TECHNOLOGY PRESENTATIONMilano – November 28th, 2017
Laurent HEBENSTREITChief Executive Officer
3 I
Agenda
Introduction
Technology
Profitable Growth Strategy
123
Introduction
5 I
o Young automotive company created in 1980 by Carlo De Benedetti
o Listed in Milano Stock Exchange since 1986
o Strong Entrepreneurship DNA
o Developed through:
• a series of strategic moves
• tight cost control
o Joined the best automotive suppliers in 2005
o Generated 31M€ of Cash in 2016
Who is Sogefi?
6 I
3 Business Units
€ 563M
o Stabilizer Bars
o Coil SpringsMAIN
PRODUCTS
€ 1,574M
2016 Sales36%
Suspensions Filtration Air & Cooling
o Oil Filters
o Engine Air Filters
o Fuel Filters
o Cabin Air Filters
o Manifolds
o Coolant Pumps
o Coolant OutletHousings
€ 535M
34%
€ 480M
30%
Main Competitors
7 I
Sogefi Customers
CARS TRUCKS 2 WHEELERS 3 WHEELERSAFTERMARKET
MAIN BRANDS
8 I
Ford
Renault/Nissan
FCA/CNH Industrial
PSA
GM
Daimler
Volkswagen/Audi
BMW
Toyota
VolvoGeely/Volvo
Well balanced clients mix
2015
2016
5% 10%
Sogefi Top 10 Clients – In % of Total Sales
9 I
Supplying premium customers & models
PORSCHE CAYENNE
JAGUAR F-PACE
MASERATI QUATTROPORTE MERCEDES GLK
VOLVO XC90
AUDI A6
BMW 5-serie
FERRARI 599
CORVETTE
Technology
11 I
Current Trends
Higher technology requirements
Fuel Consumption
Reduction
Weight
Reduction
Suspensions
Air & Cooling
Filtration
Air & Cooling
FiltrationFiltration
CO2 Emissions
ReductionAir Quality
Fine Particles
Reduction
12 I
Stabilizer Bar content
Entry
Middle
High
Weight
reduction
Indicative weight
by vehicle:
Contentby vehicle
Variable wall
thickness Tube
Tube
Solid Bar
Suspensions
TECHNOLOGY
LEVEL
45%
35%
~6kg
24€
20€
16€
13 I
Coil Spring contentWeight
reduction
Composite
Steel
+ high performance
process
SteelEntry
Middle
High
Suspensions
TECHNOLOGY
LEVEL
50%
25%
~10kg
50€
23€
20€
Contentby vehicle
Indicative weight
by vehicle:
14 I
4 Disruptive Future Trends
CONNECTIVITY
o Connected, Autonomous and Shared trends have limited direct
impact for Sogefi
o Powertrain electrification is a key trend for Filtration and Air & Cooling
o Sogefi developed with Mc Kinsey support a detailed world data base and model to create alternative powertrain scenarios
1
2
3
AUTONOMOUS
DRIVING
ELECTRIFICATION
SHARED
MOBILITY
Higher technology requirements
15 I
Different types of powertrains
Electrification
Pure ICE
BatteryHybrid Fuel Cell
New Energy Vehicle (NEV)
Internal Combustion Engine (ICE) Electric Vehicle (EV)
16 I
Different types of powertrains
Electrification
MHEV PHEVFHEV
o ICE: Internal Combustion Engine vehicle, operating on fuel.
o MHEV: Mild-Hybrid Electric Vehicle, 48V system. (e.g. New Renault Scenic dCi 110).
o FHEV: Full Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Non rechargeable (e.g. Toyota Prius).
o PHEV: Plug-in Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Rechargeable (plugged in to grid) (e.g. New Golf GTE).
o BEV: Battery Electric Vehicle, i.e., pure EV, with no ICE content (e.g. Renault ZOE, Nissan LEAF, Tesla).
o FCEV: Fuel Cell Electric Vehicle (e.g. Toyota Mirai).
Pure ICE BEVHybrid FCEV
17 I
1% 6% 12%
81%
1% 3%
41%54%
Estimated volume, including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T (LCV > 3.5T excluded)
2017 Powertrain by regionEUROPE
Rest of the World
Source: Sogefi and Mc Kinsey
1% 6% 7%
87%
2% 3% 6%
90%
2% 4%17%
78%
CHINA
1% 6%22%
72%
20.8
19.9
28.0
92.3
8.7
14.9
LV sales (M units)
Type of engine
EV Hybrid Diesel Gasoline
NAFTA
Rest of Asia
WORLD
18 I
1
2
Diesel disruption mainly affecting Europe due to
o More stringent regulations
o Consumers turning away from Diesel
o Politics
• Diesel circulation restrictions in large cities
Diesel/Electric disruption trends
WW EV + Hybrid share: from 6% in 2017 to 30% in 2027 in Base case scenario (33% in Strong case)
Electrified powertrain evolution
o Technology improvements
o Politics
• France & UK to ban Diesel/Petrol cars from 2040
• China to significantly increase EV
Diesel share in Europe: from 41% in 2017 to 25% in 2027 in Base case scenario (20% in Strong case)
19 I
11% 13% 9%
68%
11% 13% 13%
64%
11% 13% 17%
60%
7% 9% 10%
75%
7% 9%18%
66%
6% 10% 10%
75%
6% 10% 14%
71%
6% 10%18%
67%
7% 9% 14%
71%
Share of 2022 sales per type of engine, LV1 global
All scenarios predict a reduction of ICE from 98% in 2017 to
93% in Base Case and 89% in Strong Case in 2022
2022 Sogefi Forecast
Base case
Strong case
Source: Sogefi and Mc Kinsey
Type of engine
EV Hybrid Diesel Gasoline
Scenario
Diesel Low Diesel High
EV Low
EV scenarios
EV High
Diesel scenarios1 including PC and LCV (<3.5 tons)
20 I
Share of 2027 sales per type of engine, LV1 global
All scenarios predict a reduction of ICE to reach
86% in Base Case and 81% in Strong Case in 2027
2027 Sogefi Forecast
Source: Sogefi and Mc Kinsey
Type of engine
Diesel Low Diesel High
EV Low
EV scenarios
EV High
Diesel scenarios1 including PC and LCV (<3.5 tons)
19% 15% 7%
59%
18% 15% 11%
56%
18% 15% 14%
53%
14% 16% 8%
63%
10% 16% 8%
66%
14% 16% 11%
60%
14% 16% 15%
56%
10% 16% 12%
62%
10% 16% 15%
59%
EV Hybrid Diesel Gasoline
Base case
Strong case
Scenario
21 I
Powertrain Forecast by region (Sogefi Base Case)
2017 2022 2027
EV 1% 5% 11%
Hybrid 6% 9% 15%
ICE Diesel 7% 6% 5%
ICE Gasoline 87% 80% 69%
Source: Sogefi and Mc Kinsey
NAFTA
2017 2022 2027
EV 1% 6% 13%
Hybrid 3% 7% 14%
ICE Diesel 41% 32% 25%
ICE Gasoline 54% 55% 49%
2017 2022 2027
EV 2% 8% 17%
Hybrid 3% 11% 18%
ICE Diesel 6% 5% 4%
ICE Gasoline 90% 76% 61%
2017 2022 2027
EV 1% 5% 11%
Hybrid 6% 9% 15%
ICE Diesel 22% 21% 18%
ICE Gasoline 72% 65% 56%
2017 2022 2027
EV 1% 5% 11%
Hybrid 6% 9% 15%
ICE Diesel 12% 10% 8%
ICE Gasoline 81% 76% 66%
2017 2022 2027
EV 2% 6% 14%
Hybrid 4% 9% 16%
ICE Diesel 17% 14% 11%
ICE Gasoline 78% 71% 60%
EUROPE
CHINA
Rest of AsiaRest of the World
WORLD
22 I
o Strong growth of Hybrid powertrains and Electric Vehicles (EV)
o But total Internal Combustion Engine (ICE) remains flat
Light Vehicles Sales Forecast (Sogefi Base Case)
2017 2022 2027 CAGR 17/22 CAGR 22/27
Total Vehicles
(M units)92 99 110 1.4% 2.1%
EV 1 6 15 35% 19%
Hybrid 4 9 17 19% 14%
ICE Diesel 15 14 12 -2% -2%
ICE Gasoline 72 70 66 0% -1%
91 93 95 0.4% 0.5%
Source: Sogefi and Mc Kinsey Volume including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T
Total ICE
23 I
Sogefi Filtration / Air&Cooling Main Products
Air & CoolingFiltration
Manifold
Coolant Pump
Coolant Outlet Housing
Oil Filter
Fuel Filter
Cabin Air Filter
OEM AFTERMARKET
European Car Park
10 years average age
Engine Air
24 I
Hybrid Powertrain
Filtration
Manifold
New Product
CoolantPump
Coolant OutletHousing
VOLUME X2
Oil Filter
Engine Air
Volume Effect
Battery Pack
Coolant Valve
Thermal Pack
Air & Cooling
Fuel Filter
Battery Pack
coolant Manifold
High performance
Cabin Air Filter
25 I
BEV Powertrain
Air & Cooling
Filtration
High performance
Cabin Air Filter
Battery Pack
Electric
Cooling Module
Coolant
ValveElectric
Coolant Pump
VOLUME X2
Coolant Outlet
Housing
Battery Thermal Pack
New Product
Volume Effect
Battery Pack CoolantManifold Module
26 I
FCEV Powertrain
Filtration
Fuel Cell
Air FilterFuel Cell
Filters
Water
Separator
Coolant Valve
Electric Coolant
Pump
Coolant Outlet
Housing
Air & Cooling
New Product
High performance
Cabin Air Filter
27 I
SOGEFI on Hybrid and Electric Powertrain
3-serie MALIBU
S-CLASS PANAMERA
A8
PACIFICA
ZOE B-CLASSFORTWO
TX5
500
28 I
o Even if all scenarios predict an increase of EV, the total ICE powertrainscould remain flat or a substantial part of the market until 2027.
o Hybrid powertrain is a first step towards a world of multiple powertrains.
o The rise of EV is depending on key evolving factors (vehicle range, battery costs, infrastructures development,…)
o The rise of Hybrid, BEV and FCEV offers opportunities for SOGEFI.
More volume of Cooling products
New Sogefi products
Higher content for existing Sogefi products
Sogefi Filtration / Air&Cooling products offer opportunities
29 I
Oil Filter content
Oil Filter Module
+ Oil Cooler
+ Valves
Oil Filter Element
+ Cap
Oil Filter
Spin-on
Filtration
23€
2€
1€
Content
Entry
Middle
High
TECHNOLOGY
LEVEL
30 I
Engine Air Filter content
Engine
Air Intake System
Filter Element
+ Box
Filter Element
Filtration Content
TECHNOLOGY
LEVEL
28€
9€
2€Entry
Middle
High
31 I
Air Cabin Filter content
Particles and
odours
Pollen
Filtration Content
TECHNOLOGY
LEVEL
3€
2€
1€Entry
Middle
High
Synthetic media with
activated carbon
Synthetic media with activated
carbon + anti-allergen
properties + high performance
Anti-allergen
Synthetic media
32 I
Aftermarket Pricing Power
Premium
Mid Range
Private Label
Filtration Price Index
TECHNOLOGY
LEVEL
100
85
80Entry
Middle
High
33 I
Air Intake Manifold content
With Actuator
and Cooler
With Actuator
Simple
Air & Cooling Content
Cooled Air flow
Cooled Air flow
Hot Air flow
Cooled
Air flow
TECHNOLOGY
LEVEL
40€
23€
10€Entry
Middle
High
34 I
Coolant Pump content
Smart Coolant
Pump
Pump module
with Cooler
+ Thermostat
Mechanical
pumpInlet Outlet
Impeller
outlet
Flow control
with e-valve
or e-motor
+ +
Air & Cooling Content
TECHNOLOGY
LEVEL
25€
20€
8€Entry
Middle
High
35 I
Coolant Outlet Housing content
Coolant Outlet Housing
Smart
Multi Way
Valves
Electric
Thermostat
Thermostat
M
Air & Cooling Content
TECHNOLOGY
LEVEL
25€
13€
8€Entry
Middle
High
36 I
Startups are becoming key players
of the automotive world
Sogefi Ventures
disrupting existing business
creating new business
Generate profits
Add value to existing Sogefiproducts
Generate new Sogefi products
1. Monitor the fields relevant to Sogefi:
Air and Cooling, Filtration, Suspensions
2. Build joint development agreements with startups
3. Buy minimum 5% to 10% equity
4. Secure active minority shareholders’ role
5. Cash investment of 3 ~ 5 M€ per year
OBJECTIVES HOW
Profitable Growth Strategy
38 I
Profitability improvement plan
3
5 performance drivers to increase operational efficiency
o Cost reduction
through technical
modifications
o Pluriannual price
and productivity
negotiations
o Low Cost Country
sourcing
o Scrap reduction
o Direct labor
productivity
• Higher
automatization
• Shorter reaction
times to deviations
o Indirect labor
productivity increase
• Lean organizations
o Price increases
for technical
modifications
o Systematic price
increases for volume
fluctuations
o Development and
tooling cash payment
1 PURCHASING
o Polyvalence and
Polycompetence
o Process redesign
o Industrial excellence
o Plant competitivity
plan
SHOPFLOOR2 3PROGRAM
MANAGEMENT 4 INDIRECT COSTS
REDUCTION
COMPETITIVE
FOOTPRINT5
39 I
o A deep analysis of the cost base has been done
o On € 100m addressablecosts some productivitypotential have been identified with expectedsaving in the next 3 years
Strategic cost reduction initiative
Sogefi Excellence System
1245
380290
100
945
TOTAL Material for finalproduct
Transformationcosts
Costs analized Adressable costs
100% 64% 23%36% 8%
VALUATION OF POTENTIALSTOTAL COSTS
Data: 2016 cost base
40 I
Leader
Challenger
Harvest
Worldwide
N°2Worldwide
N°4
Growth Strategies : Harvest, Challenger, Leader
Air & CoolingFiltration
Manifold
Coolant Pump
Coolant Outlet Housing
OEM AFTERMARKET
European Car Park
10 years average age
✓✓✓
✓
✓
✓
✓
✓
✓✓Oil Filter
Fuel Filter
Cabin Air Filter
Engine Air
✓ France
N°1
✓
✓
✓
41 I
Geographical Expansion and cost competitive footprint
Air & Cooling
Filtration
Suspensions
ASIA
China
India
✓✓✓
EMEA
NAFTA
Mexico
✓
Morocco
Romania
✓✓✓✓
✓✓
EMEA project
✓
42 I
Health & Safety, Quality, Capacity increase, Efficiency, New products, New plants
Tangible Investments 2014-2017E
3642
51
59
70
2013 2014 2015 2016 2017E
43 I
Value Creation Through ROCE Increase
10,2%
12,8%
17,5%
Q3 2015 Q3 2016 Q3 2017
EBIT: 12 months rolling
* Lazard – Roland Berger: global automotive suppliers study. ROCE of ~600 key suppliers
Benchmark*
13.5%
2015
44 I
3.7
2.3
1.6
Q3 2015 Q3 2016 Q3 2017
DEBT/EBITDA Ratio Improved
DEBT: Net debt (end of period)
EBITDA: 12 months rolling
Leverage now supports
Profitable Growth Strategy
45 I
Sogefi Strengths
1. Entrepreneurship DNA
2. Intimacy with R&D, Purchasing and Top Management of vehicle manufacturers
3. Recognized technical credibility to develop, launch and ramp-up innovative products
4. Multi-brand Aftermarket provides resilience to OEM volumes fluctuations
Higher Technology Requirements
EV expected to increase but total ICE will remain a substantial part of the market
NEV offer opportunities in terms of more volume of cooling products, new products and higher content
Profitable Growth Strategy
Cost reduction plan to sustain profitability and cash generation
Differentiated product strategies between Harvest, Challenger, Leader
External growth opportunities researched to complement organic growth
Executive Summary