Drive international growth and leverage innovation leadership. Bankhaus Lampe Small Cap Conference

Transcription

1 Drive international growth and leverage innovation leadership Bankhaus Lampe Small Cap Conference Dusseldorf, 7 September 2017

2 Table of Contents Drive international growth and leverage innovation leadership I Strategic Roadmap II Our strategic priorities III Market environment IV Financial goals 1

3 SHW production network Bad Schussenried Germany Toronto Canada (SOP 2018) Aalen-Wasseralfingen Germany Hermsdorf Germany Timişoara Romania (SOP 2017) LongKou China Tuttlingen-Ludwigstal Germany Kunshan China (SOP 2016) Sao Paulo Brazil (SOP 2014) Neuhausen ob Eck Germany Pumps & Engine Components Brake Discs SHW is present in all strategic markets 2

4 Strategic roadmap Phase I: Consolidation Phase II: Capital-efficient growth Market penetration Innovations Operational excellence SHW on track for capital efficient growth 3

5 Our strategic priorities Enhance market penetration Pumps & Engine Components China Preparation of operating business activities 2 SOPs for Chinese OEM SOP for North American OEM 2 SOPs for North American/Chinese JV SOP for European OEM NAFTA Re-entry into the market SOP for North American OEM SOP for North American OEM Brazil First series contract (SOP 2014) SOP for North American OEM in Europe SOP for North American OEM Europe SOP for North American OEM in Europe Engine Transmission Enhanced international presence as a catalyst for future growth 4

6 Our strategic priorities Leverage innovation leadership SHW s prototypes delivered to OEMs and Tier 1 suppliers Two stroke vane pump Optimised two stroke vane pump: Weight reduction Efficiency increase up to 85 per cent CO 2 emission reduction of up to 2g per km (NEDC) Electrical double stage oil pump combines two pumps in one solution Scalable electric power pack transmission oil pump Offers two pressure stages: High pressure stage enabling gear and clutch actuation Low pressure stage serving as coolant and lube oil pump Improvements in efficiency and weight reduction SHW portfolio includes primary transmission oil pumps for vehicles powered by combustion engines (incl. hybrids) 5

7 Our strategic priorities Leverage innovation leadership M&A Electronic control units Acquisition of know-how in the area of electronic control unit technology Reinforcement of Tier 1 position Electrically driven transmission oil pumps for all powertrain concepts Transmission applications becoming increasingly important also in electric cars Product solution serves as primary transmission pump for cooling and lubricating the electric powertrain Controlled electric pump solution for needs-oriented oil supply Ongoing dialogue with several manufacturers of e-axles and automatic / hybrid transmissions Composite brake disc for high performance electric cars Electric vehicles require high performance brake discs Product solution is a composite brake disc with best comfort characteristics and high braking performance Platform strategy allows production synergies for these high end cast discs SHW portfolio includes primary transmission oil pumps and composite brake discs for battery electric vehicles 6

8 Our strategic priorities Leverage innovation leadership Technology Expertise by Lust Hybrid Technik GmbH Since employees - Sales: 10 million Services: development, industrialization, production and qualification of complex, miniaturized electronics and micro-systems technology Thick film CAD design screen printing technology laser trimming of printed resistors Chip on Board screen printing / dispense bare die attach Au / Al wire bonding heavy wire bonding & glob top Automotive Insourcing of production, logistics and quality processes SMT down to 0201, CSP, BGA - components THT ceramics, PCB and flex-rigid printed board Industry Development and production of small and high volume series Medical & other Product design according to customer requirements Process- und Final inspection electrical test traceability SPC- & ERP recording Acquisition optimises the degree of vertical integration in the electric pumps business 7

9 Our strategic priorities Leverage innovation leadership Standard Casted ventilated disc SHW Patent Weight reduction about 2 kg / disc High end casted wave disc Weight reduction > 2 kg / disc Weight reduction, improved comfort + performance > SHW is innovation leader for lightweight brake disc in the automotive sector > Composite brake discs with aluminium pot significantly contribute to weight reduction > Reduction of unsprung masses improves driving performance The megatrends weight reduction, corrosion resistance and reduction of brake dust are key drivers for the Brake Discs division 8

10 Our market environment increasing demand for mobility solutions Light vehicle production by region (m units) China Europe +1.0% +2.5% Global light vehicle production expected to increase on average by 1.9 per cent to 110 m units until 2025 China: main growth driver Europe: slight growth mainly driven by recovery in Russia 2016 South America % North America % North America: stable on current level South America: steady recovery after severe market slump SHW present in all strategic markets to benefit from increasing production volumes Source: IHS - January

11 Our market environment automatic transmissions gain market shares Transmission production by region (m units) China Europe +1.2% +3.3% China: automatic transmissions will grow above average by 7.3 per cent annually Europe: automatic transmissions will gain market shares step by step South America: manual transmissions will remain the dominant transmission type South America % North America % Majority of automatic transmissions require transmission oil pumps (primary and secondary) Limited number of competitors Automatic Manual Other Transmission oil pumps strategic growth segment for SHW Source: IHS - January

12 Our market environment combustion engines dominate until 2025 Engine production by region (m units) China Europe +0.7% +2.7% South America North America +1.2% China: gasoline engines will remain dominant engine type Europe: gasoline engines will gain market shares North America: gasoline engines will remain by far the dominant engine type Increasing hybridisation results in a growing number of pumps per car % Diesel (incl. hybrids) Gasoline (incl. hybrids) Electricity Other Source: IHS January

13 Financial goals Sales and EBITDA Phase I: Consolidation Phase II: Capital-efficient growth SHW International SHW Europe * Sales ( m) EBITDA (%) 10.7% 10.0% 11.0% 11.0% 12.0% 11.5% 12.5% 12.0% 13.0% 9.4% *Only for illustrative purposes 12

14 Financial goals Investments and depreciation Phase I: Consolidation Phase II: Capital-efficient growth Investments ( m) Depreciation ( m)

15 Financial goals Miscellaneous Capital structure Sustainable and strong capital structure with a balance sheet equity ratio of at least 30 per cent to 40 per cent Debt ratio Leverage potential to increase net debt / adj. EBITDA ratio to a maximum of 2.5 Liquidity High flexibility in terms of financial and strategic headroom: syndicated loan facilities plus additional baskets Dividend policy Results-oriented dividend policy with a pay-out ratio of 30 per cent to 40 per cent of the net income for the year taking into account the financing requirements of SHW 14

16 Your key takeaways Pumps & Engine Components business segment well on track Brake Discs business segment temporarily below target level We reaffirm our full year guidance of Group sales of 400m to 420m and an EBITDA-margin of 10 per cent to 11 per cent Sound balance sheet safeguards strategic flexibility 15

17 Financial Calendar 2017 Dates Events Financial Report January to March Annual General Meeting (Congress Centre Heidenheim) Financial Report January to June Commerzbank Sector Conference, Frankfurt Bankhaus Lampe Small Cap Conference, Dusseldorf Deutsche Bank IAA Cars 2017 Conference, Frankfurt am Main Berenberg and Goldman Sachs German Corporate Conference, Munich Financial Report January to September Kepler Cheuvreux German Corporate Conference, Frankfurt am Main Bankhaus Lampe German Corporate Conference, Baden-Baden 16

18 Contact Investor Relations Michael Schickling Head of Investor Relations & Corporate Communications Telephone: +49 (0) Sandra Scherer Junior Manager Investor Relations & Corporate Communications Telephone: +49 (0)

19 Backup 18

20 Stable market environment in H Light Vehicle Production (< 6 t) (m units) SHW Group Sales ( m) Light vehicle production: per cent to 47.2 million units with marked growth rate differences China Europe North America Global Engine Production (m units) South America H H Global Transmission Production (m units) Gasoline engines gain further market share; diesel engines stable Above-average growth rates for automatic transmissions global production increased by 6.7 per cent to 27.7 million units Gasoline Diesel Automatic Manual Source: IHS, July 2017 SHW well positioned to benefit from structural market changes and strong demand for mobility solutions 19

21 Financial figures H m 1 H H Change Group sales % EBITDA % as % of sales 9.8% 10.1% - Depreciation % EBIT % as % of sales 4.1% 4.4% - ROCE 11.7% 12.5% - Net income for the period % EPS (in ) % Investments % as % of sales 7.3% 4.6% - Working capital ratio 12.9% 12.3% - Operating free cash flow Sales development as budgeted EBITDA margin temporarily impacted by brake disc business unit and non-recurring administrative costs Slightly lower depreciation due to below average asset additions in 2015 und 2016 High investments in new markets Positive operating free cash flow Sound financial profile Equity ratio 49.9% 50.7% - Net debt / net cash Figures include rounding adjustments 2 Additions to tangible and intangible assets Financial results within the target range 20

22 Group Sales ( m) -5.8% Sales by quarter ( m) Group sales influenced by: the transition to the second generation of an electrically driven transmission oil pump for the start-stop function (Pumps and Engine Components) H H EBITDA ( m) -9.1% H H Q1 Q2 Q3 EBITDA by quarter ( m) % Q Q Q % 10.1% 9.8% 11.1% 11.8% Q4 Q4 higher unit sales (Brake Discs) EBITDA below the previous year s level mainly triggered by: a lower earnings contribution of the Brake Discs business segment non-recurring administrative costs 21

23 Customer sales VW Daimler BMW Volvo Cars Audi Thyssen 9.9 Krupp 9.0 Ford Porsche Decline in sales mainly relates to the transition to the second generation of an electrically driven transmission oil pump for the start-stop function Dependency on the VW group expected to decrease by internationalisation and diversification towards transmission oil pumps from 2018 onwards Hilite Brembo Other H H International growth and diversified product range will lead to a more balanced customer structure 22

24 Business Segment: Pumps and Engine Components 2016 Sales ( m) Sales by quarter ( m) 2017 Sales decline as budgeted by 8.9 per cent to million -8.9% Passenger Cars: -13 per cent to million Industry: +14 per cent to 16.6 million H H EBITDA ( m) -4.7% Q1 Q2 Q3 EBITDA by quarter ( m) Q Powder Metallurgy: +10 per cent 15.6 million EBITDA margin improved to 11.5 per cent due to positive volume and product mix effects and productivity improvements H H % 11.7% 10.9% 11.3% 11.2% 14.3% Q1 Q2 Q3 Q4 Earnings development of foreign subsidiaries overall according to plan 23

25 Business Segment: Brake Discs 2016 Sales ( m) 6.0% H H Sales by quarter ( m) Q1 Q2 Q Q Total number of brake discs sold: per cent Positive volume and product mix effects as well as productivity improvements contrasted with higher purchase costs for coke and the contractual delay in adjusting material surcharges EBITDA ( m) EBITDA by quarter ( m) % % 5.5% 9.0% 7.7% 12.7% 6.1% H H Q1 Q2 Q3 Q4 Temporary negative effects on EBITDA noticeably diminished in Q2 24

26 Net working capital ratio Development of net working capital ratio 10.4% 11.7% 10.6% 12.3% 14.1% 12.2% 13.1% 12.9% 12.0% 11.0% Net working capital reduced to 50.6 million Higher inventories due to: a variety of projects in progress (unfinished products) 7.0% Lower trade receivables mainly due to: lower sales (adjusted figure: per cent) Higher trade payables due to: Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/ 17 Q2/17 comparatively higher asset additions Medium-term target 11 per cent to 12 per cent Net working capital ratio target in a range of 11 per cent to 12 per cent 25

27 Investments and depreciation Investments ( m) +49.0% H H Investments by quarter ( m) % 8.4% 4.5% 5.8% 7.0% 8.6% Q1 Q2 Q3 Q Investments in property, plant and equipment and intangible assets at a total of 14.7 million Pumps & Engine Components: mainly for new assembly lines in Germany and China (total: 11.6m) Depreciation ( m) -5.7% Depreciation by quarter ( m) % 5.4% 5.8% 5.9% 6.3% 6.7% Brake Discs: mainly for second automated aluminium casting line and machining lines (total: 2.7m) Slightly lower depreciation due to below average asset additions in 2015 und 2016 H H Q1 Q2 Q3 Q4 High level of investments in new markets 26

28 Cash Flow m 1 Q Q H H Cash flow from operating activities Cash flow from investing activities - tangible and intangible assets Operating free cash flow Operating cash flow significantly improved mainly due to a significant lower increase in working capital Total free cash flow influenced by payment of second purchase price instalment for joint venture SHW Longji Brake Discs Cash flow from investing activities - financial assets Total free cash flow Other (esp. dividend payment) Change in net cash Figures include rounding adjustments Strong focus on operating free cash flow 27

29 Sound financial profile Assets Liabilities Non-current assets increased due to investments in tangible assets Current assets nearly unchanged Equity ratio at 49.9 per cent due to above average increase of balance sheet total Net debt still significantly below industry average Non-current assets Current assets Cash Equity Pensions Other long-term liabilities Bank debt Other short-term liabilities Sound balance sheet safeguards strategic flexibility 28

30 Disclaimer No offer or investment recommendation This document, which has been issued by SHW AG (the Company or SHW ), does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, any shares in the Company, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. The contents of this presentation are may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. Neither the Company nor any other party is under any duty to update or inform you of any changes to such information. In particular, it should be noted that financial information relating to the Company contained in this document has not been audited and in some cases is based on management information and estimates. This material is given in conjunction with an oral presentation and should not be taken out of context. Certain market data and financial and other figures (including percentages) in this document were rounded in accordance with commercial principles. Figures rounded may not in all cases add up to the stated totals or the statements made in the underlying sources. For the calculation of percentages used in the text, the actual figures, rather than the commercially rounded figures, were used. Accordingly, in some cases, the percentages provided in the text may deviate from percentages based on rounded figures. Future Oriented Statements Certain statements in this presentation are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein. No obligation to update the information The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by applicable laws and regulations. You should not place undue reliance on forward-looking statements, which speak as only of the date of this presentation. Statements contained in this presentation regarding past trends or events should not be taken as a representation that such trends or events will continue in the future. 29