Investor Presentation. August 2016

Transcription

1 Investor Presentation August 2016

2 The Strategic Difference Technology Leadership Customer and Geographic Diversity Financial Strength and Discipline Copyright 2016 BorgWarner Inc. 2

3 Attractive Business Model, Difficult to Replicate Copyright 2016 BorgWarner Inc. 3

4 Stringent Regulations A Resilient Secular Trend MPG Equivalent (CAFE/Local Test Cycle) for Passenger Cars Korea Enacted E.U. Enacted U.S. Enacted China Enacted Year Source: International Council on Clean Transportation As of August 2015 Copyright 2016 BorgWarner Inc. 4

5 Expanding Our Reach Across the Powertrain Timing chain Timing system VCT ephaser Variable valvetrain Fans/fan drive EGR cooler Exhaust heat recovery system Solenoid Control module Eco-Launch TM solenoid valve Friction Clutch module Wet clutch for manual transmissions Transfer case AWD coupling FXD Permanently Engaged Starter Turbocharger R2S turbocharger ebooster turbocharger Diesel cold start Gasoline ignition coils Cabin heater for EVs EcoFlash high frequency ignition Copyright 2016 BorgWarner Inc. 5

6 Remy Acquisition Strong Position for the Future Copyright 2016 BorgWarner Inc. 6

7 Customer and Geographic Diversity 2016 Sales Outlook* Europe VW/Audi 10% Daimler 5% Ford 3% Renault 3% BMW 2% PSA 2% FCA 2% GM 1% CV 3% Other 7% Europe 38% Asia ex. China 14% China Americas 14% 34% * Includes net sales from Remy As of January 13, 2016 Asia ex. China Hyundai/Kia Other Asia ex. China 9% 5% China VW/Audi 3% Ford 2% GM 1% Other China 8% Americas Ford 9% FCA GM 5% 3% Asian OEMs 2% Commercial Vehicles 7% Other 8% Copyright 2016 BorgWarner Inc. 7

8 4% to 6% Organic* CAGR thru 2018 $1.1 Billion $1.65 Billion of Net New Business 2016 thru 2018 Americas**: ~38% Domestic OEMs (FCA, Ford, GM) Diesel cold start Engine timing and VCT EGR modules Transfer cases Transmission components Turbochargers Non-Domestic OEMs (Hyundai/Kia, Renault/Nissan, Subaru, VW/Audi) Diesel cold start Engine timing and VCT Turbochargers Europe: ~18% Domestic OEMs (Daimler, FCA, JLR, Porsche, Renault/Nissan, Volvo, VW/Audi) AWD couplings and transfer cases Diesel cold start EGR coolers and valves Engine timing and VCT Transmission solenoids Turbochargers Asia***: ~44% China (BAIC, Chang an, Chery, CNHDTC, Cummins, FAW, Ford, Foton, Geely, Great Wall, Honda, Hyundai/Kia, JAC, JLR, Navistar, PSA, SAIC, S-VW, Volvo Trucks, Weichai) AWD couplings and transfer cases DCT components EGR modules Engine timing and VCT HEV/EV drives Gasoline ignition systems Thermal systems Thermostats Transmission solenoids Turbochargers Korea (Hyundai/Kia, Ford, SsangYong) VCT Transmission components Transfer cases Turbochargers * Organic growth includes the change in sales due to net new business and excludes the impact of base business growth or shrink, changes in product pricing, acquisitions, divestitures and foreign currencies ** Net new business with FCA, Ford and GM in North America is 30% of total net new business *** Net new business in China and Korea is ~32% and ~8% of total net new business, respectively As of January 13, 2016 India (JLR, Mahindra & Mahindra, Ford, Renault/Nissan) Diesel cold start Engine timing and VCT Thailand (Honda, Isuzu, Mitsubishi, Renault/Nissan) Engine timing Turbochargers Copyright 2016 BorgWarner Inc. 8

9 4% to 6% Organic* CAGR thru 2018 $1.1 Billion $1.65 Billion of Net New Business 2016 thru 2018 Ignition Systems Engine Drivetrain DCT Components Emissions Systems 2% 6% Thermal Systems 6% 3% All-Wheel Drive and Remy 18% Engine Timing and VCT 15% Transmission Components 6% Diesel Turbochargers 21% Gas Turbochargers 23% * Organic growth includes the change in sales due to net new business and excludes the impact of base business growth or shrink, changes in product pricing, acquisitions, divestitures and foreign currencies As of January 13, 2016 Copyright 2016 BorgWarner Inc. 9

10 Sales Growth Continues $ in billions * 2016E* * Includes net sales from Remy As of July 28, 2016 Copyright 2016 BorgWarner Inc. 10

11 BorgWarner 2016 Sales Guidance $ in millions HIGH end of range LOW end of range $433 $(59) $8,250 $7,876 $236 $(137) $7,975 $983 $1,003 $9,253 $8, net sales excluding Remy Market growth, price and net new business FX 2016 net sales from continuing operations Remy net sales 2016 net sales HIGH end of range LOW end of range 5.5%* 3.0%* -0.7%* -1.7%* 4.8%* 1.3%* 12.7%* 12.5%* 17.5%* 13.7%* * Percentage change to net sales As of July 28, 2016 Copyright 2016 BorgWarner Inc. 11

12 Strong Operating Income Margins 9.3% 11.1% 11.7% 12.4% 12.9% 13.0% >12% * 2016E* * Includes impact of Remy operating income, synergies and purchase price accounting adjustments As of July 28, 2016 Copyright 2016 BorgWarner Inc. 12

13 BorgWarner 2016 Operating Income* Guidance $ in millions HIGH end of range LOW end of range $58 $15 $(10) $40 $1,138 $1,098 $1,088 $5 $(23) $1,049 $39 $1,035 $ % margin 15%-17% incremental margin >13% margin >12% margin 2015 operating income excluding Remy* Market growth, price, net new business and performance Tailwinds from restructurings and efficiency gains, net of higher costs FX 2016 operating income from continuing operations Remy operating income** 2016 operating income* * Operating income as shown on this slide is non-us GAAP ** Includes impact of Remy operating income, synergies and purchase price accounting adjustments As of July 28, 2016 Copyright 2016 BorgWarner Inc. 13

14 BorgWarner 2016 Diluted EPS* Guidance HIGH end of range LOW end of range $3.02 $0.10 $0.18 $0.05 $(0.03) $(0.02) $3.20 $0.02 $(0.07) $(0.03) $3.03 $0.12 $0.12 $3.32 $ EPS excluding Remy* Market growth, price, net new business and performance Tailwinds from restructurings and efficiency gains, net of higher costs FX Incremental 2016 EPS from interest continuing expense and operations higher tax rate, net of share repurchases Remy EPS** 2016 EPS* * Diluted EPS as shown on this slide is non-us GAAP ** Includes impact of Remy operating income, synergies and purchase price accounting adjustments As of July 28, 2016 Copyright 2016 BorgWarner Inc. 14

15 2016 Guidance Other Items Free Cash Flow $400-$475 million Share Repurchases $200-$300 million R&D Spending ~ 4.0% of sales Tax Rate ~ 31% Return on Invested Capital ~ 18% $ / Euro Exchange Rate ~ 1.10 As of July 28, 2016 Copyright 2016 BorgWarner Inc. 15

16 Strong Capital Structure A Strong Balance Sheet = The Flexibility to Take Advantage of Strategic Opportunities As of June 30, 2016 $ in millions Total debt $2,635 Cash 495 Net debt 2,140 Total equity 3,756 Total net capital 5,896 Net debt to net capital 36.3% Net debt to TTM EBITDA 1.5x Copyright 2016 BorgWarner Inc. 16

17 Putting Our Cash Flow to Work $ in millions 350 1, $200 million to $300 million Dividend to be maintained 5% to 6% of net sales 2010* 2011* E * $358 million and $326 million was spent on share repurchases in 2010 and 2011, respectively, primarily to settle obligations related to convertible debt that matured in April As of July 28, 2016 Share Repurchases M&A Activity Dividends Capital Expenditures Copyright 2016 BorgWarner Inc. 17

18 Financial Discipline Return on Invested Capital* 16.7% 20.0% 19.4% 21.7% 20.7% 18.3% ~18% E * Invested capital excludes residual goodwill related to $4.8 billion leveraged buyout of BorgWarner Corp. in If included, this goodwill would have a negative impact on return on invested capital of 1 to 2 percentage points, on average, each period As of July 28, 2016 Copyright 2016 BorgWarner Inc. 18

19 Thank You for Your Attention Our Vision A Clean, Energy-Efficient World Our Mission Deliver Innovative Powertrain Solutions that Improve Fuel Economy, Emissions & Performance Fuel Economy Emissions Performance Copyright 2016 BorgWarner Inc.

20 Appendix Copyright 2016 BorgWarner Inc. 20

21 BorgWarner Q Sales Guidance $ in millions HIGH end of range LOW end of range $145 $(2) $2,026 $1,884 $46 $(41) $1,889 $240 $250 $2,276 $2,129 Q net sales Market growth, price and net new business FX Q net sales from continuing operations Remy net sales Q net sales HIGH end of range LOW end of range 7.7%* 2.5%* -0.1%* -2.2%* 7.6%* 0.3%* 13.2%* 12.7%* 20.8%* 13.0%* * Percentage change to net sales As of July 28, 2016 Copyright 2016 BorgWarner Inc. 21

22 BorgWarner Q Diluted EPS* Guidance HIGH end of range LOW end of range $0.73 $0.01 $0.04 $0.01 $0.00 $0.00 $0.78 $0.00 $(0.02) $0.00 $0.72 $0.03 $0.03 $0.81 $0.74 Q EPS* Market growth, price, net new business and performance Tailwinds from restructurings and efficiency gains, net of higher costs FX Incremental interest expense and higher tax rate, net of share repurchases Q EPS from continuing operations Remy EPS** Q EPS* * Diluted EPS as shown on this slide is non-us GAAP ** Includes impact of Remy operating income, synergies and purchase price accounting adjustments As of July 28, 2016 Copyright 2016 BorgWarner Inc. 22

23 Drivetrain Segment Adjusted EBIT 2013 to 2016 Tailwind from restructuring HIGH end of range LOW end of range $40 $368 $26 $25 ($16) $8 $20 $295 $8 $6 $3 $9 $(1) $328 $5 $(7) $304 $39 $343 $252 32% incremental margin ~26% incremental margin 10.3% margin 11.5% margin ~12% margin <10% margin 2013 operating income Market growth, price, net new business and performance Tailwind from restructuring FX Remy operating income 2015 operating income Market growth, price, net new business and performance Tailwind from efficiency gains Tailwind from restructuring FX 2016 operating income from continuing operations Remy operating income 2016 operating income Copyright 2016 BorgWarner Inc. 23

24 Hybrid and Electric Vehicle Segments INCREASING ELECTRIFICATION Internal Combustion Engine (ICE) + Electrification Electric Motor + ICE Electric Motor Only ENHANCED ICE HYBRID ELECTRIC HEV ELECTRIC DRIVE Stop/Start Mild HEV Parallel Full HEV Parallel/Series Range Extended Electric Vehicle Battery Electric Vehicle BMW 328i Buick Regal eassist Toyota Prius GM Chevy Volt Nissan Leaf % of Total LV 2021 ~55% 2026 ~49% % of Total LV 2021 ~5% 2026 ~15% % of Total LV 2021 ~6% 2026 ~8% % of Total LV 2021 ~1% 2026 ~2% Copyright 2016 BorgWarner Inc. 24

25 EPS Reconciliation Earnings per diluted share U.S. GAAP $1.54 $2.23 $2.09 $2.70 $2.86 $2.70 Non-U.S. GAAP adjustments: Non-recurring charges and restructurings 0.08 (0.07) Adjustments to tax accounts (0.09) (0.03) 0.08 (0.05) (0.04) Derivatives (Gain)/loss from divestitures/acquisitions (0.02) Non-U.S. GAAP $1.51 $2.23 $2.49 $2.89 $3.25 $3.04 Copyright 2016 BorgWarner Inc. 25