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Investor Presentation
January-June 2016Half Year Financial Report
PKC Investor Presentation Q2 2016 August 10, 2016 Matti Hyytiäinen, President & CEO
• North American heavy-duty truck market has continued on a down-slope
• Heavy-duty truck demand in Europe has continued to recover while Brazilian market is in recession. In China truck demand and production have grown
H1 2016 Highlights
PKC Investor Presentation Q2 2016
Business Environment
PKC’s Operations
PKC’s Financial Performance
• European manufacturing footprint improvement and program transfers continue including freeing up capacity for higher rolling stock volumes
• North American capacity is to be adjusted to a lower level for the medium term
• EBITDA improved q-to-q and y-on-y
• H1 cash flow negative due to seasonality, but improved from year earlier
North America Market
PKC Investor Presentation Q2 2016
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2011 2012 2013 2014 2015 2016 2017 2018
Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014
Production units
-27%+2% +14%
-3%
EPA 2014 1st stage
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Heavy Duty Trucks Medium Duty Trucks
+9%
+5%
Source: LMC Automotive forecasting Q2/2016, ACT Build History July 2016, PKC Group
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2011 2012 2013 2014 2015 2016 2017 2018
Light Vehicle (Pick-up and SUV)
+4%+7%
60%
40%31%
69%
Heavy Duty Trucks Medium Duty Trucks
Market Share 1-6/2016
Production units
Production units
-5%-11%
EPA 2014 2st stage
EU + 2 Market
PKC Investor Presentation Q2 2016
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2011 2012 2013 2014 2015 2016 2017 2018
Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014
Production units
+8%
+0%
+14%
-3%
EURO 6
0
20,000
40,000
60,000
80,000
100,000
120,000
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Heavy Duty Trucks Medium Duty Trucks
+13%
+14%
Source: LMC Automotive forecasting Q2/2016, PKC Group
43%
57%
23%
77%
Heavy Duty Trucks Medium Duty Trucks
Market Share 1-6/2016
Production units
+4%
+6%
Brazil Market
PKC Investor Presentation Q2 2016
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2011 2012 2013 2014 2015 2016 2017 2018
Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014
Production units
-10%
-37%
+14%
-3%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Heavy Duty Trucks Medium Duty Trucks
-53%
-32%
Source: LMC Automotive forecasting Q2/2016, PKC Group
32%
68%
2%
98%
Heavy Duty Trucks Medium Duty Trucks
Market Share 1-6/2016
Production units
+28%
+23%
PKC estimates production volume to continue to decrease
China Market
PKC Investor Presentation Q2 2016
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2011 2012 2013 2014 2015 2016 2017 2018Heavy Duty Trucks Medium Duty Trucks
Source: LMC Automotive forecasting Q4/2014
Production units
+9%
+2%
+14%
-3%
0
50,000
100,000
150,000
200,000
250,000
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Heavy Duty Trucks Medium Duty Trucks
-28%
-18%
Source: LMC Automotive forecasting Q2/2016, PKC Group
8%
92%
0%
100%
Heavy Duty Trucks Medium Duty Trucks
Market Share 1-6/2016
Production units
+23%
+9%
EURO 4 EURO 4
Revenue from Continuing Operations
PKC Investor Presentation Q2 2016
12 9 9 6 7 10
0
25
50
75
100
125
150
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
South America
1 1 414 10 14
0
25
50
75
100
125
150
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
APACEUR million EUR million
54 5864
77 7684
0
25
50
75
100
125
150
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
EuropeEUR million
138 142136
123 120113
0
25
50
75
100
125
150
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
North AmericaEUR million
Headcount, Average in Continuing Operations
PKC Investor Presentation Q2 2016
12,306 12,713 12,304 12,18611,281 11,373
0
2,500
5,000
7,500
10,000
12,500
15,000
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
North America
5,248 5,466
7,501 7,607 7,829 7,852
0
2,500
5,000
7,500
10,000
12,500
15,000
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Europe
2,213 1,736 1,553 1,301 1,284 1,218
0
2,500
5,000
7,500
10,000
12,500
15,000
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
South America
69 64 294 786 873 864
0
2,500
5,000
7,500
10,000
12,500
15,000
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
APAC
• North American heavy-duty and medium-duty truck production is estimated to decrease by 15% compared to previous year’s level
• European heavy-duty and medium-duty truck production is estimated to increase by 6% compared to previous year’s level
• Brazilian heavy-duty and medium-duty truck production is expected to continue to decrease
• Chinese heavy-duty and medium-duty truck production is expected to grow by about 7% compared to previous year’s level
• The demand for the rolling stock is expected to continue to grow steadily
Market Outlook – Full Year 2016
PKC Investor Presentation Q2 2016
• PKC Group estimates that with prevailing exchange rates 2016 revenue from continuing operations (i.e. excluding Electronics business) will be close to previous year level and comparable EBITDA from continuing operations will be higher than previous year level.
• Outlook includes higher than average uncertainty related to the North American heavy-duty truck production volumes during rest of the year
• In 2015, PKC’s revenue from continuing operations was EUR 847.3 million and comparable EBITDA from continuing operations was EUR 59.5 million
PKC Group’s Outlook
PKC Investor Presentation Q2 2016
• YTD revenue from continuing operations increased +4%
– YTD negative FX impact of -2%
– Revenue in North America declined due to lower heavy-duty truck volumes
– European truck revenue grew
– Increased production in China and in the rolling stock segment
• Comparable EBITDA from continuing operations improving
– Better productivity and production arrangements in Europe
– EBITDA in North America declined owing to lower volumes, weakened utilization rates and unfavourableproduct mix
– The recent transactions in Poland and China contributed to EBITDA
– Brazil achieved positive result in June
Revenue and EBITDA, Q2 2016
PKC Investor Presentation Q2 2016
205.9209.4
212.2
220.0
212.7
220.4
170
180
190
200
210
220
230
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Revenue
EUR million
13.9 15.0 15.2 15.4 15.8 17.4
-0.6 -5.4 -1.8 -1.0
0.0 0.0
6.8 7.2 7.2 7.0 7.4 7.9
-4
-2
0
2
4
6
8
10
-10
-5
0
5
10
15
20
25
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/15
Comparable EBITDAItems affecting comparabilityComparable EBITDA, % of revenue
EUR million %
Key Figures
PKC Investor Presentation Q2 2016
EUR million
(from continuing operations
unless otherwise noted)
4-6/16 4-6/15 Change
%
1-6/16 1-6/15 Change
%
1-12/15
Revenue 220.4 209.4 +5.3 433.1 415.2 +4.3 847.3
EBITDA1)17.4 15.0 +16.1 33.3 28.9 +15.0 59.5
EBITDA%1)7.9 7.2 7.7 7.0 7.0
Items affecting comparability 0.0 -5.4 0.0 -5.9 -8.8
Operating profit 9.6 2.5 +286.4 17.6 8.7 +103.7 20.2
EPS (EUR) 0.21 -0.06 0.35 0.06 +533.1 0.23
Net cash from operating activities2) 15.1 4.5 +236.0 -18.9 -25.2 14.8
Working capital2)3) 122.3 96.5 +26.8 122.3 96.5 +26.8 92.7
ROCE, %4) 10.6 10.9 9.9
Gearing, %2) 62.7 21.1 31.4
Average headcount 21,330 19,988 +6.7 21,309 19,926 +6.9 20,855
1) Excluding items affecting comparability2) Comparison periods include discontinued operations3) Inventories + trade receivables - trade payables4) ROCE, % = Adjusted operating profit (excl. items affecting comparability) / ((Total equity + interest-bearing liabilities)(average))
Cash Flow
PKC Investor Presentation Q2 2016
41.0
14.8
-20.3
-15.7
20.7
-0.9
0.0
-22.5
20.7
-23.4
-30
-20
-10
0
10
20
30
40
50
2014 2015
Cash from operations Net capex (organic)
Cash after net capex Acquisitions
Free cash flow
EUR million EUR million
-29.7
-34.0
4.5
15.1
-13.6
53.6
-40
-30
-20
-10
0
10
20
30
40
50
60
2015 2016
Q1 Q2 Q3 Q4
Cash from operations
EUR million
Q1 and Q2 2016 from continuing operations
Balance Sheet and Return
PKC Investor Presentation Q2 2016
29.0
32.6
27.3
0
5
10
15
20
25
30
35
40
2015 Q2/15 Q2/16
Equity ratio, %*
31.4
21.1
62.7
0
10
20
30
40
50
60
70
80
90
100
2015 Q2/15 Q2/16
Gearing, %*
49.4
91.2
59.563.9
0
10
20
30
40
50
60
70
80
90
100
2015 Q2/16
Net debt* EBITDA**
9.910.9 10.6
0
2
4
6
8
10
12
14
16
18
20
2015 Q2/15 Q2/16
ROCE, %*
%
EUR million %
%
* *EBITDA of previous 12 months excl. items affecting comparability ROCE % = Adjusted operating profit (excl. items affecting comparability) /
((Total equity + interest-bearing liabilities)(average))
* Comparison periods include assets and liabilities of discontinued operations
PKC’s Strategy Captures Growth
Opportunities
PKC Investor Presentation Q2 2016
PKC Investor Presentation Q2 2016
PKC’s existing addressable market amounts to about EUR 4 billion
• Trucks in North America, Europe and South America EUR 1.5 billion
• Construction equipment globally EUR 0.7 billion
• Agriculture equipment globally EUR 1.5 billion• Buses globally EUR 0.2 billion
New market opportunities equal to addressable market growth by about EUR 5 billion by 2018
• APAC truck wiring harnesses EUR 1 billion• Rolling stock control panels, power packs and
wiring harnesses globally EUR 2 billion• Aerospace wiring harnesses globally
EUR 2 billion
PKC Strategy 2018 – Doubling
the Addressable Market
1.5
1.5
0.7
0.2
Existing marketabout EUR 4 billion
Truck
Agriculture
Construction
Bus
1.0
2.0
2.0
New market opportunitiesabout EUR 5 billion
APAC Truck
Rolling stock
Aerospace
PKC Investor Presentation Q2 2016
• Doubling the addressable market
• Westerns truck markets entering new phase. OEMs are launching or planning to launch new generation trucks. PKC’s capability aligned with customers future requirements.
• Expansion into rolling stock market well received by the customers. Global Partnership Agreement signed with Bombardier, followed by some major new contracts in the size of EUR 200 million. Other opportunities in progress
• 2nd Chinese PKC joint venture signed. PKC knowhow recognized by the market and further organic and inorganic opportunities identified and in progress
Strategy Execution Proceeding
PKC Group Plc
Bulevardi 7
FI-00120 Helsinki, Finland
www.pkcgroup.comPKC Investor Presentation Q2 2016
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