investor presentation q4 2016 - pkc group...pkc investor presentation q4 2016 29.0 27.4 0 5 10 15 20...

Investor Presentation Q4 2016

Financial Statement

PKC Investor Presentation Q4 2016 February 9, 2017 Matti Hyytiäinen, President & CEO

• North American heavy-duty truck production was on a low level and Brazilian market in recession

• Truck demand continued to recover in Europe whereas in China strong growth due to overload regulations

• Demand for rolling stock electrical commodity was strong

Q4 2016 Highlights

PKC Investor Presentation Q4 2016

Business Environment

PKC’s Operations

PKC’s Financial Performance

• North American operations recovered during Q4

• European manufacturing footprint improvement and program transfers continue, Estonia factory was closed

• Volumes, quality and productivity continued to improve in China

• SPG transfers continued to free up capacity for rolling stock operations

• FY EBITDA of 7.6% improved from previous year

• FY cash flow from operations improved significantly from previous year

• Conditional dividend proposal of 0.70 Euros per share

North America Market


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

-30%

+1% +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

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15Q1/16Q2/16Q3/16Q4/16

Heavy Duty Trucks Medium Duty Trucks

-2%

-12%

Source: LMC Automotive forecasting Q4/2016, ACT Build History January 2017, 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)

+2%+6%

62%

38%31%

69%


Market Share 1-12/2016

Production units

Production units

-13%

-3%

EPA 2014 2st stage

EU + 2 Market


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


Production units

+6%

+24%

+14%

-3%

EURO 6

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15Q1/16Q2/16Q3/16Q4/16


-1%

+0%

Source: LMC Automotive forecasting Q4/2016, PKC Group

43%

57%

24%

76%



Production units

+16%

+17%

Brazil Market


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


Production units

-18%

-25%

+14%

-3%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15Q1/16Q2/16Q3/16Q4/16


+18%

-6%


31%

69%

2%

98%



Production units

+2%

-34%

PKC estimates production volume to remain on the level of 2016

China Market


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

+34%

+7%

+14%

-3%

0

50,000

100,000

150,000

200,000

250,000

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15Q1/16Q2/16Q3/16Q4/16


-1%

+2%


8%

92%

0%

100%



Production units

+55%

+25%

EURO 4 EURO 4EURO 5

Revenue from Continuing Operations


12 9 9 6 7 10 11 10

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

South America

1 1 414 10 14 12 13

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

APACEUR million EUR million

54 5864

77 7684

6676

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

EuropeEUR million

138 142136

123 120113 111 115

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

North AmericaEUR million

Headcount, Average in Continuing Operations


12,306 12,713 12,304 12,18611,281 11,373

12,27111,529

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 Q3/16 Q4/16

North America

5,248 5,466

7,501 7,607 7,829 8,324 8,292 8,503

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 Q3/16 Q4/16

Europe

2,213 1,736 1,553 1,301 1,284 1,218 1,124 1,079

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 Q3/16 Q4/16

South America

69 64 294 786 873 864 855 896

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 Q3/16 Q4/16

APAC

• North American heavy-duty and medium-duty truck production is estimated to decrease by 7% compared to previous year’s level

• European heavy-duty and medium-duty truck production is estimated to remain on the previous year’s level

• Brazilian heavy-duty and medium-duty truck production is expected to remain on the previous year’s level

• Chinese heavy-duty and medium-duty truck production is expected to remain on the previous year’s level

• The demand for the rolling stock is expected to continue to grow steadily

Market Outlook – Full Year 2017


• PKC Group estimates that with prevailing exchange rates 2017 revenue and comparable EBITDA will be in the same order of magnitude as in 2016

• This estimate includes the negative impact of lower North American heavy duty truck volumes and the divestment of some light vehicle programs which took place in fourth quarter of 2016.

• In 2016, PKC’s revenue from continuing operations was EUR 845.7 million and comparable EBITDA from continuing operations was EUR 64.4 million

PKC Group’s Outlook


• YTD revenue from continuing operations close to previous year level

– Neutral full year translation FX impact

– Revenue in North America declined significantly due to lower heavy-duty truck volumes

– European truck revenue grew

– Increased production in China and in the rolling stock segment

• Comparable EBITDA recovered from Q3 and FY improved from 7.0% in 2015 to 7.6%

– Approximately EUR 2.5 million of extra ramp-down and ramp-up expenses related to a light vehicle program in Q3 were recovered in Q4

– EBITDA in North America declined owing to lower volumes, weakened utilization rates and unfavourable product mix

– Better productivity and production arrangements in Europe

– The recent transactions in Poland and China have a positive contribution to EBITDA

– Brazil profitability improving even though it was still negative on a full year level

– Items affecting comparability relate mainly to North American organization and production capacity adjustment

Revenue and EBITDA, Q4 2016


205.9209.4

212.2

220.0

212.7

220.4

199.2

213.4

170

180

190

200

210

220

230

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

Revenue

EUR million

13.9 15.0 15.2 15.4 15.8 17.411.2

19.9

-0.6 -5.4 -1.8 -1.0

0.0 0.0

-2.9 -2.5

6.8 7.2 7.2 7.0 7.4 7.9

5.6

9.3

-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 Q2/16 Q3/16 Q4/16

Comparable EBITDAItems affecting comparabilityComparable EBITDA, % of revenue

EUR million %

Key Figures


EUR million

(from continuing operations

unless otherwise noted)

10-12/16 10-12/15 Change

%

1-12/16 1-12/15 Change

%

Revenue 213.4 220.0 -3.0 845.7 847.3 -0.2

EBITDA1)19.9 15.4 +29.4 64.4 59.5 +8.1

EBITDA%1)9.3 7.0 7.6 7.0

Items affecting comparability2)-2.5 -1.0 -5.4 -8.8

Operating profit 8.4 6.2 +36.4 26.5 20.2 +31.2

EPS (EUR) 0.16 0.09 +81.3 0.43 0.23 +92.9

Net cash from operating activities3) 75.0 53.6 +40.1 35.5 14.8 +139.4

Working capital3)4) 89.9 92.7 -3.1 89.9 92.7 -3.1

ROCE, %5) 9.7 9.9

Gearing, %3) 30.2 31.4

Average headcount 22,027 21,898 +0.6 21,920 20,855 +5.11) Excluding items affecting comparability2) 2016: expenses related to North American organization and production capacity being adjusted to medium term demand outlook3) Comparison periods include discontinued operations4) Inventories + trade receivables - trade payables5) ROCE, % = Adjusted operating profit (excl. items affecting comparability) / ((Total equity + interest-bearing liabilities)(average))

Cash Flow


14.8

35.5

-15.7-18.4

-0.9

17.0

-22.5

0.0

-23.4

17.0

-30

-20

-10

0

10

20

30

40

2015 2016

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

-20.7

53.6

75.0

-40

-20

0

20

40

60

80

100

2015 2016

Q1 Q2 Q3 Q4

Cash from operations

EUR million

2016 from continuing operations

Balance Sheet and Return


29.027.4

0

5

10

15

20

25

30

35

40

2015 2016

Equity ratio, %*

31.4 30.2

-10

0

10

20

30

40

50

60

70

80

90

100

2015 2016

Gearing, %*

49.446.6

59.564.4

0

10

20

30

40

50

60

70

2015 2016

Net debt* EBITDA**

9.9 9.7

0

2

4

6

8

10

12

14

16

18

20

2015 2016

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



1.0

1.5

0.8

1.4

2.1

2.0

PKC Global Addressable Market

Totals EUR 9 billion

End-Market Region

Global Addressable

Market Approx. €9bn Strategy

(€bn)

Maintaining Market

Leading Positions

Improving Global Position

by Organic Means

Progressing Towards Entry

Primary Growth Focus

Aerospace

Rolling Stock

Truck

SPG

SPG

Truck

APAC

APAC

NA, EU,SA

NA,EU,SA

-

-

€8.8bn


• PKC strong market leading position in truck segment continues. Scania has selected PKC as their main supply partner for harnesses to new generation truck program for years 2019-2022

• PKC continues to expand its footprint in China by commencing 2nd Chinese JV operations Q2/17

• PKC rolling stock has major organic growth opportunities. Concrete actions by some RS OEMs to further outsource their in-house production taking place

• In Europe, PKC now has at its disposal a competitive and modern production network to serve the needs of its customers

• Divestment of some LV business in NA executed in Q4 2016 and divestment of 100% of PKC Electronics expected to be completed during Q1 of 2017

Strategy Execution Proceeding


• Motherson Sumi Systems Limited launches a voluntary recommended public tender offer for all shares and stock options in PKC Group Plc. The target is to combine the two companies and create a leading supplier of wiring systems and components for the worldwide transportation industry.

• The offer period for the Tender Offer will commence on February 6, 2017 and expire on March 21, 2017 unless the offer period is extended or any extended offer period is discontinued.

• The offer price is EUR 23.55 in cash for each Share and the Share Offer Price represents a premium of:

• 51.1 percent to the closing price of the Share on Nasdaq Helsinki Ltd (“Nasdaq Helsinki”) on January 19, 2017, i.e. the last day of trading before the announcement of the Offer; and

• 53.1 percent to the three month volume-weighted average price on Nasdaq Helsinki up to and including January 19, 2017.

• The PKC Board has unanimously decided to recommend the Securities holders to accept the Offer.

MSSL Tender Offer

PKC Group Plc

Bulevardi 7

FI-00120 Helsinki, Finland

www.pkcgroup.comPKC Investor Presentation Q4 2016

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