Annual results Analysts' meeting. Wednesday 27 February Agenda

Transcription

1 Annual results 2012 Analysts' meeting Wednesday 27 February 2013 Agenda 1. Kendrion at a glance Highlights 3. Key figures for 2012 and financial objectives 4. Review of business units 5. Financial position 6. Dividend 7. Fine imposed by European Commission 8. ERP project HORIZON 9. Priorities and outlook 2 1

2 1. Kendrion at a glance 3 The Kendrion organisation KENDRION N.V. Development, production and marketing of high-quality electromagnetic components 1,600 employees (including 100 temps) in 12 countries Revenue: approximately EUR 300 million Listed company on NYSE Euronext's Amsterdam Market 4 2

3 Organisation Kendrion breakdown of revenue 2012 Industrial Magnetic Systems Machine building Safety engineering Transportation industry Medical engineering Power engineering Elevator industry Automation Passenger Car Systems Automotive applications Hydraulic applications Industrial Drive Systems Medical technology Packaging machines Servo motors Robotics & Automation Elevator drives Crane construction Machine tools Transportation industry Consumer appliances Commercial Vehicle Systems Motor cooling systems Air conditioning compressor drives Torsional vibration dampers Magnetic clutches and brakes Controllers Fire protection technology 5 5 Global activities Kendrion 6 3

4 Kendrion committed to being a high-performer in selected business units Mission Strategy Objectives To develop business units that have strong international market positions in selected business-to-business niche markets and are market leader whenever possible Spearheads - Niche market leadership - Organic growth in the current operations - Utilisation of synergy in and between the business units - Balanced geographical spread of the operations - Enhancement of flexibility in the organisation - Targeted add-on acquisitions - Enhancement of the innovative capacity Organic growth > 10% ROS > 10% ROI > 17.5% 7 Kendrion's strategy - A clearly defined profile of a multinational, fast-growing high-tech company - Build leading positions in business-to-business niche markets - Balanced spread of activities - Automotive with bus, truck EUR 200 million and growing strongly - Industry EUR 100 million - Ambitious growth targets (EUR million in 2015) - Selective value-adding acquisitions for expansion preferably in industrial activities - Further improvement of geographical distribution across continents (USA, China, India) - Financially strong - Strategy redescribed in Mid-term Plan "Entering another league" 8 4

5 Key actions for achieving our strategic spearheads (1) - Alert response to market developments in all key markets (market intelligence) - Increase customers' commitment in projects, particularly in Industry - Expand and retain workforce - Very little unemployment in southern Germany, flexibility pressured as a result - Recruiting engineers is very time-consuming - Kendrion devotes extensive efforts to the development of its employees - Redefine workforce flexibility and costs - Targeted acquisitions - In the USA and China (markets, customers) - Niche players in Germany (technical know-how) 9 Key actions for achieving our strategic spearheads (2) - Enhancement of innovative capacity - Continuous flow of new initiatives and ideas - Innovation cells and "treasure mapping" - IP strategy - Foundation of Kendrion Academy - CSR - Focus on working capital management - Ongoing strengthening of risk management - Good analysis of the business risks - Tax and regulatory compliance - Smaller entities ("Kendrion in Control") 10 5

6 Revenue distribution Highlights 12 6

7 2012 Highlights - Market conditions deteriorated during the year - Transitional year, revenue up 6% (-4.1% on an organic basis) - Net profit EUR 18 million (normalised net profit EUR 13.6 million) - Growth in business units IDS and CVS - Revenue decrease in IMS and (on an organic basis) in PCS - Satisfactory free cash flow (EUR 9.7 million) - Extensive focus on innovation and flexibility - Dr. Wilhelm Binder Day highly successful (> 300 visitors) - Acquisition of remaining 49% in Kendrion (Linz) GmbH - Order book for industrial activities growing again to some extent 13 Revenue development per region (x EUR 1 million) 2012 share 2011 share growth Germany % % -6% Rest of Europe 61 21% 65 24% -7% Americas 50 17% 20 8% 150% Asia 33 12% 32 12% 2% Other 2 1% 3 1% -2% Total % 14 7

8 3. Key figures for 2012 and financial objectives 15 Key figures 2012 (x EUR 1 million unless otherw ise stated) Q Q Difference in % Revenue % Normalised EBITA * % Realised net profit Normalised net profit * % ROS 3.4% 10.3% 1 The quarterly figures are unaudited (x EUR 1 million unless otherw ise stated) Difference in % Revenue % Normalised EBITA * % Realised net profit Normalised net profit * % Solvency 44.8% 39.2% ROS 7.8% 11.5% ROI 12.4% 22.2% * Profit adjusted in 2012 to exclude release of FAS Controls earn-out payment of 4.4 million (Q4 1.1 million) in 2011 to exclude non-recurring provision/expenses relating to EC fine of 39.4 million and non-recurring costs of 1.3 million (after tax, 1.2 million) 16 8

9 Financial targets Target Realisation 2012 Realisation 2011 Organic growth >10% per year -4% 21% ROS >10% 7.8% 11.5% ROI >17.5% 12.4% 22.2% Solvency 35% 44.8% 40% Interest-bearing debt/ebitda < Free cash flow Dividend Healthy 35-50% of net profit 71% of normalised net profit 50% of normalised net profit 71% of normalised net profit 35% of normalised net profit 17 Performance Q Difficult quarter, especially the month of December - EBITA margin 3.4% in fourth quarter Inventory effects (priority for working capital management) - Tax credit (utilisation of Dutch losses) 18 9

10 Added value 2012 Added value fell by over EUR 11 million on an organic basis due to: - Lower revenue EUR 5 million - Lower inventories EUR 2 million - Price effects net EUR 1.5 million - Revenue with low added value EUR 2.5 million 19 Changes in Kendrion organisation - Smoothly operating organisation in From 1 January 2013: new Business Unit Manager CVS (Erik Miersch) - From 18 February 2013: new CFO (Frank Sonnemans) - Engineering significantly strengthened 20 10

11 4a. Review of business units 21 General - Operations: electromagnetic components and systems for industrial applications - Focus markets: mechanical engineering, locking and safety, energy sector and medical sector - Highly innovative, customised solutions - Global player with operations in Germany, USA, China, Switzerland, Austria and Italy; agencies in France and other countries - > 2,000 customers - Project business (70%) and standard solutions (30%) - Competitors: besides MSM, ETO and Kuhnke there is a large number of (usually smaller) niche players in Germany, Italy, France and the USA - Fast-growing market in China, but with poor quality - Engineering, logistics and delivery time most important drivers - Competitive advantage: innovation capabilities, global possibilities, know-how for decades, reliable partner, fast delivery time 22 11

12 Top 10 customers account for 27% of revenue, largest customer for EUR 2 million - Successful in acquiring new projects (especially in the USA) - Challenging market conditions, particularly in textile machine market (since Q2), but also volume reduction at other (large) customers - Organic revenue decrease (12%) since Q Cost reduction implemented successfully, part of effect only in Sales office in Italy successful - Progress in China difficult 23 4b. Review of business units 24 12

13 General - Operations: electromagnetic brake and clutch systems for industrial drive technology - Two production sites in Germany; international service coordinated through UK sales office - Global market leader in permanent magnetic brake systems - Number of customers 600 of which 100 large customers - Substantial project business (80% of revenue), in addition to services business (20% of revenue) - Innovative business unit with many new products - Competitors: limited number of players with revenues between EUR 10 million and EUR 50 million - Engineering, logistics and delivery time most important drivers - Competitive advantage: know-how for decades, reliable partner, fast delivery time Organic growth (5%) in permanent magnetic brake systems continued in 2012, due to German machine building - Strong increase among top 10 customers, revenue down at smaller customers - Top 10 customers account for 63% of revenue, largest customer for over EUR 12 million - Strong focus on market introduction of spring applied brakes (KOBRA-line) in HY New projects in China (start in Q3 2013) - Aiming for further efficiency improvement (project "Fit for Production") - Margin improved due to lower supplier prices - Organisation strengthened significantly 26 13

14 4c. Review of business units 27 General - Operations: electromagnetic components and systems for the automotive industry - Production sites in Germany, Austria, the Czech Republic, China and the USA - Serves European Original Equipment Manufacturers : Daimler, Volkswagen (incl. Audi), and first-tier suppliers (Continental, Delphi) and increasingly also in the USA (Eaton, Navistar) - Good spread of customers (around 30), top 10 account for 65% of revenue - Continental largest customer, with 20% of PCS revenue (10% of Kendrion's revenue) - High tech, focus on energy efficiency, emission reduction, safety and comfort - Contracts for 6-8 years - Established strong position with high-quality electromagnetic valves for common-rail technology - Existing expertise can be extended to other markets (e.g. gasoline, off-road, trucks) - Competitive advantage: know-how for decades, focus, high entry barrier (long lead times, high investments) 28 14

15 In 2012 good 1st half year (organic revenue increase of 2%), organic revenue decrease (15%) in 2nd half year Growth slowed by limited new revenue in 2012 (was expected), by French market and by shifts for small diesel engines at Volkwagen - Continued success in acquiring new projects (total revenue over expected economic life EUR 250 million), new important market segments - Outflow of revenue in next 5 years EUR million - Good profit contribution from Kendrion (Shelby), after dip in third quarter - Alignment of Kendrion (Shelby) with Kendrion standards on track - Follows the trends in motor management (smaller parts, switchable units, lower fuel consumption, CO 2 reduction) - Preparations for new business unit Heavy Duty Systems (truck market) 29 4d. Review of business units 30 15

16 General - Operations: components and total cooling systems for buses, trucks, special vehicles and generators - Global market leader in electromagnetic cooling systems for luxury coaches - Many customers worldwide - Sites in Germany, USA, Mexico, Brazil, China and India - USPs are energy-efficiency and convenience - Increasingly a systems provider - Service business (approximately 20% of revenue) forms an important basis - Competitive advantage: know-how for decades, strong global partner network, fast delivery and service, close to the customers Organic growth of 2%, particularly due to growth in India - Top 10 customers account for 59% of revenue, largest customer for over EUR 9 million - European bus market weak - Extra focus on cooling systems for truck market - Faltering Chinese market, introduction of new products - New greenfield plant in Pune (India), hick-up around the summer, now steady revenue growth - Weak year in Brazil, new project in Kendrion sees good scope for strong growth in truck market in the next few years (cooling systems, Kendrion FAS products) - Organisation expanded by adding engineers for the truck market - Recent claim Far East US$ 1.3 million, validity and insurance coverage is investigated 32 16

17 5. Financial position 33 Financial position - Satisfactory free cash flow for full year 2012: EUR 9.7 million - In control of working capital, inventories reduced - Strong balance sheet (net debt at year-end 2012 EUR 21.3 million, solvency 45%) - Some EUR 80 million freely available for acquisitions - Slight adjustment of financing arrangement 34 17

18 6. Dividend 35 Dividend - Dividend window 35% - 50% of net profit - Solvency of at least 35% - Proposed optional dividend for 2012 of 50% of normalised net profit (EUR 13.6 million) - Dividend of EUR 0.58 per share 36 18

19 7. Fine imposed by European Commission 37 Fine imposed by European Commission - Fine imposed in 2005 (EUR 34 million) - Reason: alleged involvement of former subsidiary Fardem Packaging in cartel in period Recognised a provision following judgement of General Court of the European Union in November 2011, amounting to EUR 43 million at present - Kendrion lodged appeal, hearing on 5 February Decision expected at the end of 2013, beginning of

20 8. ERP project HORIZON 39 ERP project HORIZON - Investment between EUR 5.5 and EUR 6.0 million - 1 October 2012 IDS Villingen live, 1 January 2013 PCS Eibiswald live - 1 April 2013 IMS Villingen scheduled, i.e. 3 major entities completed then - Within budget for investments and costs - Uses standard software, no tailor-made adjustments - Desired improvements incorporated in IFS standard - All companies to be migrated by mid

21 9. Priorities and outlook 41 Priorities for 2013: "Entering another league" - Four spearheads maintained (flexibility, innovation, sustainability, globalisation) - Focus on the internal organisation - Achievement of financial objectives (costs and cash) - Further steps in the field of innovation - Expand businesses in USA, China and India - Focus on "green" (energy savings, convenience, sustainability), new label "Green signed by Kendrion - Roll-out of CSR programme - New steps in HORIZON project - Targeted acquisitions 42 21

22 Outlook - Uncertainty about economic situation - Developments in eurozone and China uncertain - Further signs of recovery in USA expected - Nervous markets, uncertain outlook - Order book for industrial activities growing again to some extent - New revenue in 2nd half year First quarter difficult, gradual improvement expected after that - Solid financial position - No specific profit forecast 43 We magnetise the world! 22