Earnings Call Presentation Q3 2017

Transcription

1 Earnings Call Presentation Q October 26, 2017

2 Safe Harbor Statement Statements contained in, or incorporated by reference into this presentation, future filings by us with the Securities and Exchange Commission ( SEC ), and oral statements made by, or with the approval of, our authorized personnel, that relate to our future performance or future events are forward-looking statements under the Private Securities Litigation Reform Act of Such statements can be identified by use of forward-looking words or phrases such as intend, anticipate, plan, estimate, target, aim, forecast, project, expect, believe, we are optimistic that we can, current visibility indicates that we forecast, contemplation or currently envisions and similar phrases. Although we believe that the expectations reflected in these forwardlooking statements are reasonable, our expectations may not prove to be correct. Forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control, which could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties, among others, include: our dependence on automotive and truck production, both of which are highly cyclical; our reliance on major OEM customers; commodities availability and pricing; supply disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key management; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims; and future changes in laws and regulations in the countries in which we operate. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All subsequent written and oral forward-looking statements concerning the matters addressed in this presentation and attributable to us or any person acting on our behalf are qualified by these cautionary statements. Forward-looking statements are based on current expectations only and are not guarantees of future performance, and are subject to certain risks, uncertainties and assumptions. We may change our intentions, beliefs or expectations at any time and without notice, based upon any change in our assumptions or otherwise. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In addition, some factors are beyond our control. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. BorgWarner Inc. 2

3 Reconciliation to US GAAP $ in millions, except per share data US GAAP (Reported) Restructuring Expense M&A Expense Asset Impairment Expense Contract Expiration Gain Tax Adjustments Non-US GAAP (Excluding noncomparable Items, including M&A) 2017 Q3 Sales $2,416.2 $2,416.2 Operating income (16.0) (6.4) % of sales 11.4% 12.3% Diluted EPS $0.88 $0.07 $0.03 $(0.02) $0.95* 2016 Q3 Sales $2,214.2 $2,214.2 Operating income (1.3) (5.9) (106.5) (1.3) % of sales 6.8% 12.0% Diluted EPS $0.39 $0.0 $0.03 $0.37 $0.0 $(0.01) $0.78 *Row does not add due to rounding and/or use of basic vs. diluted shares BorgWarner Inc. 3

4 Agenda James Verrier President and Chief Executive Officer Macro Outlook and Industry Perspective Recent Product Announcements Q Recap and 2017 Outlook Ron Hundzinski Chief Financial Officer Q Results 2017 Guidance Q&A BorgWarner Inc. 4

5 Industry Perspective and Company Update James Verrier, President and Chief Executive Officer

6 Macro Outlook and Industry Perspective General Comments Market Outlook Technology Trends BorgWarner Inc. 6

7 Recent Product Announcements Cabin Heater for a new electric vehicle (EV) for a globally known EV automaker. High Voltage Hairpin (HVH) 410 Electric Motor for Scania s new Citywide hybrid bus for urban areas. Transfer Case for the new Range Rover Velar premium SUV. Compact Wastegate Turbocharger for Honda s new threecylinder 1.0-liter gasoline direct-injected engine. BorgWarner Inc. 7

8 Q3 17 Recap and 2017 Outlook Q3 17 organic exceeds the high-end of the range and our operating performance was in-line with expectations Revenue and EPS Guidance increased BorgWarner Inc. 8

9 Sevcon Acquisition A global player in electrification technologies. Complements BorgWarner s existing power electronics capabilities. Annual sales for 2017 are expected to be approximately $60 million. Modestly dilutive to earnings in BorgWarner Inc. 9

10 Earnings Review and Financial Outlook Ron Hundzinski, Executive Vice President & Chief Financial Officer

11 BorgWarner Net Sales Q to Q3 2017, $ in millions $268 $38 $(36) $2,416 $2,214 $(68) $2,147 Q net sales including Remy AM 2016 Remy Aftermarket Impact 2016 Proforma Backlog Market growth/pricing FX Q net sales Organic Sales Growth of 10.8% BorgWarner Inc. 11

12 BorgWarner Operating Income* Q to Q3 2017, $ in millions $35 $1 $297 $297 $298 $(3) $265 $ % margin 12.5% margin Q operating income* Market growth, price, net new business and performance Corporate, Raws & Other FX Q operating income from continuing operations 12.0% Margin 12.3% Margin * Operating income as shown on this slide is non-us GAAP. See reconciliation to US GAAP BorgWarner Inc. 12

13 Engine Segment Net Sales & Adjusted EBIT Q to Q3 2017, $ in millions $118 $29 $1, %* $1,506 Q net sales Market growth, price and net new business FX Q net sales $16 $1 $222 14% incremental margin $239 Q adjusted EBIT 16.3% Margin Market growth, price, net new business and performance FX Q adjusted EBIT 15.8% Margin * % change to net sales BorgWarner Inc. 13

14 Drivetrain Segment Net Sales & Adjusted EBIT Q to Q3 2017, $ in millions $866 $68 $798 $115 $9 14.4%* $922 Q net sales including Remy AM 2016 Remy Aftermarket Impact 2016 Proforma Market growth, price and net new business FX Q net sales $89 $0 $89 $22 $0 19% incremental margin $112 Q net sales including Remy AM 2016 Remy Aftermarket Impact 2016 Proforma Market growth, price, net new business and performance FX Q adjusted EBIT 10.3% Margin 12.1% Margin * % change to net sales BorgWarner Inc. 14

15 2017 Full Year Guidance BorgWarner Inc. 15

16 Organic Sales Growth excluding Sevcon of 9.0% - 9.5% $ in millions $905 $15 $37 $9,700 $(73) $9,670 $9,071 $(255) $8,816 $ net sales including Remy AM Remy Aftermarket Impact 2016 Proforma Backlog Market Growth/Pricing Sevcon FX 2017 net sales BorgWarner Inc. 16

17 Operating Margins Expand by bps $ in millions $124 $1,213 $(18) $(4) $1,168 $(3) $1,208 $1,114 $ preliminary Market growth, operating incomeprice and backlog Headwinds from corporate costs and other Sevcon FX 2017 operating income 12.3% Margin 12.5%-12.6% Margin BorgWarner Inc. 17

18 2017 Guidance Update - Other Items EPS Guidance $3.81-$3.83 Free Cash Flow $450-$500 million CapEx $525-$575 million Share Repurchases $100 million R&D Spending ~4% of sales Tax Rate ~29% $ / Euro Exchange Rate $1.125 BorgWarner Inc. 18

19 2017 Fourth Quarter Guidance BorgWarner Inc. 19

20 Organic Sales Growth of 5.0% - 6.5% $ in millions $2,259 $(20) $2,239 $181 $151 $2,371 $(34) $(21) $15 $85 $2,386 $2,471 Q net sales including Remy AM Remy Aftermarket Impact Q Proforma Backlog Market Growth/Pricing Sevcon FX Q net sales BorgWarner Inc. 20

21 YoY Incremental Margins to Improve Sequentially $ in millions $0.06 $0.03 $0.03 $0.04 $1.01 $0.99 $(0.01) $0.85 Q EPS Market growth, price, net new business and performance Tailwinds from corporate costs and other Sevcon FX Lower share count and tax rate Q EPS from continuing operations BorgWarner Inc. 21

22 Thank you! BorgWarner Inc. 22