Capital Markets Day 2013 in Helsinki 1
Disclaimer The content of this presentation contains time-sensitive information that is accurate as of the time hereof. A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by PKC Group. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, PKC Group will not be reviewing or updating the material that is contained herein. Capital Markets Day 2
The Agenda Capital Markets Day 2013 12.30 Opening words Matti Hyytiäinen, President & CEO 12.30 13.00 PKC s Strategy Matti Hyytiäinen, President & CEO 13.00 13.20 Developing PKC Uniqueness further Jyrki Keronen, Senior Vice President, Business Development & APAC 13.20 13.40 Maximizing current PKC set-up Rico Mutone, Vice President, Sales and Engineering, North America 13.40 13.50 Coffee break 13.50 14.10 Penetrating into APAC Matti Hyytiäinen, President & CEO 14.10 14.25 Exploring Opportunities to Expand within Transportation Industry Frank Sovis, President, Wiring Systems, North America 14.25 14.45 Financials Juha Torniainen, CFO 14.45 15.00 Closing Statement Matti Hyytiäinen, President & CEO Capital Markets Day 3
Capital Markets Day PKC Strategy Matti Hyytiäinen President & CEO 4
Definition: Electrical Distribution Systems PKC delivers Nerve Systems to vehicles Capital Markets Day 5
Definition: PKC in Transportation Industry Trucks & Buses (HCV & MCV) Light Commercial Vehicles (LCV) Construction Equipment Railway Vehicles Commercial Aircraft Recreational Vehicles Agriculture and Forestry Engines Material Handling Vehicles Mining Machinery Current Customer Segments Potential Customer Segments Capital Markets Day 6
PKC Today Today, PKC is the Preferred Supplier for the main global Commercial Vehicle brands, supplying Electrical Distribution Systems. The customer programs are typically 5-10 years long, which gives us a good view ahead. PKC is a critical partner in its customers value chain. We see plenty of opportunities to grow our topline. Capital Markets Day 7
PKC Uniqueness Our current position is based on PKC Uniqueness. That is how we call our unique know-how of managing complex processes of individually tailored products and thousands of product variants. PKC Uniqueness makes us an asset to the customers because we can integrate into their processes, enabling our customers an unlimited product offering, with very short lead-times. PKC Uniqueness is scalable and hard to copy, which gives us a significant competitive edge. Capital Markets Day 8
PKC Capturing Growth We see interesting and above average growth possibilities in our current customer base, in penetrating into Asia and in expanding within the Transportation Industry globally. Capital Markets Day 9
Growth Dynamics 1,000 pieces 4 000 3 000 2 000 1 000 Global heavy duty and medium duty vehicle production volume 2012 2018 CAGR 6.0% Global heavy and medium duty vehicle production will grow approximately 50% from 2012 to 2018 EDS content and value will grow approximately 60% from 2012 to 2018 driven by emission standards and technological advancement Within Transportation Industry inhouse production is historically dominant. This provides PKC an opportunity as outsourcing is gaining momentum. 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: LMC Automotive forecasting Q4/2012 / PKC own estimation Capital Markets Day 10
PKC s Financial Targets Financially we aim high. We target our topline to grow up to 1.4 billion euros by 2018, with EBITDA target >10% while maintaining healthy balance sheet. Capital Markets Day 11
PKC s Strategy Captures Growth Opportunities VISION 2020 PKC is the Preferred Supplier in Electrical Distribution Systems for Transportation Industry globally. STRATEGIC INITIATIVES Managing the Complexity Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Developing Electronics business as a stand alone within PKC Group Capital Markets Day 12
Capital Markets Day Developing PKC Uniqueness further Jyrki Keronen Senior Vice President, Business Development & APAC 13
Developing PKC Uniqueness further Managing the Complexity Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Capital Markets Day 14
Complexity as a Trend will Prevail Urbanization Transportation standards, special purpose vehicles Green initiatives Pollution, fuel efficiency Emerging markets APAC South America Mass Customization High mix, low volumes, architecture platforms Technology Power & signal, consistency, reliability, light weight materials Business evolution TCO, Technology, Push to pull, Consolidation Managing the Complexity is a global challenge Capital Markets Day 15
PKC Uniqueness Managing the Complexity More than 1 Engineering Change per day over the lifecycle of product platform Example platform: 810 routings 2,650 harnesses 5,200 active part numbers 11million parts delivered for 50,000 trucks annually Capital Markets Day 16
PKC Uniqueness Key Elements PKC s own developed data management process and tools enables seamless interface and data transfer from customer systems to PKC s design and production PKC Data Management -process Special PKC COP and PKC LAD tools to support efficient manufacturing ensuring short lead time PKC Order Fulfilment -process PKC Safe Launch concept, efficient new product launch ramp-up tool Capital Markets Day 17
PKC s Own Data Management System CUSTOMER Component library Functionalities 3D wiring PKC Data Processing Master / Composite PKC Data Management -process CUSTOMER Daily call-offs Sequencing Timing PKC Data Processing Cutting, Crimping, Assembly & Final Assembly, Testing, Shipping CUSTOMER To assembly line Sequencing PKC Order Fulfilment -process Capital Markets Day 18
NPI Centers Enable Continues Development of PKC Uniqueness Key elements of PKC Uniqueness are developed further in NPI centres Keila, Estonia Acuña, Mexico Curitiba, Brazil Development focus in Methods MRP system Plant logistics / layout Production technology Processes Organization Capital Markets Day 19
PKC Uniqueness - Benefits PKC Uniqueness - benefits for customers Short lead time Unlimited customization Robust change management Fast and secured product launches and ramp-ups Competitive TCO (Total Cost of Ownership) Capital Markets Day 20
Capital Markets Day Maximizing Current PKC Set-up Rico Mutone Vice President, Sales and Engineering, North America 21
Maximizing Current PKC set-up Managing the Complexity Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Capital Markets Day 22
PKC Positioning in Value Chain OEM s Features PKC Vehicle Electrical Architecture PKC and / or Components suppliers Software Hardware Data inputs & outputs Power Distribution Components Wiring Harnesses Vehicle Electronics Capital Markets Day 23
Global Leader Position as a Target Current business relationship with all key western OEMs in commercial vehicle industry enable future growth Global leader position as a target North America Europe South America APAC 1 % Heavy Commercial Vehicle 68 % 32 % 99 % 0 % Medium Commercial Vehicle 100 % Source: ACT report, January 2013, LMC Automotive forecasting Q4/2012. Note: Europe comprised of EU27 + Efta Capital Markets Day PKC Other 24
Maximizing PKC s Current Set-up Volume, 1,000 pieces 1 500 1 250 1 000 750 500 250 Heavy duty and medium duty commercial vehicle production Globalizing relationships with our customers Expand manufacturing footprint to meet the growing market demand Participate future full range commercial light vehicle programs 0 South America North America EU & Russia Japan India China Source: LMC Automotive forecasting Q4/2012 2012 2018 Estimation Capital Markets Day 25
Capital Markets Day Penetrating into APAC Matti Hyytiäinen President & CEO 26
Penetrating into APAC Managing the Complexity Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Capital Markets Day 27
PKC Focus Countries in Asia-Pacific China is the biggest truck market in the world Total production 830,000 trucks in 2012 Dominated by seven state-owned manufacturers Strong governmental influence India s truck market grow steadily Total production 280,000 trucks in 2012 Growth focus in light and medium duty Japan has mature market Total production 290,000 trucks in 2012 Growth focus in medium duty PKC Current and potential customer Capital Markets Day 28
APAC Market Dynamics Asia, especially China, is the world s largest commercial vehicle market that is forecast to continue to grow significantly PKC s current global customers actively focus their growth into these markets In addition to market growth, Asian commercial vehicle markets are subject to a structural change New emission standards and customers need for uniquely optimized vehicles. Technological contents of commercial vehicles increases which adds complexity PKC s core competence is to be able to mass produce high quality uniquely tailored products with infinite variants with very fast turnaround time PKC has excellent competitive position to expand its business in Asia to current customers and the leading Asian and Chinese truck manufacturers Capital Markets Day 29
Global Brands in Asia Global brands are penetrating into Asian markets with strategies adapted to each local market MAN Sinotruck, China Force Motor, India Daimler Fuso, Japan Foton, China BharatBenz, India Navistar JAC, China Iveco SAIC, China Ford Jiangling Motor, China Volvo Nissan Diesel/UD Truck, Japan Dong Feng, China Eicher, India SDLG Construction Vehicles, China Capital Markets Day 30
EDS Base in Asia China: 90% of commercial vehicle EDS in-house production Very limited customization Japan: outsourced locally Cost pressure India: outsourced locally Limited competition and competence Capital Markets Day 31
PKC s Strategy in Asia Develop our Existing Business Framework Expand the existing business as we support our global key customers doing business in China, India and Japan Greenfield Explore Avenues for New Partnerships Collaborate with market-leading customers in China, India and Japan Outsourcing deals, joint ventures and acquisition Capital Markets Day 32
Capital Markets Day Exploring Opportunities in Transportation Industry Frank Sovis President, Wiring Systems, North America 33
Developing PKC Uniqueness further Managing the Complexity Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Capital Markets Day 34
PKC Uniqueness as the Basis A global leader in commercial vehicle electrical systems Expert in Managing the Complexity Understanding customers and their processes PKC Uniqueness OEMs in the transportation industry face similar challenges than OEM s in commercial vehicle industry PKC specializes in managing these challenges PKC s Uniqueness can be leveraged to add value to adjacent markets Capital Markets Day 35
Interesting Segments to Explore Trucks & Buses (HCV & MCV) Light Commercial Vehicles (LCV) Construction Equipment Railway Vehicles Commercial Aircraft Recreational Vehicles Agriculture and Forestry Engines Material Handling Vehicles Mining Machinery Current Customer Segments Potential Customer Segments Capital Markets Day 36
Interesting Segments to Explore Sizeable market Available total end market of these four combined segments is the same as our current customer segments (excluding light commercial vehicles) Traditional Supply Chain In-house production and fragmented supply base Railway Vehicles Commercial Aircraft Similar complexity as our current customer segments Similar quality and reliability demands Material Handling Vehicles Mining Machinery Potential Customer Segments Capital Markets Day 37
Market Expansion Rationale PKC Uniqueness is scalable and it is not only commercial vehicle related knowhow PKC is actively seeking expansion opportunities within Transportation Industry Study growth opportunities in selected Transportation Industry Segments Leverage PKC Uniqueness to provide value to customers in adjacent markets Increase economies of scale of purchased materials Rationale for expanding within Transportation Industry Utilizing the existing PKC knowhow Better pricing/profit opportunity Growth opportunities Increase PKC s market value Capital Markets Day 38
Capital Markets Day Financials Juha Torniainen CFO 39
Delivering Growth PK Cables listed in the Helsinki Stock Exchange Acquisition of Estonian production Operations started in China Acquisition of MAN business in Poland Acquisition of SEGU in Germany, Poland and Ukraine 1997 1998 2000 2002 2003 2005 2006 2007 2008 2009 2010 2011 Brazilian factory was opened Acquisition of electronics business Acquisition of Russian production Acquisition of Electro Canada in Canada, the USA and Mexico Acquisition of AEES in North America, Brazil and Ireland 928 CAGR 19% during 1997-2012 550 66 84 114 129 125 134 146 178 199 229 289 312 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net Sales, EUR million 202 316 Capital Markets Day 40
Delivering Profitability 90 80 70 60 50 40 30 20 10 0 EUR million % 83 65 60 49 38 42 30 34 16 7 2008 2009 2010 2011 2012 EBITDA (adjusted*) EBITA (adjusted**) EBITDA* % EBITA** % 14 12 10 8 6 4 2 0 * excluding non-recurring items in EBITDA ** excluding non-recurring items and PPA depreciation and amortization in EBIT Capital Markets Day 41
Strong Cash Flow over the Cycles 100 80 60 40 20 0-20 -40 EUR million 25-10 -6-22 42-4 0 38 23 76 40 15 0-8 -11-13 0 64-60 -50-80 -100-80 2008 2009 2010 2011 2012 Cash from operations Net capex (organic) Acquisitions Free cash flow Cash after net capex Capital Markets Day 42
Earnings, Cash Flow and Dividend per Share 3,5 3,0 EUR 2,97 2,5 2,32 2,0 1,5 1,0 0,5 0,0 1,46 1,09 1,16 1,12 0,87 0,82 0,70 0,55 0,60 0,31 0,40 0,15 0,13 2008 2009 2010 2011 2012 Earnings per share Free cash flow (excl. acquisitions) per share Dividend per share Capital Markets Day 43
Improving Net Working Capital 150 100 50 EUR million % 125 31 111 106 26 88 62 52 58 58 44 36 35 30 25 20 0-50 -100-33 -34 17-55 15 9,3 15 10 5-150 -121-135 2008 2009 2010 2011 2012 Receivables Inventories Payables NWC* % of net sales * Average of beginning and end of the year 0 Capital Markets Day 44
Solid Balance Sheet and Returns 60 50 40 30 20 10 0 % 57 49 42 30 34 2008 2009 2010 2011 2012 80 70 60 50 40 30 20 10 0-10 % 76 73 36 34-2 2008 2009 2010 2011 2012 120 100 80 60 40 20 0-20 Equity ratio, % EUR million 111 60 57 28-2 2008 2009 2010 2011 2012 30 25 20 15 10 5 0 % Gearing, % 26 21 19 19 17 17 15 7 6 3 2008 2009 2010 2011 2012 Net debt ROE, % ROI, % Capital Markets Day 45
Funding Structure EUR million, Dec 31, 2012 Long-term loans from banks 71.8 Long-term financial leases 2.8 Short-term loans from banks 68.6 Short-term financial leases 0.6 Total borrowings 143.8 Cash 87.2 Net debt 56.6 Un-utilized credit facility 30.0 80 70 60 50 40 30 20 10 0 Loan maturities (excl. leases) 68 47 8 8 8 2013 2014 2015 2016 2017 Capital Markets Day 46
Long-Term Financial Targets Annual Revenue EUR 1.4 Billion by 2018 EBITDA > 10% Gearing < 75% Dividends 30 60% of Free Cash Flow Developing PKC Uniqueness further Maximizing current PKC set-up Penetrating into APAC Exploring opportunities to expand within Transportation Industry Capital Markets Day 47
Capital Markets Day Closing Statement Matti Hyytiäinen President & CEO 48
PKC is an Excellent Investment Opportunity PKC is a growth-driven company PKC has unique technological capabilities that deliver major benefits to our customers Solid financial position Capital Markets Day 49
Managing the Complexity www.pkcgroup.com Capital Markets Day 50