabout every 24 seconds. And we're picking up just under 90 million liters a day on this very day to day, every day ofthe week.

Globally we process between 21 and 22 billion liters of milk and I'll talk about our outlook in terms of where we seethat heading. As I said, we are one of the world's largest processors of milk, collecting 21.6 million tons of milkintakes. If you look at our food service and consumer business, I think it's an important aspect in terms of where we arepoised for growth of course in Australia and New Zealand where our roots are. We also operate strong consumer andfood service businesses across Latin America, principally Chile, Brazil and Venezuela. Across Southeast Asia in anumber of key markets, of course China growing very strongly, and also in the Middle East and North African markets.

It's important when you reflect on our strategy and also when we look at where we're at with the global dairy markets.The size of the circles here represents the overall volume or value of the market that we're operating in and the bars areour outlook on demand versus supply. Over the next 10 years, our expectation is global dairy demand is going to growby about 3% against the supply that's only going to grow by about 2%.

So, over the medium to long term, we certainly see strong growth and a shortfall in supply versus demand. That'sparticularly notable in China where we see growth in the domestic market of only about 4% in supply, but at least 7%in demand. We see similar trends across Southeast Asia and the Middle East, and India, although India is an interestingmarket for us because it's largely close.

Over the last 12 months, we exported of 2.9 million tons of ingredients, only 22,000 to India and imports in Indiagenerally represent less than 0.2% of total consumption. So, whilst it's growing very strongly, from a Fonterraperspective, it's a market that we have an office in. We look to it for future growth, but don't see immediateopportunities.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

So, what's happening right at the moment? Many of you will be aware that dairy prices have softened significantly overrecent months and there are some good reasons for that. We see them as relatively short-term issues. Across the globeand the green, we've seen milk production up in many of the key milk-producing markets.

In New Zealand, Fonterra milk production from 2013 to 2014 was up 8%. Our forecast for this current year is milkoverall in New Zealand will be up 2%. We've also seen growth in Australia in Fonterra's milk collection of 2% againstthe market overall that's up just under 0.4%.

The US and Europe, two of the largest producers of milk in the world, both have seen growth of 4% on the back ofstrong prices historically, but also relatively cheap feed prices at the moment. Geopolitically, there's also some unrest.The Russian ban on key markets across European Union, Ukraine, Australia and Canada has created uncertainty interms of where that milk and of Europe will end up, unsettling global dairy markets.

We've also seen a slowing in China. So, although volumes up year-on-year, we've seen a slowdown and as a resultinventories of whole milk product in particular in China are higher than we'd expected to see. That has createdvolatility. If you look at the last three years, these two lines here, cheese prices and whole milk powder prices in termsof global commodities. Typically you see the prices bouncing around, but they generally track each other.

In the first half of 2014, we saw an unprecedented divergence in those prices. So, very high (inaudible) prices thatdriven primarily by higher demand in China in the second half of our fiscal 2014 year. So, over the last six months wehave seen a significant decline in the process. But we've also seen the prices cheese and -- switch around.

How do you look through that sort of volatility and why we think the outlook is still very strong, as we've got a veryfight for strategy to fall back on. That informs the decisions that we make on day-to-day and month-to-month basisaround our own strategy and our own investments.

I'll start perhaps with our journey, Fonterra undoubtedly a very proud New Zealand cooperative on a journey to becomemore globally relevant. We've got some key milestones along the way including in 2012 by getting our strengtheningour capital structure with the opportunities for the first time external investors to have a state in a fund associated withFonterra.

In 2012, we refreshed our strategy, which gives us a very clear focus, we have now to look through the volatility I'lltalk about turning the wheel as a short-hand major tracking our progress against our strategy. This is Fonterra giving usabsolute purpose about what we've do connecting together our people, our strategy and our identity to lead ultimately,to a globally relevant cooperative.

Importantly, what does that mean and how is that relevant today. Our ambition is to build a globally relevantcooperative that makes a difference in the lives of more than two billion people globally by 2025 so over the next 10years.

Our current estimates through our ingredients and our consumers and fleet service business. We impact on and make adifference to the lives of about one or 1.2 billion people. So, nearly doubling or nearly doubling there over the next 10years. Growth in milk, at the moment we have access and processed just on 22 billion liters of milk. And we expect totake that to 30 billion over the next 10 years. Across five to six milk over globally and I'll talk about why that importantand how we intend to deliver on that ambition shortly. Taking our turn over from 22.3 billion in this last financial yearto 35 billion by 2025. Remaining the number one ingredient business and diary in the world. And I'll talk about how wedo that and why that so important to us.

But also our focused and our growth in our consumer include service business. Being number one or two in the eightstrategic markets we've identified. So, whilst we operate across more than 100 countries globally. Making sure thatparticularly in our consumer and food service business, we are focusing our efforts on the markets that are mostimportant to us and that are growing more strongly.

Our reputation not just globally, but particularly in New Zealand underpins the importance of our growth ambitions.We need to have New Zealand on side, we are New Zealand's largest companies and we represent about 25% of NewZealand's exports. So, we need to make sure that we have a strong reputation in New Zealand to realize the ambitions



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

that we have globally. And to do that of course you need a well engaged team. All business about -- or about the greatpeople that support and might (inaudible).

So turning the wheel, if you like shorthand for our measure of success against our strategy. It's about taking our lowestvalue products and driving as much volume as we can into higher value products. Increasing the value that we return toour shareholders and in particular are New Zealand farmers.

It's about growth is our consumer and foodservice volumes. It's also about making sure that we grow the value of ouringredients business. And making sure that in our investments, our return on capital is of course greater than the cost oftheir capital. We have seven key strategic priorities across our business and that this that gives us very clear focus evenin times of volatility as we've seen in global commodity markets.

I'll talk in a moment about farms sources that underpins our ambition to grow excess not just to New Zealand milk, butmilk globally across those five or six months polls as focus. That's about our brand it's about connecting shareholdersand the cooperatives in New Zealand.

And making them aware of what's important in terms of the cooperative and outperform and our growth and gives usthe ability to use that offshore as we grow excess to milk and most importantly it sees us not only tying but grow ourshare of New Zealand milk and realize that ambition not just to New Zealand but globally to reach 30 billion liters ofmilk over the next 10 years.

I'll talk about investing an optionality, increasing our capacity in New Zealand, in particular so we have more flexibilityto manage through volatility in global diary markets and also I'll talk about what we've done to invest in turning thewheel that consumer and food service strategy.

Through the middle part here in terms of building and growing beyond their current consumer positions. Anddelivering on food service potential, growing out annually in business and developing leading position in pediatric andmaternal nutrition. It's a branded supplier as I said its felt focus not every market but eight key strategic markets. And Ican talk about some of the initiatives that will success in that space and also I'd say that will bring success in that space.And also focusing on six global brands. So, consolidating our investment into those important trends. I've spoken aboutinvestment in global multi-hubs. It's about maintaining our relevance given we see a gap in global supply versusdemand and New Zealand in a relative terms has bought us more local way to look to get access for growth in milkoutside of New Zealand and our strategy is very much about that.

We then got some underpinning strategies, that make sure that we have got an organization that supports that strategyand that we have a new approach to food safety and again a very similar to some of the material you heard from Jurg.So, what's Farm Source? Farm Source is an initiative we launched in New Zealand just three weeks ago. And as I said,we'll expand this globally as part of our strategy to grow our access to milk. It's about providing members of ourcooperative with benefits that are greater than just the returns we provide to them through the milk.

It's about connecting together, recognizing regional differences across not just New Zealand but across the globe. It'sabout connecting the way we work and making sure we've got a clear brand in the way we go to market to access milk.It's interesting to talk about our outlook on the dairy market. But I think what speaks volumes to that commitment is theinvestment that we are making in growth and in capacity. If you look at New Zealand alone, we've got current projectsannounced and on the way, that will expand our capacity by 8.2 million liters of milk processing per day.

Lichfield recently announced and to be built by GEA by 4.5 million liter per day plant. So, not only these plants likethe Darfield II plant. the largest spray dryers in the world are also the most efficient spray dryers in the world. On topof that, we're investing in Edendale, in the lower South Island. So, Lichfield in the North Island of New Zealand,Edendale, in the lower South. And Pahiatua, another project underway and due to tight milk makes August. On top ofthat, we've invested 50 million in improving existing plants. So, not only are we putting new plants on the ground,we're improving the efficiency of the existing plants.

Both projects alone total more than NZ$750 million of investment underway right now. What will they achieve? This isa very seasonal New Zealand milk curve, it will give us about an extra 10% capacity at peak.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

That will give us the optionality to have greater choices about what we make throughout the season ensuring that wecan match customers (inaudible) with our own capabilities. We are also investing in turning the wheel. So again, wecome back on our strategy around growth in consumer and food service. Over the last 12 months in New Zealand, wehave completed or have projects underway around building UHT capacity. It's the largest UHT plant in New Zealand,now up and running exporting branded Fonterra product to Southeast Asia and China under the Anchor brand.

At Clandeboye in the South Island, one of our major plants, we're doubling the size of our mozzarella capabilitydelivering on food service. We believe that all the Pizzas in China made on any given day, 80% of them on top withFonterra mozzarella. It's a very strong growing markets starting as a small market but it's an important market for us tobe a part of. At Eltham, we have a processed cheese plant where we have doubled the capacity of our slice-on-slicecheese, it's a sort of cheese that we typically see in cheeseburgers from McDonald's and other customers around theglobe. At Te Rapa in the North Island, we've spent $32 million on doubling our cream cheese capacity.

So again, we have a strategy that not only am I would have talked to you about today that I'm able to demonstrate ourcommitment to our investments. If you look at our brands aligning with that technology platforms. I spoke about the sixor seven strategic platforms behind Fonterra to see us through the volatility we're seeing in the markets globally. Ourglobal ingredient brand is indeed play. Ingredients is more than just about selling commodity products, it's making surethat we can sell ingredients and our customers are prepared to buy more for an competition.

We do that through our commitment to serve us through quality and making sure that an ingredient with the NZMPbrand on it attracts quite a value. We have our global brands around Anchor, Anlene and Anmum across every day inadvance nutrition strategy and those height strategic markets. And then Farm Source which we have spoken aboutunderpinning that making sure that we've got the growth in milk to realize our ambitions in terms of market growth.We link that to our benefit platforms again linking to face few on food.

Our customers want consistency in the products the (inaudible) texture and the quality that they buy. And also, acrosstheory technology starting are some right through the supply chain. making sure that we are center of excellence forfairly. Talking about the global picture and our access to global locals and our ambition to grow that to 30 billion. Welook down here at New Zealand our traditional buys, we see largely milk powders and milk protein been exported fromNew Zealand to the growth marks across Southeast Asia, China, Africa and the Middle East.

We see nutritionals out of Australia. We have over 11 plants in Australia. And we have focused on nutritional andpediatric products out of Australia. We're investing, as I said in milk in China behind borders where we've got directinvestments of farm and farms. And we expect to grow that over the 10 years to about 1 billion liters. That gives usaccess potentially to UHT milk. We've got a partnership with announcement Abbott to see pediatric milk from localChinese milk at a very high quality standard with Fonterra frame behind it announced.

In Europe, we've got a construction underway (inaudible) in the Netherlands. We have partnered with the cheesemanufacturer so without having to deal directly with farmers, we're getting access to milk in Europe through takingaway, turning it into high value ingredients that will move into Southeast Asia and China through our ingredientscapability. Likewise, we've announced the partnership with Dairy Crest in the UK, where again we'll access whey thatthey produce and we'll use our ingredient capability to bring that into our network.

Similarly, in both North America and South America, we see whey and lactose ingredients coming out of theirsupplementing (inaudible) ingredients business. So, looking specifically at some examples of that strategy in action,what is it mean? What are we doing? Our investments over the year, over the last year, the whey investment withA-Ware, I mentioned that (inaudible) in the Netherlands, our partnership in the UK with Dairy Crest. We've reshapedthe joint venture we have with Nestle in South America. That means we were tying with as a joint venture partner, butit gives us direct access to grow our foodservice business in particular across Brazil and Latin America.

In Australia, we're seeing consolidation of the dairy industry. We now hold a strategic share of BEGA and taken a 9%stake in that business. We've also acquired yogurt, specialty yogurt business in Australia to supplement our consumerbusiness across Australia. Very importantly, we see China as a growth market. We've announced a partnership wherewe take a stake in Beingmate in China. We supply them with ingredients and their nutritional products and in return,



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

they distribute our Anmum brand across China.

I mentioned before the joint venture that was announced some months ago with Abbott, where we'll develop a thirdfarming hub and supply that milk to Abbott for the creation of high value pediatric products. All in all, we've investedover $1.6 billion since 2011. In the ingredient side of things, I've touched on those capacity expansions in New Zealandand two across the North Island and two across the South Island. Plants that we are very proud of, as I said, it's not justthe world's largest spray dryers but the world's most efficient dairy processing plants.

And finally in foodservice, I touched on the investments we've made to grow our capability in those markets. Towardsthe end here, I do want to talk just about the importance of food safety. We're not just in the dairy business, we are in afood business. We're reshaping our commitment and our approach to food safety to build on the very strong reputationwe have amongst our global customers. So, making sure currently that we haven't absolute clear focus around foodsafety and driving change over the next 12 months, achieving absolute credibility in terms of one of the world's mosttrusted sources of dairy nutrition and ultimately over the next four years and beyond becoming the world's leadingsetter for excellence in dairy and dairy food safety.

So, just to summarize we do see volatility in global markets, but we have a very strong strategy that says it's true. Whatthat will deliver is improved value drivers; we see volume growth delivering EBIT for our shareholders. We have aclear focus on working capital, ultimately that will drive improvement in our return on capital for smart use of workingcapital but also by working as a charter.

Ultimately what that leads to our shareholders is greater earnings per share, higher milk price given our cooperativenature and the fact that we pay very strong milk price in New Zealand and ultimately that will see growth in the valueof our share price to our share holders.

At this point I'm happy to take any questions. I think we've got time for few questions.

Questions And Answers

Unidentified ParticipantTalk about your in-house engineering expertise, I mean as you get revenue growth do you need more levels of supply,supplies of certain expertise or do you have a lot of internal in house expertise you used in the growth?

Unidentified SpeakerIt's a combination of both, in fact we talk openly with GEA for example about the expertise I have in delivering theplant and building the plant. Our expertise's are as a processor of dairy products. Not in the design and build thoseplants. So we rely very strongly on the partnership with like (inaudible) but also we like to say, I think we have theexpert and operating those plants. So we take pride and getting some of the world best dairy plants and we are going tooperate them with our own in-house expertise better than anyone else could operate this type facility.

So we do have a very strong team of engineers but the focus is on how we operate those plants rather than the designand build naturally.

Unidentified ParticipantJust a question on your investments, so you basically adding 8.2 million liters per day. So that's roughly 603 billionliters per annum, which means that you are adding capacity, adding 15% of your processing or milk intake processingcapacity just in '16 and '17.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

How does that compare with the 3% dairy consumption that you talked about initially and also what is the contributionof that within the 2% growth in the dairy supply that you mentioned, how much of that. And finally what is yoursensitivity to milk prices, I mean both raw and also processed milk, how do you see that within your CapExexpectations?

Unidentified SpeakerSure. Lot of questions in that one point, I saw try to work through them one by one. First of all our focus in NewZealand capacity expansion is both meeting the growth that we see in milk in New Zealand of about 2% or 3%annually over the next few years, but more importantly that's about increasing the additional capacity we have at thepeak of the very seasonal curve in New Zealand.

So New Zealand milk is produced (inaudible) system. So that I point to making additional capacity is designed to giveus 10% additional capacity in the peak of the season. That will give us twice of about what we make and ultimatelythrough the volatility we are seeing in dairy markets.

For example at (inaudible) where we are seeing the price of cheese and (inaudible) around it allow us to make moneyout of that volatility by choosing what we make -- based on the market returns. Next part of your question in terms ofglobal growth, in New Zealand we currently carried about 17 billion liters of milk, globally 22 billion liters. Over thenext 10 years as I said we expect to grow that to about 30 billion globally. Probably less than two. So it may be one oftwo billion liters and that is going to come out of New Zealand.

The reason for that is New Zealand in relative terms is quite a small producer of milk overall especially relative to thelots US or the European markets. So our global strategy is around getting accessed milk outside of New Zealand andthat's where the vast majority of that milk collected from the current 22 billion liters to 30 billion liters of milk willcome. That's important to us, because as we say that growth and global demand of about 3% and global supply of 2%we want to remind relevant, we represent currently about 17% of globally traded dairy products, so we need to ensurethat we grow and as I said during that across 5 or 6 milk polls including New Zealand that's about how we do that.

The final part of the question I think was around the decisions on the volatility of milk price. In New Zealand we paymilk price based on the global returns for milk products in a particular products that make out in New Zealandincluding (inaudible). Ultimately we pull back on our strategy, so we look through the volatility in a market where wesee demand outstripping supply, we expect the half of the prices is favorable on the longer term.

So we make our decisions based on our strategy and the longer term outlook rather than being destructive for the shortterm volatility caused by all the sources of things I show you around very favorable production across all the majorproducers at the moment and also some political instability in key markets.

So in summary our investment decision is not influenced by shorter volatility. The other thing if you look at NewZealand farmers. We export from New Zealand more than 90% of the milk we process unlike many other globalmarkets in the domestic consumption. Our farmers in New Zealand on a postural system also have relatively speakingquite hot fixed cost, and quite low variable cost that means whether the price is higher or low they need to produce milkto recover those fixed cost and that's again where we see strong and sustain growth in milk production not just globallybut certainly in New Zealand where we are investing in that capacity.

Unidentified ParticipantTwo questions if I may. The first one do you deal sow equipment in your dairy equipment and second question why didyou choose GEA over intelligence supplies?

Unidentified Speaker



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Sure. We use a range of supplies, so GEA of course are an important supplier but they are by no means, most important(inaudible) we as I said there is a range of activities when we go to market. In some cases its negotiated outcome andothers it's a competitive tender. Number of the recent projects that I spoke about and being provided by GEA includingin particular the large milk powder plants that we fill some of the other investments I talk about has been provided byother partner that we used.

So we are global company we have access to a range of global supplies. GEA I think are very aligned to our strategyaround the importance of technology, the precision of technology, the importance of food safety so we got some verystrong links there but we do use a range of supplies across our names.

Okay. Thank you very much for your time this afternoon. So, welcome then to the presentations of today. Talking alittle bit of you were on the numbers. So the financial targets, in some more details and where we are coming from andto how do we see here to develop for the near-term future. Well, let's start with the financial targets and summary infirst place this is the summary sheet on those key metrics and I will come back to more details during my presentation.

First of all, we will list that, the markets we are in, will allow us to generate compounded average growth rate of some4% to 6% per year, over the period from 2014 through the year 2020 and that gives you some insights a little bit lateron that. But at least based on the fact that we are having such a high exposure in order to the global food industry soldto the food processing markets. I believe that also based on the reasons studies there for example from Citigroup, oftenBarclays this is assumption you can well take looking into the future on what our growth opportunities.

With regard to the service business, as some of you may know, we actually standard around as a percentage of around27% of service businesses as part of global sales. We believe based on the actions, we will take to even intensify ourfootprint and to focus more on the service activities also our new organization. We will be able to ramp that up to about30%.

Now, the operating EBIT margin. We target to be in a range of about 13% to 16% in the period 2017 and during theyear 2020. It has to do largely off course with our reorganization well, we believe that we will get savings into place ofaround EUR100 million. That goes data before seeing that an additional increase also profitability, we then wouldexpect from the increasing share of service business and the volume increased year-on-year which we are going toexcept.

Now, we forget to working capital we came along the way, we are around 12% actually and we believe that also herewith the new organization, we will have to opportunity maybe to drive it further down, to see the bottom of that couldwell be around 10%. So that we believe target range of 10% to 12% working capital over sales of course, the verymoment you are strongly growing in first place the working capital starts to board a little bit and sales force later. Thisis why we gave a target year between 10% and 12%.

CapEx, we have invested a lot in the past, into our regional footprint in new capacities around the global. Now, webelieve that we have the presence, we want to have. And that actually we would be able to reduce that to level off 2%or let's say between 1.5% and 2% actually for the first nine months of the year 2014. We are on 2% of CapEx oversales.

Cash would have margin well in a world where the working capital it's not fluctuating a lot and we have CapEx to beon the level of depreciation. Then of course mathematically you would expect that the EBITDA and hence our cashwould our margins should be in line more or less 50 EBIT margin. However, based on what I just said before thevolatility in order intake backlog the fact that before you generate sales you will have first an increase in the workingcapital it's wise to assume that and to give some debate here it's wise to assume that the cash flow drivers will be,maybe I'm not further down compared to the year -- to the operating EBIT margin.

Return on capital employed, last but not least, we believe that we can deliver here a range of 20 up to 25% in duringthat period and that is, as you would know form those who are closer to our Capital Markets communication that is --has no forgiveness for any restructuring offer any acquisitions we are going to do. So it's an all-in return on capitalemployed, which of course has a downside if you acquire a new company in the first place, you will get the purchaseprice immediately as an element of the capital employed and then the profitability only kicks in later once we're fully



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

integrated the Company and once we will overcame the depreciation of the step-up varies in the assets from thepurchase price allocation.

Now as you recall, Oleas always said to you on his presentation, and we believe that we can do this. And that is ofcourse a case as long as we are carrying forward with our Board and even maybe mid-size acquisitions would we do attimes -- transformation in terms of from an acquisition. So an acquisition time target which really is a transformationfor the GEA Group then of course we need to revisit that target. However, as we said, predominantly if you would liketo really seek both on smaller and mid size acquisitions.

Last but not least, I promised to you that, I will give you an update during this occasion here today on what is theexpected effective tax rate after we have no sort of the heat exchanger business and it's very likely that we willconclude on that within this month of October as we got the anti-trust approvals in place. So we believe that once HXhas left the consolidation or the consolidation area of GEA Group that then the net effective tax rate will be around24% for the period in consideration here.

Now coming back to the financials in more detail. First of all, the organic sales growth, I said that we are expecting thatto be around 4% to 6% year-on-year until the year 2020. If you do hear the comparison to what we have achieved so farsince 2009 you'll find that GEA was growing annually by about 5.8% and that is some 200 basis points faster comparedto the global GDP. Hence, we believe that target range 4% to 6% as a CAGR for the sales growth will be achievable.

The service business, I quickly touch based already if and then you'll see that our aspiration is to come from 27% todayto the 30%, we of course see that growing the installed base of our equipment. We aim to improve our coverage ratioby the new organization for example, we will put the service business in the various countries under one lead, so thatwe have that to be and how -- much more harmonized compared to the past. And that of course we seem all, also by thenature on how our markets are developing, we believe that we can increase the service intensity per machine. Forexample, by doing some online moving -- monitoring of the performance of our machines.

Now, the operating EBIT margin and let me go back a little bit into the history. One of our record years in the past wasthe year 2008 where we performed an 8.8% EBIT margin. And then that was just a year before the Lehman crisis tookplace, and then Lehman crisis transpired and we also were hit by that. However, we remained very profitable also dueto the face after a biggest financial crisis, the world so far has seen. And then quite quickly recovered in the years 2010and 2011 already, again to a double-digit EBIT margin and we stent based on quarter two, 2014 normal on a level, let'ssay, of around 11%.

As Oleas has outlined, we would like to keep the savings of the 100 million due as net savings for the company. So thatthis is meant to improve our operational EBIT margin. And then of course on the other hand, you would expect thatsome improvement of the target range for the EBIT margin synergies will come from the operational volumedevelopment means increasing volume and also maybe some higher service share in our tool sets hence it's wise toassume what's -- it's the right -- to assume the right target range for our new operating EBIT margin to be in the rangeof let's say 13% to 16%.

Working capital, I was already highlighting that we gave ourselves a new target range of some 10% to 12%. You seehere on that graph that we came a long way from the year 2008 and 2009 onwards and that we are now trading around12% of working capital over sales. And also here, we believe that the new organizational setup for example, bycoordinating the factories more than we did in the past that this will have a positive impact on our working capital.

And as I said, during strong periods of course on the other hand, you might expect that working capital runs up a littlebit and this is why we said, well, we -- give our sales and target range overall, 10% to 12%, which we believe we coulddeliver in the near term future.

Last but not least, CapEx. The new estimation of the capital expenditures as year-on-year that will stand is that it willbe around 1.5% to 2% over sales. And as I said, we have spent quite some more in terms of money during the recentyears here you'll observe the numbers for 2011, '12 and '13. And again, that has to do with the investments we havetaken for the globalization of our manufacturing footprints for example in Europe and in China.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

And some of you may have seen our new separate -- separator factory in early which we have inaugurated quiterecently and that is one of the (inaudible) elements of those expenditures. And however, now we believe we have avery decent footprint to serve the global markets. And this is why he believes that we can drive down our spendingcapital expenditures to a range between 1.5% to 2%.

Now then the cash flow driver margin based on what I just said to be from an EBIT margin of minimum of 13% andthe corresponding EBITDA margin with reduction of the capital expenditure as to 2% at the max and working capitaldiscipline, which will bring us down to 12% to the max of the appropriate target range for the cash flow driver marginand that new organizational set up from GEA is some 12% to 15%, which is to be compared with the minimum 9%guidance we gave for the year 2014.

The next important financial target for us, of course, remains to be the return on capital employed. Also here we haveimproved quite substantially just after the Lehman events and also as following and the impact from our acquisitionCFS, our Food Solutions. And as I said, we here believe that the target range of some 20% to 25% is appropriate for theGroup and that isn't all in return on capital employed as I said. So, the EBIT margin, so to say, the numerator should be-- should strengthen that return on capital employed and to decrease in working capital.

And also the decreasing CapEx as part of the denominator would be a beneficial to our return on capital employeddevelopment. And whereas I said, acquisitions have a 7 temporary dampening impact on the return on capitalemployed. And we believe that's nevertheless we can deliver these 20% to 25% as long as we stay with smaller bolt-onand mid-sized as acquisitions.

Now, leaving the financial targets behind, I would like to talk a few now a little bit alongside of the capital allocation.And here in first place, I would like to exchange my views with yourself on why GEA would like to stay within theinvestment grade rating, some of the arguments are giving here on that slide.

So, we believe that, we will simply not only have a better reputation, which and also have some larger financial leeway,but you would have also in difficult times, a better access to debt capital markets as I believe the very moment you willhave another financial crisis likely those companies, which are not investment grade rating of which are not havinginvestment grade rating would get in more trouble compared to others.

Then it offers us the opportunity here and that took place instead of bank guarantees or bank bonds, group bonds forour large contracts, as we are a financially stable company, this is definitely an opportunity to also get that type ofcompany bonds in place, which are of course less expensive compared to bank bonds.

Then some of our debt covenants require investment grade and last but not least, we see also lower interest rate, if weare an investment grade rating company, however the interest rates anyhow are very low in these days. So, that mightbe more an argument for the future again. Well why, how do we actually need review the actual situation with regard tothe credit rating for the year. Well, this, for this, you need to understand a little bit, how is the debt seen from the ratingagencies. And here the most important thing is that rating agencies like for example, Moody's they are taking only intoconsideration the gross debt, while cash on hand is simply ignored.

There is of course not very nice for our situation, as we, for example, have decided that we keep a strategic minimumcash reserve overall EUR150 million to EUR200 million. In case there would be a default in the global environment, Imean that is also one lesson learned from the Lehman crisis that as a sense of urgency you need to be able to pay downor to pay your debts also if no cash would come in, this is why we decided at GEA level to keep a minimum cashreserve of some EUR150 million to EUR200 million as a safety caution.

And then you need to go into some more details of the calculation of the gross debt in order to understand whereactually we are, how we are seen from the rating agency point of view. I did it here based on the quarter two numbers.You'll find the net debt, which we reported was some EUR552 million. And then as I said cash has not seen beneficial,so you need to add back the cash position to get the gross financial debt, and then rating agency would also add pensionliabilities to the gross debt and operating lease which is your annual lease payments, you have multiplied, you have amultiplier which in our case then is another EUR380 million.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

So that the rating relevant gross debt for us is EUR2 billion and that those numbers still have the heat exchangerbusiness in there. Now, if you think about what happens next. We have sold the heat exchanger business. So, in order tostill absorb the necessary corridor for the, being investment grade rating, we need to pay down our gross or our net debtand gross debt to a certain degree, and that is a part of how we will spend the proceeds from our operations and fromthe disposal of the heat exchanger business in short term.

Anyhow, it doesn't make sense to pay down the debt as much as possible with cash. I attend you don't want too muchinterest in these days and it's better to pay down the debt where you are paying higher interest burden. Well in order toget a substantial upgrade in the credit rating you would need to target at least a multiplier of 2.5 EDITDA compared tothe gross debt. However, actually in the calculation here, if I would now take out the business of the heat exchangersegment which so far was part of our operations, definitely, we would be beyond three. Actually it's in the rangebetween 2.5 and 3 as a multiplier over EBITDA, still the debt is okay from the point of view of rating agencies.

But maybe if you would really like to get a sound update or sound improvement in the credit rating maybe you need totarget a multiplier of 2.5. However as I said I'm okay if it's somewhere in the range between 2.5 and three. Well can weactually pay down our debts? Yes, we can. This is the structure of our main financial instruments and the gravity centerwhen we need to pay those debts would be 2016 and 2017. However a large chunk of the loans we have in place, we atwill kept on flexible interest terms in order to be able to pay the debt down, the very moment we can afford that.

And here you'll find the instruments which we have in place like the loans from KfW from the European InvestmentBank and the borrower's note loan.

On the one hand and then of course the GEA bond, which has a fixed coupon of 25 and the average actually interestrate for us is, let's say around 3%, a little bit less than 3%. So all-in-all compared to what you can earn with your moneyand if you buy into loans and buy into assets, that is a much higher burden than what you really earn as an interest onexcess cash you have.

And this is why of course we're all saying that paying down the debts are somewhat is advisable. Even more as GEA asan investment grade rated company can get new loans from the debt market once we would lead them again. Okay.Now with the slide doesn't move any here, now it moves again. Well if we look into the period of the years 2015 until2017, how much money would be available for GEA and how we are going to spend that.

Now first of all we will get the proceeds from the disposal of the heat exchanger business of around EUR1 billion,which of course then is achievable to, to be spent for the one or the other allocation. Then we would have operationalcash flow during that period of let's say another EUR1 billion and that is made before mergers and acquisitions,activities and dividends to be paid.

So that all-in-all up until the year 2017 funds of around EUR2 billion would be available for us. Now we give ourselvespriorities for the capital allocation. So in first place we said that we would like to range or to increase the target rangefor our dividend payout ratio. As you may remember it stands at one-third of the net result, so we would lift that ofcourse assuming that the AGM will approve it to some 40% to 50% of the net income.

During this we would be online with what many peers do within the index [ph] or in the team, industrial engineering.And we proposed this or we will propose this based on the fact that GEA now is cash flow strong enough to supportthat target range of 40% to 50% of net income also for the future and not only for (inaudible).

Well, then of course as we were highlighting during the presentation of Jurg Oleas, we believe that we have a strongpipeline of acquisitions, which we can do, of a couple of year bolt-on acquisition, mid-size acquisition following thelogic of the (inaudible) process, which we have now in place and I will tell a little bit more on that in a couple ofminutes.

And then of course repayment of financial debt and we will invest into the organic business development in line alsowith our "Fit for 2020" program so to increase service, research and development and regional presence. And at the endof the day, as case may be, we wouldn't exclude to distribute also the residual cash volume to our shareholders at theend of the observation period. And that -- but this is, I would say the last priority as we would like in first place, of



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

course, the goal of the company in its operation.

I very often get the question on what is our firing power. Well, you have seen the 2 billion of gross debt; I was -- justshown to you. Well, if we use the proceeds here of the heat exchanger business and the operational cash flows, we have2 billion available to be spent. Whatever if I would -- if I'm asked how much that does that mean in terms of M&Adeals. And I would say, well, during the period of 2015, '16, '17 also operationally and by acquisitions GEA will grow.So that all in all, I believe that up to EUR1.5 billion of cash would be available for our M&A opportunities.

Well, talking a bit more on the M&A side. In line with the strategy, which we have developed we have developed alsoa GEA M&A strategy. So what are we intending to do and where are we intending to invest the money. I'm prettymuch can skip this one here. That is just a repeat of what your colleague has told you that we are about to investmoney, of course, predominantly again in the existing applications, which we do have in all portfolio in order to fill outfor white spots, for example, in the meat and poultry business or in the cheese business and here we have done italready with the acquisition of the Klokslag for the semi-hard cheese applications.

We believe that we can invest and should look into opportunities in adjacent markets. Personal care was mentioned, butalso pet food. There we have a scant presence so to say, and we can definitely improve our footprint. And then last butnot least, what gets more and more important is to talk of or to think about in terms of online monitoring and processlines, process automation [ph] which also will be more and more important for GEA in the near term future and hencewe believe we should take a deep dive into investment opportunities there, especially, as we have already, is about 650engineers who are focusing on that area of activity.

Well, what are then our detailed M&A criteria, so how we are going to assess this? In first place, of course, we have theARTE scheme that does mean we are looking toward applications, regions, technologies, functional excellence, whichwe would like to see from acquired targets. And that is the first test level which enable such target needs to pass.

Then we take a more deep dive into the strategic fit we've got to market attractiveness and target attractiveness and Iwill come to that a little bit later. And then last, but that would be the second check point and the third gate would thenbe the value creation, which we would get from that acquired target. And here follow the logic of some keycomparisons and metrics which we are going to observe.

Starting from right hand side, of course, we would like to acquire accretive target which are accretive to or also hurdleswhich I just presented to you after a period of integration, because it cannot be accretive in the first years immediately.As I told you, we need also to the right on the step up values of our assets in first place before then really contributes tothe return on capital employed and effectiveness in return on capital employed.

Then cash flow driver must be higher than the run rate, which we will set. The DCF, of course, needs to be higher; thediscounted cash flow needs to be higher than the price we are going to pay. And that of course is measured without anysynergies. In order to answer the question is a price much which is in demand from the seller in line with what we thencan later on develop out of that.

And then we are always challenging ourselves, well, how does the acquisition of a target compares to a situation, whereI would invest the same amount of money in our own shares. And what is a comparison of the earnings per share,which I will get in the first year, for example, from the target compared to our own company and our own EPS.

So we see, we have a kind of cockpit with various elements starting always with the consideration on just the target fitto our ARTE program, then we are looking to the strategic fit and at the end of the year, of course, also in the valuecreation criteria and the others and which were also mentioned by Jurg [ph], which are more general observations onwith regard to the targets. One, of course, for example, would be the reliability of numbers, which are available. Thereliability of financials, so also this is criteria on which we would measure any potential acquisition.

Talking about the market attractiveness, I was just mentioning that on the previous slide, so market attractiveness, herewe are taking deep dive into market size, growth, volatility, profitability and competitive landscape. What are the entrybarriers is the technology, which we are going to buy which prevents ourselves from being exposed to too muchcompetitors just following the mark. And then the target attractiveness as such is related to how the target itself



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

positions in that market.

So what is the market share growth and profitability? Service sales will be gaining more and more importance for us aswe believe, we as a company really should and must focus on all opportunities from the service business. What's thecost flexibility that doesn't mean how flexible can we react on changes in growth expectation and then competitiveadvantages of course, and strategic fit as I said before.

Well, then the last element of the year; M&A strategy is at the end of the day the post-merger integration. Withpost-merger integration I would like to highlight in the first place a little bit the history of the company. So I have(inaudible) since the year 2004 and you see that we have acquired a lot of mid-sized companies and integrated theminto our organization. Well, the point made maybe as a concern from your perspective, well can GEA really do all ofthese potential acquisitions in parallel to the major reorganization, which we are doing is that maybe too much for theorganization as such.

Well, almost all of these acquisitions, which we have done in the past, with one exception very successfully, were doneand integrated then on the lower operational level of our company and now in the new structure business areas or in theformer structure segments. And they were nicely integrated by the operational managers and we have very good(inaudible) in doing so. And we believe that we've just can't continue with that also looking into the future.

Well, and then with the new organization that new GEA hosts so to say offers also a good opportunity on how tointegrate these targets into our new organization. You can see that all these functions like engineering sales,productional service we can take and just integrate them into the new structure which we will have.

So the new structure makes it much more easy to find the right counterpart in the existing business areas in order tointegrate these functionalities of the acquired company into it. And that goes even more so for the regions as we willfocus very much on our country setup and on our regional setup and that goes also without saying for anything, whichis related to admin functions as we will largely aim to integrate those into Global Corporate Center and or SharedServices around the globe.

By the way and well, we are not talking here anymore about a headquarter, we are talking about a Global CorporateCenter as some off the functionalities, for example, in the -- take the example of the tax department they will not becentered only in the headquarter in Dusseldorf, but they will find the counterparts in the various countries or regions.Hence, we will talk about the Global Corporate Center and not about the headcount -- headquarter anymore.

Well, this was my dive into financial targets, new financial targets, capital allocation, and acquisition criteria. Now asan update for you, I would like to talk also quickly about the preliminary key figures, which came in just the other dayfor the third quarter. I'm happy to report to you that the order intake for the third quarter about 1.165 billion is on thesame level like the quarter in previous year in 2013, and that was -- and is still the second strongest quarter ever forGEA. So it was a very decent quarter with regard to order intake. And by the way it's also in line with the order intakewe have seen in the second quarter of the year 2014.

What you'll find here is basically that again the smaller segments, Farm Technologies and Refrigeration Technologies,did nicely. And to that based on business opportunities, they see for example in Farm Technologies, we got two ordersfrom China, in Refrigeration Technologies it require decent freezer and component business which adds to this. ForMechanical Equipment, we just got in the quarter three 2013 a very large order. So it's a high water mark for them as acomparison, and hence we are little bit down there by 9% to EUR326 million. And Process Engineering, althoughwe've got one large order, which we reported to you of EUR90 million, the previous quarter was even much better withEUR550 million. But again, we are trading on a very high volume also here for Process Engineering.

So cumulative for the first nine months, we have now an order intake of EUR3.359 billion, which is an organicdecrease of minus 2%. However, I said already from the beginning of the year, the year 2013 was certainly outstandingin terms of order intake volume with two segments means Mechanical Equipment and Process Engineering being 1billion -- more than 1 billion or 2 billion order intake in that year. That was really a high water mark for the year 2014when it comes to comparison. So all in all, a very decent order intake and stable environment.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Sales just follows. The organic growth here is 5% and for the nine month period, we are up 6%, and hence I'm happy topresent to you the on the top line and from the volume -- from the sales volume, we have a very solid delivered andended in a very solid quarter three 2014.

What does that mean for our guidance for the year 2014, we simply aim to confirm the guidance as I did alsopreviously. And you just find here the same numbers as I -- we've present already during our quarter two call. Andbeing the CFO of the company, I always tend to say to you while it's not a walk in the park. And so as usual for GEA,we need to climb up the mountain to the end of the year still the quarter four is the most important one for us. However,we believe that the target ranges which we have provided for and to remain valid.

So that concludes my presentation, my quick snapshot on where does GEA stand. And I tend to believe that now it's theright time to -- go to a quick wrap up from you maybe (inaudible) and then after, we would be happy to surf [ph] youall questions and answers.

Unidentified SpeakerYeah. Thank you very much. Yeah, let's come to the end of our presentations before enter into Q&A. Let me try tosummarize in the next two slides what I would like that you take away or you talk home from this afternoon. GEA hasdecided to realign and to focus and concentrate very much on the food business to become global number one insupplying processes and machines and solutions and technologies for our customers in the smart food processing.

And why? Because we believe that in this food processing market, growth rates are going to be steady. And there isvast room for improvement and catch up in emerging markets for the reasons we said. We are convinced that thisbusiness offer some superior margin levels, because it is very much technology driven. As you have heard also fromour customers survey, the relevance and importance of reliability of our equipment, our machines and our solutions isabsolutely key in this market for our customers.

That has also to do with the concerns of food safety, we have seen almost every year now two or three global scandals,which caused some paranoia. And the interesting thing is it's irregardless whether it's in China, in Argentina, inCalifornia, or in German, humans are in the same level of paranoia when they believed there is something in the foodwhich should not be in there.

The food business, as we have seen earlier this afternoon, is very much innovation-driven. When you go to thesupermarkets, you always find new solutions, new offering from (inaudible), et cetera, they always reinvent something,which then triggers business for GEA. And last, but not least, our customers are very much driven and followed also by-- even by NGOs, because food processing in the area where we are active very often goes hand in hand with highenergy consumption and high water consumption and consumption of chemicals to clean (inaudible), et cetera. So ourcustomers, they are always trying to innovate, not only to innovative their product, but also to innovate and to use lessenergy or less chemicals or less water in order to improve efficiency of their process.

The other thing which is important for you to remember, it's quite simple, it's the ARTE. A stands for applications. Wewant to be a partner in the key applications. We explained to you which are those, about 10 key applications from endto end for our customers. We want to much more improve our penetration in the regions. We have put ourselves a redlight on that in the current structure. We're going to improve that technologies.

We're going to be -- continue to be leader in supplying technologies as we did with Fonterra. The Spray Dryer is thelargest in the world. They were very happy. So that's why they have ordered the second one, the Lichfield Spray Dryer.And functional excellence, we see there are a lot of room for improvement and efficiency, improvement by that cuttingcosts and that's what (inaudible) explained, and that's why we also have given this improved long-term guidance.

In a nutshell [ph], once again, the long-term guidance is that we do expect a steady growth, organic growth between 4%and 6%, that we do see a range for the future EBIT margin between 13% and 16%. We're going to save costs of at leastor minimum 100 million to our Fit for 2020 program. And we're going to increase efficiency in structuring theorganization of GEA.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Capital allocation, (inaudible) explained that very much in detail. We're going to invest the proceeds from HX in thenext two years in smart acquisitions, bolt-on acquisitions, rather on the level of 30 million to 50 million, 60 millionannual sales, filling the gaps of the applications as we have explained or -- missing technologies. And we're going to --that's what we announced this morning also to increase the range of dividends to a level of about 40% to 50% of netearnings due to the reason that we have more stable business, less project risks, and increased cash flow in the future.We are going to M&A, however, the absolute priority to spend our money to leverage our balance sheet, M&A andincreased dividends is priority.

And last but not least, for me, it's very important that you take home from this if you believe in this food industry, insupplying smart solutions machines and processes and engineering solutions for this food industry, GEA is currentlythe largest opportunity in the world, stock -- traded on stock. There is a large competitor in Sweden, who is privatelyowned, you cannot invest. If you want to invest in this opportunity, here is GEA. We're the largest company alreadytoday stock listed in the food processing industry. Donat and myself would be very happy now to receive yourquestions and deliver the right answers today.

Unidentified ParticipantCan you talk a little bit about the process. You've told us about volume growth that into margin, a little bit ofimplement in service. Would you assume your prices are going to remain stable as you try to build out market shareand you try to become the number one in the few processing segment. What is your competitive outlook and how doyou get to, to where you need to be within the next three to four years on the pricing side. That was question numberone.

Question number two. I'm not as familiar with GEA's some of the foods maybe, but why did you combine the twodivisions into equipment and solutions. Why we gone to four to two, because I can see voice the old food might be alittle bit legacy. But having on two divisions in a EUR4 billion business it lacks a little transparency. So can youexplain that.

Jurg Oleas, Chief Executive OfficerYeah, let me start with that the first question about the pricing power of GEA, that seem to pricing power very muchhas to do with the innovation and technology. And I was quite happy to see when I saw the feedback from our customerthat they give technology, absolute priority number one for the many reasons, I need to explain. However, we are not anaive that in certain areas there will be some pricing pressure and we will have to fight through our market shares, buton the other side we are also reducing the costs and the complexity.

So, I think fully spread in between the March and there is room for improvement. So pricing, yes, but I don't see that intoo many areas, the pricing pressure, but we are struggling a bit currently is more than on pricing is on payment terms.We are focusing as you have seen very much on the working capital and on the cash flow drivers and we see somepressure there from other competitors accepting other payment terms et cetera, or even financing the projects. We arenot doing these type of things. So we are asking our managers to stay firm there. And so far we are able to stay firm onpayments term in order not to dilute our working capital

Unidentified ParticipantThe stable (inaudible) is huge in pricing over the next few years, is that right?

Jurg Oleas, Chief Executive Officer



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

And yes, and you also have to see that in most of these areas be it coffee, be it cheese or infant formula, et cetera, theworld is basically divided into two sometimes, three suppliers. One is of course tetra, and in certain areas it speaks withtheir segments called APV or they call it APV. They are at the lower-end, smaller spray dryers, smaller homogenizes etcetera. But when it comes to large processes, very often its tetra and GEA. So it is not that we are facing eightcompetitors in bits for plans or solutions for our customers.

Coming to your second question, why did we decide for that. Where that we are taking a bit of weight transparency,nevertheless we will continue to report on the industries, in the future the applications will be the industries. So willcontinue to report about 10 or 12 applications, top lines et cetera will continue to report service, the gross margin of theservice et cetera.

While we are putting them together is that, I give you an example that, when we have the engineers now forcomponents for pumps, valves, homogenizes, milking robots, we want to bring these engineers together. So we want tomake a global engineering pool to save costs to have synergies et cetera. So there going to be more and more melted toget it and we will be less and less able to separate them and that's where we see the great benefits of GEA.

So you have to have one compromise and compromises that we decided to go for these components or equipmentsbusiness area and the other one is the solutions. However, in the solutions we are going to give certain KPIs also for theapplications.

Donat Muller, Investor RelationsMaybe to that point. We have taken deep dive into the situation how our existing segments operate to do. And we havefound by that two general business models. The one is the engineering business and the other one is the equipmentbusiness. This is, while we set well, in order to tear down the walls, in order to harmonize as much as we can effectivereason conglomerate them. We need to really combine that into one operation and this is then the outcome of that neworganization.

Unidentified ParticipantI have two questions basically. You said at result, you're going to tear down walls, you're going to dissemble all thebusiness units, all the divisions and we have been talking a lot about it's a mid-term 2015, what's happening 2017, butwhat about the short term. I mean, it's a massive change product that ahead of you. And we have only talked about theeffect because the internal focus could probably dilutes the external focus that the margin focus to some extent. AndI'm pretty sure, you have talked about that and I would like to review yourself from that.

And secondly well, with emerging of the businesses having two business units and probably looking at the brand nameshas been mentioned that probably going to write down some goodwill and you have massive portion of goodwill onyour balance sheet. Can you talk about that as well and what do you see is going to happen at the end of the yearprobably?

Jurg Oleas, Chief Executive OfficerWell, I'm going to answer the first one.

Donat Muller, Investor RelationsI'll take the second one.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Jurg Oleas, Chief Executive OfficerThe focus that's of course a major concern for us. We did some weeks ago, careful analysis with this design team hadshowed to you, while that potential risks and of course one potential risk is that managers may leave us, because of theuncertainty or that competitors may still manage us and the other one is to focus internally and not towards to customer.What are the measures against that.

First of all, as you know, we have this global demand index, where we once a month, we asked our top 600 or 800salespeople out there in the world, how is the mood out there is our competitors being tougher or weaker et cetera. Sowe have introduce additional three or four questions to our top sales guys, which they have to answer as of now, as ofOctober for the first time. In addition, do you see that compared to this are blackmailing us in front of the customertelling that customer, you should not award to GEA, because GEA is now internally focused.

Question number two is, do you get less service from the headquarters of the different businesses because they mightbe all focused on this for 2020 project. Number three is do you sense that the customers may have themselves someconcern, while we are doing this transition. So we will get on a monthly basis the feedback from our top 600 or 800sales people in order to that. Immediately, if we see in certain areas that --.

Number two is the team I have showed to you, this design team leaders or members, they will be entitled to get thesubstantial bonus, if they achieve all the targets, which we have given them provided that they also achieved theongoing budgets and ongoing business. So, if they let that business down they will also not get the other bonus. So thethreshold number one is to fulfill the ongoing business to continuous operation, fulfilling the guidance which almosthas explained for 2014. We are just in the margin discussions for 2015, right as we are speaking here. So to fulfill thisongoing business and only if they do that's they're entitled to the bonus for 2020, if they achieve those targets too.

So these are some mitigations against that and then of course at its usual we're going to have about 40 or 50 topmanagers also stay in bonuses for whom we do not, maybe not yet have a job immediately, but we need them to carryon their ongoing business. So, I think we have safeguarded the derailing to this traction potential which is always thereof course that is. Yes.

Unidentified ParticipantYes, I understand sir. I appreciate the answer, but honestly speaking that people involved and many people involved, ifyou take away business units had these functions whatever. And certainly when you remunerates the top managementor the middle management that's one things, what about the engineers. Based on the uncertainty some degree upuncertainty as well. So how do you do with that, because that could lead to probably low profitability. And if not askingfor guidance in 2014, 15, 16, but is it right to assume that we should see the long-term guidance that you had in the pastas well, 12% EBIT margin is a base case and that this is a basic we just -- the safeguarding line that we could seeinternally

Jurg Oleas, Chief Executive OfficerI honestly saying, I don't see that at the engineering level that we will lose too much focus. For us, number one, it's veryimportant that the people they like GEA, to work for GEA be for them motivating for a successful company with agood story. I mean this story food and all these things, it's a story which I'm also an engineer which is an engineer likes.I mean that's much more sexy than if you are, for example building nuclear power plants or this type of things. You cango home and tell a story that your opinion (inaudible) go to the supermarket and see a new drink, you can tell yourwife.

So I think that is a basic thing to have very motivated people and also when we talk about this 1,000 FTEs, if you takethat in correlation to the 18,000 something, it's about 5%. And I know that many people at (inaudible) also from otherside they say okay, 95% will survive.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

If I may add to that point, well just after the organizations will be in my view even more attractive employer and Ibelieve that people who are really living with the company, they are who are interested in the global food business.They will recognize that and that is for me also safeguarding element why would people would simply stay.

On the other hand, yes quite some experience with the reorganization of some which we have done. I perfectlyremember that also there are some people who are afraid of all the good ones we will leave as maybe they aredemotivated, they are not called anymore indicator. At the end of the day nobody really has left what to keep and so wehave some evidence that you can manage such if opposes if you have a decent communication in place and to tell thepeople right from the beginning what our targets and where we want to go.

Second question talking about the branding. Yes the observation we would like to keep hour to promote GE as thebrand name and to have that as the brand in the marketplace which was different in the past. Then it goes withoutsaying that over time we will face out existing old brands as they are not needed anymore.

I can't give you the exact timing although we would do it, we will assess the individual. The total if I am not mistakenthe total amount of value we have found is brand names is EUR50 million. So if we in the worst case, it's one caseissue.

Unidentified ParticipantTwo questions please. Firstly can you just confirm there won't be any exceptional restructuring charges in 2015 or 2016to implement the restructuring or is there something we should be taken care. And then secondly you have aninteresting comment third of the -- it was the top 200 customers outside in emerging markets and went by. Who arethey buying from, are they buying from people like (inaudible). So are they buying from local suppliers who have andare you behind or are they buying from local suppliers who got lesser technologies and therefore there is an opportunityfor you because it's a very immature market.

Jurg Oleas, Chief Executive OfficerIf I take up the second question and maybe then take the first one and the second question is yes certainly especially inLatin America (inaudible) has been much Sichuan has surely so we all times went at the end of our loan loss allowancealtogether. So they have deeper market penetration and those suppliers they also buy very often, at this point in timethey buy second hand machines, so they buy second hand lines from somebody else. So and then and of course yes theyare also other supplies less quality, et cetera but those local branded food supply they would like to stand up to thestandards of Nestle or (inaudible).

So they are looking as they did in China we have great experience in China. We're very often I was asked do customersin China pay you less price and ask for lower quality and what we actually did see and still see in China is that they askfor the highest quality because they sell their chocolate bars or what so ever. They usually they say it's as good asNestle and then they say we are a using even more modern machines as Nestle, et cetera.

So emerging markets I am confident that will start to use more and more high quality machines in order to secure theirbrand source.

If I had to on restructuring going on. So, I mean if I got your question right we have, you always have somerestructuring going, the costs of the normal operation that will be a little bit here and little bit there but no realstructuring problem which takes place, but of course you take individual decisions for small shop or whatever you needto replace it or to do something else. That will continue. However we said well we will now in first place really lookinto what is the new footprint you want to have based on the new organization which we have in place and then wepostponed many things which are not obvious to later time.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

And otherwise it's EUR100 million and the timing here would be that it is not so much this year, but it will be more inthe year 2015 where we will likely see the bulk of it .

Unidentified ParticipantSir, just wanted to stick to that regional question because the numbers slightly surprised was the U.S. which is only 40compared to Germany it's 100, if you look at sales per GDP. Is that an active decision not to go after slightly lowergrowth. Again is it SPX or is there an opportunity for you to try and increase that penetration.

Jurg Oleas, Chief Executive OfficerWell, it's a combination. Of course one of our competitors SPX is native there as were in SPX in Germany. Maybewhen we said in areas cash in the states field increase what it is. It's a combination of course one from competitors XPsorry mate as we had made 6 maybe one Germany as a benchmark to bid on the high end, because that's native country,our country of origin.. And similar things maybe to the US.

Our presence in the US also was not -- our coverage was not so good. Our coverage was mainly on the East coast, verymuch focused there and also (inaudible) milk machines is very strong in the US, we are also strong. We are strongnumber two but (inaudible) has been historically more present in the US than us. So that's a combination of these threeelements.

Unidentified ParticipantI think making acquisitions this year may be slightly longer than people expected. Are you seeing the bidding processturning more competitive given let's say in the end market. And secondly meeting your hurdle rates for returns whatkind of time period you have to meet those returns for acquisitions?

Jurg Oleas, Chief Executive OfficerWell, of course the prices for acquisitions are higher now than they were in 2009. I mean somehow they moved also themultiple switch you have pay are moving more or less in parallel with the stock markets. However the one we just hitlast week or announced last week, I don't believe that we paid too high price.

There were small enterprises, very often those families they also watched careful that's their enterprise goes into a goodenvironment instead of just selling it at higher price and then they see collapsing it later.

The hurdles, we will not take them away. I mean we will leave them as long as and maybe changed sometimes in thefuture but I think the hurdles with presenter makes a lot of sense. So first of all we would not accept a long termdilution of our (inaudible) neither from our cash flow driver nor would be accept that we would pay than what the sharecost because we could not justify that in front of our shareholders that we used the money to buy something else thanbuying shares back.

We had still one hurdle which is comparing to what we got for HX. So we carefully also compare if we have to pay amultiple for an acquisition that we do not dilute how much we got for HX for the same EVIT. And that hurdle, we aregoing to take away as soon as we have spent the money from HX. As long as we are spending money, these are roughlyone billion net proceeds which you mentioned. We're also checking carefully that we are not making stupid things byhaving sold HX for multiple weeks and paying for the same EBIT higher price for an acquisition. But that benchmarknaturally we believe we can take away once we have spent the money from HX.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Unidentified SpeakerSo, for the two targets, which we just acquired, we have done of course the exercise of a cockpit which I was justpresenting to you. And just to add to that, they of course passed all the tests, which we have done and to remarks on theother hand of course not all traffic lights would be always green, and then you need to take a decision well how muchyou can afford that maybe one traffic light is more yellowish, yellow and the other ones are then greenish.

And that is however a good tool to use in order to get an overview, view on this target. And the other point I want tomake is don't expect that as I said to you in my presentation that the (inaudible) or the cash flow driver is readily in linewith our target just from the first year of integration because you have one or some accounting things which you needto follow strictly in order to, for example recognize the purchase of transaction price, and then it kicks in, we've a littlebit off delay, but it needs to be in a decent period to fulfill those targets.

Unidentified ParticipantThree questions, two very quick ones and then a slightly longer one. Just going back to the first question and talk youabout the move to this sort of two divisional structure. I think you said you're going to give some disclosure on the topline, but for companies like CFS where the top line is being relatively stable, but profitability hasn't. Will you be givingdisclosure on that, I think from memory, that's the single biggest source of margin upside within the group and so itwould be nice to when you get to 10% or whatever that figure is for CFS?

The second one, just talking about you mentioned you wanted to reduce the proportion of engineering sort ofcontracting business within the group and you had done over, over a considerable period of time. Could you just saywhat that figure is as a percentage of sales now? And then the last one when you talk about barriers to entry, if you areroughly going to spend 1.5 billion on acquisitions. I mean clearly from that point of view, the barrier to entry isn'tfinanced because anybody who has got that sort of money can go out and buy those companies. So, could you just talka little bit about why you think you got better barriers to entry than any other any other PE buyer or any other companybuyer has?

Unidentified SpeakerYeah. Let me start with the last question first. GEA has a story that we want to complete the applications. If the PEwould have bought for example the (inaudible) I mean the only thing he could have made is maybe if they were poorlymanaged which is not true then improve their management, improve their working capital and get the value out of that.But those especially, those family owned companies, they are very proud to see that their enterprise goes into one ofthose application and starts to play an expansion within the GEA family.

And we have been working with them and many others now for years I mean when we acquired Bock, the same yearwhere we acquired CFS. We worked with Bock, with the Bock family already five to six years together. So, it was anatural convention that led us put things together and actually most of our acquisitions that's the case. Of course, if a PEwants to step in and wants to overpay then he can do that. But I can tell you the biggest hurdle quite now to be fastacquisitions is we have learned our lessons from Food Solutions or Convenience Food or from CFS.

And we really spend a lot of time in due diligence and then sometimes you find that somebody has used 15 years ago asbest source or if somebody is infringing some patents which he even didn't know that we told him, are you aware thatyou're infringing patents towards a competitor et cetera. And we are just then pulling out from these things, because wedo not want to have any adventures anymore. So, that's a bit, we had to give up some acquisitions, we wanted to do forthose reasons and not so much for the price reasons.

Coming to your question about Convenience Food and tracking Food Solution that will be, you have to see out thoseengineers are going to be put together. So, we will not be able to do, separate it anymore more. It will be very difficult,but I mean we'll roll the industry, Convenience Food, we'll report that, that not the legal entity Convenience Food,



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

because the innovation engineers or the supply management engineers or the operational engineers are going to betogether with the supply management engineers for mechanical separation and pumps and valves. And let's say factoryengineers from Food Solutions are going to be now together with factory engineers from pumps and valves andhomogenizes et cetera.

So, it's not that in the future, we'll be able to say the legal entity as we had today in healthy or a burden or theConvenience Food, they are doing this and this and this margin. We will by business line, yes, we'll be able to do that,but the engineers are going to be melted. That's where we see huge potential of not only cost savings, but also leverageknow-how from left to right and right to left.

Unidentified Participant(inaudible) whether you should be selling more products to a particular customer and whether Nestle as a wholecustomer is more profitable than customer Plc [ph]. Do you know, have that information as you currently have?

Unidentified SpeakerYes, we will have on the, for example, on the equipment side, we, I think they are proposing now our teams to designabout 4, 14 product categories. And within those profit categories we'll see the gross margin, the top line development,service percentage of service development et cetera. And we will steer of course we will need those numbers to steerthe group. But it's not like we had in the past the Convenience Food or a (inaudible) or a Niro or the Westfalia wherewe could say Westfalia is doing so much or Niro is doing so much.

It's the product lines, the global product lines and the industries. When it comes to the customers, we have not beenable neither in the past and that will still take time to see how profitable a customer is. What we know very well in themeantime is how much is the top line in which product line with which customer, that we know, so we know who arecurrently our top five customers in which areas et cetera but not yet the profitability of those customers.

Unidentified Participant(inaudible).

Unidentified SpeakerYeah, sorry, can you repeat that.

Unidentified Participant(inaudible) element as a percentage of the total group sales?

Unidentified SpeakerHas become very low. We on purpose we reduce and reduce and reduce it as some of you may remember us sayingabout two, three years ago that we want to reduce the level of contracting, because contracting, the risk-reward profileis looks quite poor. So, overall contracting business for GEA today is maybe less than a 1%. It's not much more.

Unidentified Participant



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Two quick questions. The first one is assuming 5% organic growth which is your guidance for the mid-term. What kindof operating leverage excluding let's say the savings. Can we expect in the normal year when you have 5% organicgrowth, given the cost structure that you have between fixed and whatever?

The second question is if you look at your current pipeline for a minute. Can you give us an idea of the average size ofthe company that you are, let's say is in the pipeline by size in revenues in those, which is the biggest, just have an ideaif the bill materialized could be the impact? And the last one is considering that clearly because of the base in 2013 thisyear probably the order intake will be a little bit lower than in 2013? And how important is the orders that you get in2015 to achieve some growth in the sense if this year the order intake will be slightly below last year. What do youneed to grow the revenues next year? Thank you.

Unidentified SpeakerIf I may take from the end of your questions. What we expect is that we'll see the average growth or the next four yearsto come as we were just outlining it and that is pretty much I would say and even distribution. So, basically we sayyear-on-year we see some of the 4% to 6% of gross kicking in and then of course we would need that in order togenerate the necessary sales. In general we are pretty much or pretty good covered by our backlog. So if we start thefinancial year we are likely more than 2 billion, 2.1 billion, something like that, already in view on what we can invoicethen to the customers throughout the year. So that has acquired quite decent amount of money which we are no early upand no I mean it must come from in for our business. And there you need this curve in order to achieve also thenecessary sales growth. And well, what was the first question, was on...

Unidentified ParticipantOrganic leverage.

Unidentified SpeakerOkay, organic leverage. I mean that's up and that depends little bit on how the business is composed between theEngineering or the Solutions business in the future and the Components business. For GEA as a total, I would sayyou're not far away if you think about something that maybe 18%, 20% something like that as a leverage.

Unidentified SpeakerAnd then your second question was about the M&A platform. So, as I mentioned we do see at an average about 50million annual sales. And currently, we have in our focus the largest targets are up to close to 100 million sales.

Unidentified ParticipantYeah, question here. On the services, if we assume 2017, 30% of revenue is coming from services. Would you be ableto split that between really service purely service and how much of that would come from parts components, you mightpull it. And also what is the duration if you sell something, do you get service contracts for one year, or is it just onecall and you call that is servicing somebody's called out those machines don't work?

Unidentified SpeakerWell, it's actually it's everything. The services just selling I mean let's from one extreme it's selling the chemicals forthe cleaning off the teeths of the cows, that service where they dips these chemicals to clean the cows. The farmers they



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

need every week couple of 100 liters. So, we sell them the recipes et cetera. And then it goes through classical spareparts rear and tear from pumps, valves, homogenizers up to refurbishment on debottlenecking of plants you have heardto gentleman from Fonterra that they do not only invest in new plants, they also debottleneck existing plants and GEAsolutions also is able to offer debottlenecking, making, increasing the throughput et cetera.

So service is a huge variety from integrative spare parts up to debottlenecking plants.

Unidentified ParticipantYeah. But do you have contracts with for instance the milk drying product? Do you then sell also a service contractwith one or two years old, five years plants?

Unidentified SpeakerYes. Quite often in very critical plants and that is very often the case. The customers, they even want to have two orthree GEA engineers in their plant. So, they have been overall from the customer from Nestle or from their asset. Andthey live and sleep in the plant just in case if something happens that the GEA engineers there and the customer doesn'thave to worry about how do I order a spare part et cetera because GEA maintain its people anyhow. So, of course thenwe have our maintenance people which we sell on a yearly contract to the customer in the plant.

Unidentified ParticipantOkay. So, that would be an yearly contract is the average for the services?

Unidentified SpeakerWell, you cannot say that. I mean in some cases, the customers say they do it on their own and they say, I'll give you acall when something starts to breakdown, then I need your help. And in sometimes some cases they say I leave that allto you and you fix that. What we are currently doing is trying to touch the customer closer and closer to us by thingslike software intelligence system. So, we are selling him upgrades which the machines which we call intelligentmachines that the machines, they themselves, call us so the customer doesn't have to worry.

Customers say like that quite much that the machine is in daily contact through the Internet, we have the headquartersand then the machine tells the headquarter I'm suffering of this and this and this and I need to service in 5,000 hourswith most likely this and this part. And if we have such a contractors to customer, then it's basically done fullyatomized the customer is not ordering anymore anything said to himself. The machine itself is telling us through theInternet when the machine needs some service.

The other thing is for example in farm technologies, we offer to customer's full maintenance of the cows and whetherthe cows are sick or not sick. And if they eat enough and if they walk enough et cetera. And we offer to the customersif they want it and it's also very popular this time in large farms that we tell the farmer, you have to watch that cow, thatcow, that cow, take it out because it's not giving milk or it seems to be sick because it's no walking around et cetera. So,that's -- that is also service for us.

Unidentified SpeakerMaybe I can quickly add to on to it. Many cases of course also the customer expresses with the GEA machine, nowpassing water pure (inaudible). For the first two years it can also well be that for baseline contract who are just doingthe contract and then service kicks in later on. The other point I want to make if you have commission with regard to



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

what is maybe the split between service from minerals and from parts we are selling so and so forth. That is also part ofall new controlling cost. If you always need not to ask or want to ask what is the extra price we need to pay in terms ofmen ask if I would like to understand what are you earning from man hours? What are you earning from parts andmaybe other services.

Is it really worthy effort? I mean if you would like to save EUR100 million and a lot of that is coming also from theG&A expenses. You really need to see it also down and understand well take a white sheet of paper and start fromscratch and ask yourself what's important to really understand.

Unidentified ParticipantYeah, exactly. So, that's going to be disclosed once you have these numbers or maybe?

Unidentified SpeakerWe are still to answer the question where it is bought down.

Unidentified ParticipantThank you. Then even me. If you develop an application which can go into several end market because you split nowequipment business area from solutions business area. What gets to revenue if you have an application that go intodifferent business areas, equipment businesses?

Unidentified SpeakerWell, it's the same as today very often in this large applications, for example the plants, which Fonterra was showing.The order intake is taken by the segment today Segment Process Engineering and they internally get the machines frommechanical separation or from other segments. So, it will be the same in the future, but the -- if you can see that in theconsolidation line, it's quite limited. It's the internal sales from one today's segment to another in the future from onebusiness area to another is ranging between maybe 102 million sales, that's the internal business.

They have amongst themselves where one is fronting towards the customer and the other one is supplying internally.So, 95% of the top line comes with direct business.

Unidentified ParticipantCould you give us an idea in the pet food and personal care markets. How fragmented they are relative to your existingfood markets in terms of competition and other key technologies that you already have in your existing businesses thatjust need to be applying to those customers in those different industries? And also could you give us an idea, you'vetalked lot about milks day which is for the year enlightening.

And but could you give us an idea out of the whole group not just dairy farms how much of your business is dependenton milk and milk products or dairy or fruit juice to give us an idea of the end raw materials that go in irrespective ofwhether it's cheese or something else that comes out of the input plant? And on service, growing your percentage ofservice, are you taking away business from in-house service people of the customers or how the machines beingdesigned to really require more input from you in the future?




Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Well, coming to your second question, the service, there is a lot of -- still a lot of parrots in grey areas trying to doservice out there. So, we believe that we've dedicated and we have been increasing the level of service over the pastyears from I still remember 22%, 23% now to about 26%, 27%. First of all, because of the installed fleet but that wouldnot increase the percentage but also from taking back to service from maybe others who have been doing the service.

Then, regarding new technologies, examples of new technologies, you mentioned, for example, pet food. GEA has, Ican say that very openly mid single technology, which is exclusion exclude us which are very important in many areasof the food industry but also especially in the pet food industry. From whom we would take away, that's actually if wewould buy a manufacturer who owns technologies of extruders, we wouldn't take it away from nobody but just wouldthen start to do the business with the acquisition which is the acquisition was doing.

But in those areas then we would see other competitors not as much, not so much as speak or tetra would be -- may bemore of the company dealer or booker from Switzerland which are also in other areas especially in the PETA industrybut what we -- why that makes sense for -- because we have got the feedback when we need did the certain services, ifthe customers, with our customers in 2013 that they say rather than buying this piece from this supplier and this piecefrom the other supplier and from this and this. I would like to have, to speak in part was able to talk about anycomponent in that application that's why I think it would be very beneficial for us to have in our scope until we set anexample.

We would end by competing as dealer and two or others but we would by the technology from an acquisition and wewould first have their markets share and trying to increase that market share through our global presence and been aglobal partner to the large food producers.

Unidentified SpeakerI'm here bring on to the end markets, we have a slide always in all materials for all shows and all conferences, but wewould find breakdown of what's dairy farm, how its daily processing, how much its beverages involved. I can just giveyou the numbers you do, if earnings are about 14% as we state and diary processing, there is another 23% and thebeverage business would be 14 and that is based on the Q2 numbers the actual breakdown.

Unidentified ParticipantJust two questions please. The first one is regarding your non-food business which is still a bit more cyclical probablyyou can comment whether you're seeing currently a slowdown, I still remember that the chemical industry was one ofyour first signs was always some warning signals pop up probably you can comment on the non-food business.

And the second question is what strikes me for 2014 you're giving an EBITDA guidance. Now you're guiding mid-termoperating EBITDA guidance, probably this is not only linked with the lower CapEx, you're expecting that in theforthcoming year. So, what was the major reasons to switch from EBITDA to --.?

Unidentified SpeakerWe start with that later on. Just actually what we said is long term. It's not the same. I mean if CapEx is equaldepreciation and you don't see too much variations there any more than basically the EBIT it's just in line with theEBITDA you have with that.

Unidentified Participant(inaudible)?



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Unidentified SpeakerYeah. But that we set well at the end of the day for us, we believe that our CapEx will be you mean all the CapExexpenditure but it will be no more in that range. It makes 2%. So we don't see that peak anymore and don't forget thatwe are still the EBITDA in our cash flow margin, so because there it's the starting point. Its emplaced guidance anyorder.

Unidentified SpeakerYou were asking about cycles of the non-food industry. The marine business is currently doing okay. I mean it neverreturn back to the peak levels before the Lehman crisis but it has recovered quite a lot and the oil and gas business. Isdoing fine, we got some large orders also last year, and also this year. I think also in last quarter, we got a good quarterfrom mechanical from separators in the oil and gas business. So, that's okay. The chemical industry is somewhatdeclining especially , the specialty chemical industries or not so, I haven't seen yet announcements from the bulk.

I mean the season is not yet open but what I did see from the first one reporting was specialty chemical the --Switzerland they reported a softening or decline top line, so I think bulk chemicals is not so bullish anymore as it use tobe.

Unidentified ParticipantHi, as far as I can see it about, about one and half billion this year sales. Come from acquisitions maybe in last 10 years.And you all dis-satisfied with the complexity of the business or an internal between the clients. So, undertaking yourrestructuring program in all -- program therefore say adding 1 million to 2.5 million from acquisitions. How do youthink it will joint off both ends at the same time in the industry.

And the second questions, is (inaudible) power (inaudible)?

Unidentified SpeakerYeah, question number one for -- did the -- organization one of the many -- are getting design rules is the ability tointegrity. So, when they proposed to a new way to organize engineering or purchasing it's -- you have insure us howthey will in the future make it possible to even easier integrity so they are already now pretty much occupied on how tointegrate in the future.

We also have prepared post merger integration clients for the acquisitions we're going to make. But of course, you areright. That's also the reason why we were bit staying on the break with the acquisitions because we said as long as weare busy the new strategy, the applications, the blueprint and all the things. We should not try to integrate at the sametime. But I think towards the mid of next year the major hurdles of these new reorganization and new structures we leftbehind us.

So, then people will be able to focus once again on to current business, which is also acquisitions. Sorry, did you asksecond question.





Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

For this project or ongoing basis.


Unidentified SpeakerIn generally it's mainly the cash flow drive. So, they have, there are three individual targets, but they are not sorelevant. They are incentivized by the cash flow drivers for those three years enrich. Out there three years it's nothealthier. So it's last 36 months the cash flow drivers has outlined term. The third point for the cash flow drivers is thethree years -- which is 8% for the rose its 19%. Also three years average and then the gear share versus the euro stocksEMI industrial group which is a compulsion of about 70 peers. Where -- so those are the key incentives for our topthree managers.

Unidentified ParticipantThank you for your presentation today. I have a question about Russia situation. I'll be wondering, how this Russianbound on food imports from the US and certain other countries affecting our business maybe you'll see a little bit moreactivity on the Russians side. Also on the western Europe aside what you've seen also if this Russian sanctionsremained for longer time like for few years. Then how do you think it's going to affect your sales and profitabilitytarget? Thank you.

Unidentified SpeakerWell there are two sides of that core. One of course, it hurts us because without -- or sales price was, its roughly moreor less 3% in Russia. The exposure direct and that has mainly disappear in the mean time. However what we hear andsee from our people out there is not everybody of course, has a ban on Russia that's only the US, and EU not evenSwitzerland has a ban on Russia. But now what we do see a lot of activities in Argentina and Brazil, in China to supplythrough Russia.

I mean what even processed meat or milk powder or cheese products, dairy products et cetera.

So, there are lot of others trying to fill the gap now. Which could even be an opportunity for us if they want to expandtheir capabilities. I would rather prefer not to have the Russian crisis and I hope that the tension is going to settle againfor worldwide economic sensitivity of this thing. But in the food business, somebody is going to supply that and thereare many, many countries in the world who have no problem to supply that and they are going to replace supplies fromGermany or from France or from Holland. I'm absolutely sure, it'll take one or two years and they will supply fromother parts of the world.

Unidentified ParticipantThank you. Just a bit about the phasing of the cost savings, if you take the most of the 100 million euro charge nextyear, when do you get to that kind maximum point of savings basically how much closing until next year and howmuch comes of about. And then you mentioned I think briefly that you'll stepping up the organic investment in R&Dand sale force in some regions to drive the organic part of the growth and maybe you can quantify that how big it dragthat would be on margins going forward offsetting those cost savings. Thank you.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Jurg Oleas, Chief Executive OfficerWe are planning with our design teams who have the savings as much as front-loaded as we can, because the risk isalways if you plan them for 2017 or '18 they may never come. It's difficult still because we do not yet have the detailedblue print, who will have it in December from our teams and the detail plan of the savings when they are going to dowhat saving. But my expectation to the teams is the following that in 2015, or now in January 2015, we have identifiedall the savings. That's number one. That's they're becoming effective in the P&L of 2015, its maybe 70% of thosesavings. The other 70% in the P&L of 2016, because we say that for the full year 2017, all the 100 should be there.

Unidentified ParticipantHi, and then just a couple questions on the pulling of your engineers. Could you just give us a color of how desperateyour production is and your R&D? So how spread us across the world. How many plants you have or what theopportunity is that to prove them?

Jurg Oleas, Chief Executive OfficerWhile manufacturing plants, we have about 70 around the world, mostly of timing of course in Europe, and outside ofEurope to be large countries out of U.S. and China. To get your flavor of the potential, which is in there the averagefactory has only about 60 employees, which is by far too low. Of course, we have some factories, which have 600employees' sites by the averages by far too low. So we are going to do a similar exercise as we did (inaudible) in 2010,when we class with the factory.

Engineers, it's much more spread around, I think there we are quite well positioned. We have huge engineering groupsin China. We have a very big engineering hub in India, which they don't do any business for India, it's just for example,this New Zealand plants et cetera. Many of the tasks are done out of India, from our engineers in India. We have largeengineering groups in the U.S. of course in several places in Europe.

When it comes to engineering and project managements, we are quite well distributed around the world for differentpurposes. One is cost, but that's not the only one there. The reason to have this big engineering hubs in India is theavailability of engineers. They used to be times and it's still today, difficult to hire 20 engineers, skilled engineers in acertain area in Germany or so and where it's much easier, in India there are much more engineers available, goodengineers, project managers, supply managers et cetera.

Unidentified ParticipantWould you quantify how many engineers you'll be asking to move around?

Jurg Oleas, Chief Executive OfficerI get you. Now, not at this phase. But I don't think it will be so much of moving from Australia to Mexico. So it wouldbe much more of concentration within Holland of concentration, within Germany of concentration, within France, etcetera, rather than moving across board.

Donat Muller, Investor RelationsI mean, it's little bit like also with the finance thing. You need to get it under one governance, one guidance. Sosomebody centrally needs to set this tendency. And then you can do it, where the best cost base is around the globe.The important thing is where we have one governance in place there.



Date: 2014-10-13



Current PX: 32.439





Current Year: 1.776




of 39

Jurg Oleas, Chief Executive OfficerOkay, good. If there are no more questions, on behalf of the Board and my colleagues here from Communications andInvestor Relations, I would like to extend many thanks to you. And I think there are some drinks out there waiting forus. Thank you very much.

This transcript may not be 100 percent accurate and may contain misspellings and other inaccuracies. This transcriptis provided "as is", without express or implied warranties of any kind. Bloomberg retains all rights to this transcriptand provides it solely for your personal, non-commercial use. Bloomberg, its suppliers and third-party agents shallhave no liability for errors in this transcript or for lost profits, losses, or direct, indirect, incidental, consequential,special or punitive damages in connection with the furnishing, performance or use of such transcript. Neither theinformation nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securitiesor commodities. Any opinion expressed in the transcript does not necessarily reflect the views of Bloomberg LP.

© COPYRIGHT 2014, BLOOMBERG LP. All rights reserved. Any reproduction, redistribution or retransmission isexpressly prohibited.

transcript%20gea%20cmd%202014 tcm11 25493

Documents