LEVERAGING OUR EXPERTISE. INTRODUCTION TO HÉROUX-DEVTEK June 2017

Transcription

1 LEVERAGING OUR EXPERTISE INTRODUCTION TO HÉROUX-DEVTEK June 2017

2 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements which are mainly about, but may not be limited to, Héroux-Devtek s future financial performance, expectations, objectives or possible events. The predictive nature of such statements makes them subject to risks, uncertainties and other important factors that could cause the actual performance or events to differ materially from those expressed in or implied by such statements. Such factors include, but are not limited to: the impact of worldwide general economic conditions; industry conditions including changes in laws and regulations; increased competition; the lack of availability of qualified personnel or management; availability of commodities and fluctuations in commodity prices; financial and operational performance of suppliers and customers; foreign exchange or interest rate fluctuations; and the impact of accounting policies issued by international standard setters. For further details, please see the Risk Management section of the Corporation s MD&A. Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive, and undue reliance should not be placed on forward-looking statements. Héroux-Devtek provides such forward-looking statements for the purpose of assisting the reader in understanding the Corporation s financial performance and prospects and to present management s assessment of future plans and operations. The reader is cautioned that such statements may not be appropriate for other purposes. Although management believes in the expectations conveyed by the forward-looking statements and although they are based on information available to it on the date such statements were made, there can be no assurance that such expectations will prove to be correct. All subsequent forward-looking statements, whether written or orally attributable to the Corporation or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. Unless otherwise required by applicable securities laws, the Corporation expressly disclaims any intention, and assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. 2

3 PROFILE LISTED ON TSX SINCE 1986 (HRX) 1,408 EMPLOYEES WORLD S 3 rd LARGEST PRODUCER OF LANDING GEAR 13 INSTALLATIONS 940,000 SQ FEET FISCAL 2017 SALES $406.5 MILLION

4 HISTORY 1942 Company founded Began manufacturing of aerospace components 1966 Manufactured the Apollo lunar module landing gear 2000 Merged with Devtek Corporation 2012 Sale of substantially all of the Aerostructure and Industrial operations 2013 Multi-year contract to manufacture complete landing gear systems for Boeing 777 and 777X 2014 Acquired APPH (UK and Wichita, KS) 1970 First major landing gear R&O contract for Hill Air Force Base (USAF) 1985 Management buy out 2016 Delivery of first production shipsets of Boeing 777 contract 1986 Initial public offering Creation of Aerostructure and Industrial operations 4

5 OUR NETWORK TODAY 5

6 Market Segment Penetration (Commercial, Military) GLOBAL LANDING GEAR MARKET #3 #2 #1 #4 Corporation believes that it can achieve sales of $480- $520 million in its 2021 fiscal year #6 #5 $100 M $500 M $1 G 6

7 MAJOR CUSTOMERS END USERS O.E.M.s TIER I 7 7

8 MAJOR SHAREHOLDERS PRINCIPAL HOLDERS OF VOTING SECURITIES AS OF MARCH 31, 2017 Directors, officers and key management 11.8% Caisse de dépôt et placement du Québec 13.3% Fiera Capital 10.9% Deans Knight Capital Management Ltd. 10.4% Total Shares Outstanding: approx million 8

9 GROWTH PLATFORMS PROPRIETARY DESIGN PROGRAMS DASSAULT FALCON 5X Growth source: Initial program ramp-up BUILD TO PRINT PROGRAMS BOEING 777 and 777X Growth source: higher production rate LOCKHEED CH-53K Growth source: Initial program ramp-up SAAB GRIPEN E Growth source: New aircraft variant EMBRAER KC-390 Growth source: higher production rate and more content F-35 Growth source: Higher production rate 9

10 BOEING 777 AND 777X CONTRACT Long-term contract signed with Boeing in December 2013 to supply complete landing gear systems for the Boeing 777 and 777X programs Investments of $110 million made to develop world-class infrastructure to execute the most important landing gear contract in our history Our plants and supply chain are actively manufacturing and assembling components, and ramping up further Twenty-one complete shipsets delivered as at March 31, 2017 Expertise can be leveraged into other large-scale mandates The sky is the limit 10

11 FINANCIAL INFORMATION

12 LONG-TERM SALES GROWTH The result of investments in leading-edge automated machinery and equipment 12

13 LONG-TERM ADJUSTED EBITDA GROWTH 13

14 FISCAL YEAR 2017 SALES MIX Héroux-Devtek s sales are well balanced between the commercial and defence sectors of the aerospace market. 14

15 FISCAL 2017 SALES BY SECTOR COMMERCIAL SALES (51.8%) BY SECTOR DEFENCE SALES (48.2%) BY SECTOR 8.0% 2.6% 15.4% 5.7% 5.5% 30.0% 3.3% 29.5% Large Commercial Business Jet Other Regional Jet Helicopters Manufacturing - Civil Manufacturing - Government MRO 15

16 FOURTH QUARTER RESULTS For the three months ended Mar 31, In millions of Cdn $, except per share data Variance Sales % Commercial % Defence % Adjusted EBITDA* % As a % of sales 15.9% 17.6% Net income % per share Adjusted net income* % per share Weighted average shares (diluted, in millions) Free Cash Flow As a % of sales 18.9% -2.8% * This is a non-ifrs financial measure which does not have a standardized meaning prescribed by IFRS and may therefore not be comparable to similar measures presented by other issuers. Refer to the Corporation s MD&A for further details. 16

17 FOURTH QUARTER RESULTS For the twelve months ended Mar 31, In millions of Cdn $, except per share data Variance Sales % Commercial % Defence % Adjusted EBITDA* % As a % of sales 15.1% 15.7% Net income % per share Adjusted net income* % per share Weighted average shares (diluted, in millions) Free Cash Flow As a % of sales 8.1% -16.3% * This is a non-ifrs financial measure which does not have a standardized meaning prescribed by IFRS and may therefore not be comparable to similar measures presented by other issuers. Refer to the Corporation s MD&A for further details. 17

18 FINANCIAL POSITION MARCH 31, 2017 In millions of Cdn $, except ratios March 31, 2017 March 31, 2016 Cash and cash equivalents Long-term debt* Net debt Net debt to EBITDA ratio Net funded debt to EBITDA ratio Net debt/equity ratio * Including the current portion, excluding deferred financing costs $200 million Credit Facility extended to May 2022 with accordion feature expanded to $100 million 18

19 RECENT NEWS AND CONTRACTS

20 EMBRAER KC-390 The KC-390 is a medium-size, twin-engine jet-powered military transport aircraft The long-term agreement broadens the scope of an existing contract Héroux-Devtek will manufacture, assemble and deliver landing gear components for new aircraft production and spare parts requirements Work will be performed at facilities in the U.K., United States and Canada 20

21 KF-X FIGHTER AIRCRAFT Long-term contract signed with Hanwha Corporation of the Republic of Korea Héroux-Devtek will jointly develop the landing gear system for the new KF-X fighter Engineering, testing and qualification will be performed in Runcorn, UK and St-Hubert, Quebec This agreement further expands our global reach into Asia 21

22 RECOGNITION FROM LOCKHEED MARTIN F-35 Top Performing Supplier award for our Laval facility Recognizes the exceptional quality and on-time delivery for door uplock systems for the F-35 program We extended our current agreement with Lockheed Martin 22

23 SAAB GRIPEN E AND BAE HAWK GRIPEN E Under agreement with SAAB AB, Héroux-Devtek will manufacture, assemble and deliver complete landing gear systems for 96 Gripen E for Swedish and Brazilian air forces HAWK Under agreement with BAE Systems, Héroux-Devtek will manufacture and assemble complete landing gear replacement shipsets and hydraulic actuators for the fleet of an export Hawk customer. 23

24 ECONOMIC OUTLOOK

25 GLOBAL AEROSPACE MARKET 2016 Aircraft deliveries: A record $179.8 Billion $6.6 $17.8 $3.9 Large Commercial Business Aircraft $13.6 $4.2 $7.1 $105.4 Regionals Military Rotorcraft Civil Rotorcraft Military Transports $21.2 Fighters Other Large jetliners represented 59% of the global market 25

26 COMMERCIAL SECTOR OVERVIEW Forecasts remain favourable for large commercial aircraft IATA forecasts a 5.1% RPK growth for calendar year 2017, following a solid 5.9% growth in calendar Above historical average of 5.0% 20-year forecasts call for annual average traffic growth ranging from 4.5% (Airbus) to 4.8% (Boeing) 26

27 ANNUAL LARGE COMMERCIAL AIRCRAFT DELIVERIES 1,500 1,200 Peaks are consistently higher than previous downturns Slight increase expected in Sources: Boeing, Airbus 27

28 GLOBAL FLEET TO DOUBLE OVER THE NEXT 20 YEARS 50,000 45,240 40,000 30,000 20,000 10,000 22,510 22,730 Growth 57% 16,890 Replacement 43% 39,620 0 Fleet retained 5, Source: Boeing 2016 Current Market Outlook 28

29 SOLID INDUSTRY BACKLOGS 39,620 Aircraft Average of 1,981 per year Order backlogs (Dec 31, 2016) 29

30 DEFENCE SECTOR OVERVIEW Hawk Gripen E Market appears to have bottomed out and should recover modestly Early signs from new US administration appear positive Our diversification is a key advantage Operations in North America and Europe Content on longstanding and new programs Integrated solutions ranging from design, built-to-print manufacturing and aftermarket services 30

31 CONCLUSION

32 IN CONCLUSION We are a world-class player in the landing gear market with a world-class team We offer fully integrated solutions to our customers We are actively seeking strategic acquisition and organic growth opportunities Our focus is on executing our business strategy on our main growth platforms Ramp up of Boeing 777 and 777X complete landing gear contract Landing gear design programs Product support We will continue to create value for our shareholders 32

33 5-YEAR SHARE PRICE PERFORMANCE $350 $300 $250 $200 19% Annualized return $150 $100 $ HRX S&P / TSX Composite Index 33

34 THANK YOU