Returning to the path of capital-efficient growth Berenberg European Conference - Pennyhill, 6 December 2016 - SHW AG
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Returning to the path of capital-efficient growth
Berenberg European Conference
Pennyhill, 6 December 2016
Agenda
Preparing the return to capital-efficient growth
> Strategic roadmap for returning to capital-efficient growth
> Financial goals 2016 and beyond
> Financial results 9M 2016
1
SHW’s strategic roadmap
Phase I: Consolidation Phase II: Capital-efficient growth
Operational excellence
Internationalisation
Innovation
2015 2016 2017 2018 2019 2020
After a phase of consolidation SHW will get back on the track for capital efficient
growth
2
Our strategic priorities – Enhance operational excellence (I)
Lean management
> Shorter cycle times in Powder Metallurgy
Production > Press tool optimisation in order to achieve higher process stability
excellence > Linking and automation of production processes in Powder Metallurgy and Brake Discs
> Release of temporary workers since Q4 2015
> Further development of process and matrix organisation
Organisation > Close integration of business critical departments (e.g. procurement, sales, R&D) within
the production network of Aalen-Wasseralfingen and Bad Schussenried
Procurement
> Reorganisation of the purchasing and supplier management
& supplier
> Centralising of certain functions in one location
excellence
> Implementation of shopfloor management
Leadership
> Implementation of continuous improvement process and KPI cockpit
Execution of measures increase production efficiency
and trigger performance improvements
3
Our strategic priorities – Enhance operational excellence (II)
Capacity and production lots increase
Demand-
capacity > Investments of approx. € 20m (2014–2016) in Powder Metallurgy
imbalance
Powder > Sufficient capacity and flexibility for bigger, economical batch sizes
> Significant reduction of backlogs and logistics costs
Metallurgy
> Reduction of reworking costs
Pumps > Positive effects on Pumps Assembly division
Assembly > Operations can run smoothly; no capacity or logistical constraints
Investments improve efficiency and profitability of Powder Metallurgy business,
positively impacting also pump assembly division
4Our strategic priorities – Enhance operational excellence (III)
Production network optimisation eastern Europe
Relocation phase Production phase
H1/2016 2017
> Low single-digit million
> Decision on target > Partial start of production
infrastructure investment
location taken > Relocation of further costs
H2/2016 assembly lines
> Annual sales in eastern
> Set-up of infrastructure
> Sales expected to amount Europe to be expected
> Relocation and to a double-digit million above € 100m in 2020
commissioning of first euro amount
assembly line
Earnings improvements should reach high single-digit million Euro range by 2020
5Our strategic priorities – Drive internationalisation (I)
Bad Schussenried
Germany
Aalen-Wasseralfingen
Germany
Toronto
Canada
LongKou
China
Neuhausen ob Eck
Germany Shanghai
Tuttlingen-Ludwigstal China
Germany
Sao Paulo
Brazil
Pumps &
Engine Brake Discs
Components
SHW is present in all strategic markets
6Our strategic priorities – Drive internationalisation (II)
Pumps & Engine Components
2015 2016 2017 2018 2019 2020
NAFTA
Re-entry into the market SOP for North American OEM in US
China
Start of operating activities SOP for North American OEM
2 SOPs for Chinese OEM 2 SOPs for North American/Chinese JV
SOP for European OEM
Other
Production capacity shift to eastern Europe SOP for North American OEM in Europe
SOP Eastern Europe
Brazilian subsidiary and ramping up of production SOP for North American OEM in Brazil
SOP for leading manufacturer of fully electric vehicles
Engine Transmission
Enhanced international presence as catalyst for further international growth
7Our strategic priorities – Drive internationalisation (III)
Brake Discs
2015 2016 2017 2018 2019 2020
NAFTA
Development of market entry strategy Market entry SOP and ramp-up
China
SOP JV for unprocessed Brake Discs Switch to production of processed Brake Discs
Other
Ongoing evaluation of further cooperation possibilities
Enhanced international presence as catalyst for further international growth
8Our strategic priorities – Leverage innovation leadership (I)
> SHW’s prototypes delivered to OEMs and Tier 1 suppliers
> R&D experts were able to optimise performance of two stroke vane pump:
> Weight reduction
> Efficiency increase up to 85 per cent
Two stroke > CO2 emission reduction of up to 2g per CO2 / km (NEDC)
vane pump
> Transmission applications becoming increasingly important also in electric cars
> Product solution serves as primary transmission pump for cooling and lubricating
the transmission and the electric motor
> Needs-oriented cooling and lubrication of the electric powertrain
Electric pump > Major contract from world’s leading manufacturer of fully electric vehicles
for cooling and > Lifetime sales volume of approx. € 100 million
lubricating > SOP scheduled for the first half of 2017
SHW offers primary transmission oil pumps for vehicles powered by combustion
engines (incl. hybrids) as well as for battery electric vehicles
9Our strategic priorities – Leverage innovation leadership (I)
> Pump helps to reduce CO2 due to a reduced capacity of the
primary pump
> Serves as secondary, needs-oriented transmission pump
Auxiliary > Enables start-stop and sailing function in cars
transmission oil
pump
> Electrical double stage oil pump combines two pumps in one solution
> Offers two pressure stages:
High pressure stage enabling gear and clutch actuation
Low pressure stage serving as coolant and lube oil pump
Scalable electric
power pack > Savings in space and thus weight reduction
transmission oil
pump
Growing market for electrically driven transmission oil pumps
10Our strategic priorities – Leverage innovation leadership (III)
Standard casted High end casted
ventilated disc SHW Patent wave disc
Weight reduction
Weight reduction > 2 kg / disc
about 2 kg / disc
Weight reduction, improved comfort + performance
> SHW is innovation leader for lightweight products in the automotive sector
> Composite brake discs with aluminium pot significantly contribute to weight reduction
> Weight reduction of unsprung masses improves driving performance
The megatrends weight reduction, corrosion resistance and reduction of brake dust
are key drivers for the Brake Discs division
11Financial goals – Sales and EBITDA
Phase I: Consolidation Phase II: Capital-efficient growth
SHW Europe SHW International 630 – 660
570 – 600
463.5 410 – 430 410 – 430 480 – 505
[440 – 460] [440 – 460]
Sales
(€m)
14%
As of 2018: 13%
12%
43.5 43 – 47 EBITDA margin ≥12%
EBITDA 11%
10%
(€m)
9%
2015 2016E 2017E 2018E 2019E 2020E
Margin improvement in 2016 sustained by positive effects resulting from efficiency
measures in both business segments
12Financial goals – Investments and depreciation
Phase I: Consolidation Phase II: Capital-efficient growth
32 – 35
29 – 32
25 – 28 26 – 29 27 – 30
23.9
Investments
(€m)
31 – 33 31 – 33
25 – 27 26 – 28
22.5 21 – 23
Dep
(€m)
2015 2016E 2017E 2018E 2019E 2020E
Investments in the consolidation phase trigger capital-efficient growth from 2018
onwards
13Financial goals – Miscellaneous
Capital > Sustainable and strong capital structure with a balance sheet equity ratio of at least 30
structure per cent to 40 per cent
Debt ratio > Leverage potential to increase net debt / adj. EBITDA ratio to a maximum of 2.5
> High flexibility in terms of financial and strategic headroom: syndicated loan facilities
Liquidity
plus additional baskets
Free cash
> Focus on optimising operating free cash flow
flow
Dividend > Results-oriented dividend policy with a pay-out ratio of 30 per cent to 40 per cent of the
policy net income for the year taking into account the financing requirements of SHW
14Your key takeaways
Sales for FY 2016 at the lower end of the € 410 million to € 430 million range
Driven by the effects from the efficiency measures the EBITDA is still expected at the
lower end of the € 43 million to € 47 million range
We confirm our SHW 2020 strategy – we believe in capital-efficient growth from 2018
onwards
With new orders from China we safeguarded more than € 100 million turnover in
China in 2020
Entry into the market of fully electric vehicles once again underlines innovation
leadership
15Financial Calendar 2016
Dates Events
European Conference – Berenberg Bank
6 December
Pennyhill (London)
16Contact Investor Relations
Michael Schickling
Head of Investor Relations & Corporate Communications
Telephone: +49 (0) 7361 502-462
E-Mail: michael.schickling@shw.de
Sandra Scherer
Junior Manager Investor Relations & Corporate
Communications
Telephone: +49 (0) 7361 502-469
E-Mail: sandra.scherer@shw.de
17Stable market environment in Q1-Q3/2016
Light Vehicle Production SHW Group Sales (€m)
(< 6 t) (m units) > Moderate increase of global
light vehicle production by
18.6
3.4 per cent to 67.7 million
358.5
16.8
15.7 16.1 312.2 units with strong regional
13.2 13.5 discrepancies
> Combustion engines incl.
hybrids continue to dominate
2.4 2.0
Q1-Q3/2015
> Diesel engine production in
China Europe North South
America America Q1-Q3/2016 Europe above prior year
Global Engine Production Global Transmission Production
(m units) (m units) > Above-average growth rates
for automatic transmissions;
53.3 38.8
51.6 36.4 global production increased
28.8 28.5 by 6.6 per cent to 38.8
million units
13.6 14.0
Gasoline Diesel Manual Automatic
Source: IHS, October 2016
SHW well positioned to benefit from market trends and global demand for mobility
from 2018 onwards
18Group
Sales (€m) Sales by quarter (€m) > Sales decline in the Pumps
and Engine Components
-12.9% business segment as
123.1
358.5 117.0 106.6 108.7
118.3 expected
312.2 97.0 105.0
> Sales in the Brake Discs
business segment
influenced by lower number
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016
of units sold and lower
material surcharges
Adj. EBITDA (€m) Adj. EBITDA by quarter (€m)
> Adj. EBITDA margin
-1.6%
increased from 9.2 per cent
33.0 32.5 11.0 10.8 11.9 11.0 10.0 10.7 10.5 to 10.4 per cent despite
reduced sales
9.2% 10.4%
9.4% 10.1% 9.7% 10.1% 8.5% 11.1% 10.0%
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016
2015 2016
Results within target range
19Financial figures Q1-Q3/2016
Q1-Q3/ Q1-Q3/
> Sales development as
€m1 Change expected
2016 2015
Group sales 312.3 358.5 -12.9%
> Adj. EBITDA margin of 10.4
Adj. EBITDA 32.5 33.0 -1.6% per cent exceeds 2015
as % of sales 10.4% 9.2%
Depreciation (excl. PPA) 18.3 16.5 +11.5% > Net income influenced by an
investment related increase
Adj. EBIT 14.1 16.5 -14.6%
in depreciation and a non-
as % of sales 4.5% 4.6%
recurring consolidation effect
ROCE 11.6% 14.3% in FY 2015
Net income for the period 9.9 12.4 -19.8%
EPS (in €) 1.54 1.95 -21.1% > Working Capital increased
Investments2 16.7 19.3 -13.8% > Inventories up to ensure
as % of sales 5.3% 5.4% supply readiness
Working capital as % of sales 14.1% 11.7% > Lower receivables due to
Equity ratio 51.2% 46.6% lower sales and receivables
management
Operating free cash flow -13.5 -3.6 275.5%
Net cash / net debt -7.8 -9.0 -14.0% > Payables lower following
lower investments
1 Figures include rounding differences
2 Additions to tangible and intangible assets
Efficiency measures driving positive margin development in 2016
20Customer sales
91.1
VW
81.5
> Expected decrease in sales
64.3
Daimler
49.5 with VW Group and Daimler
27.9
Group
BMW
29.6
38.6
> Decline in sales relates
Audi mainly to two volume
27.2
22.3 products due to a customer’s
Volvo Cars
20.0 switchover of technology as
Thyssen 17.7 well as the transition to a
Krupp 13.9
successor product
17.5
Porsche
12.7
13.5
Ford
9.4
7.9
Hilite
7.7
5.2
PSA
5.7
52.5 Q1-Q3/2015
Other
54.9 Q1-Q3/2016
International growth and diversified product range will lead to a
more balanced customer structure
21Business segment: Pumps and Engine Components
Sales (€m) Sales by quarter (€m) > Sales decline as expected
by 13.6 per cent to € 245.4
-13.6%
million
284.0 92.5 85.9 98.2 84.7 93.3
245.4 74.8 81.1
> Adj. EBITDA margin
improved from 9.1 per cent
to 11.1 per cent despite
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4 reduced sales
2015 2016
Adj. EBITDA (€m) Adj. EBITDA by quarter (€m) > Considerably lower costs for
external processing,
+4.5% 9.3 9.5 9.0 9.2 9.2 finishing and expedited
26.0 27.1 7.8 8.4
freight
9.1% 11.1%
10.0% 11.1% 9.1% 10.9% 8.3% 11.2% 11.4%
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016
2015 2016
Operational efficiency programme with positive effects
on EBITDA and EBITDA margin
22Business segment: Brake Discs
Sales (€m) Sales by quarter (€m)
> Sales development mainly
influenced by lower sales of
-10.3%
74.4 24.5 24.9 24.0 25.1 one-piece brake discs. This
66.8 20.7 22.1 23.9
was not completely offset by
higher sales of composite
brake discs
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4 > Sales development further
2015 2016 influenced by lower scrap
prices
Adj. EBITDA (€m) Adj. EBITDA by quarter (€m)
> Positive product mix effects
-15.7%
and disciplined
7.8 3.0 2.7 2.8
6.6
2.1 2.2
implementation of
2.1
1.6 productivity measures partly
10.5% 9.9%
8.7% 7.7% 11.9%9.0% 10.8%12.7% 8.3% compensated lower capacity
utilisation
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016
2015 2016
EBITDA margin close to target level of 10.0 per cent
23Working capital ratio
> Working capital increased
14.1% year-over-year by € 4.2
million to € 58.7 million
12.3%
11.7%
11.3%
10.5% 10.4% 10.6% > With 14.4 per cent, working
capital ratio above previous
year’s 11.7 per cent
7.2% 7.0% > Inventory built-up to ensure
supply readiness
> Reduced trade payables due
to lower business volume
and lower investments to
date than 2015
Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/2016 Q2/16 Q3/16
Medium-term target: 11%
24Investments and depreciation
Investments (€m) Investments by quarter (€m) > Investment ratio in Q1-
Q3/2016 on the same level
-13.8%
8.1 as previous year
19.3 6.8
16.7 6.2
5.0 4.9 5.0 4.6 > Investments in Q4/2016
5.4% 5.3% 5.3% 4.7% 6.6% 4.5% 4.2% 7.0% 4.4%
approx. between € 8 million
and € 11 million
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016 > Depreciation ratio increased
due to high investment
Depreciation (€m) Depreciation by quarter (€m)
levels in previous years
+15.4%
5.9 6.2 6.0 6.1 6.0
12.2 5.0 5.5
10.6
4.6% 5.9%
4.3% 5.6% 4.5% 5.8% 5.1% 6.3% 5.7%
Q1-Q3/ Q1-Q3/ Q1 Q2 Q3 Q4
2015 2016
2015 2016
Investments in 2016 / 2017 basis
for capital-efficient growth in the subsequent years
25Cash Flow
Q1-Q3/ Q1-Q3/
(€m)1 Q3 2016 Q3 2015
2016 2015
> Operating cash flow
Cash flow from operating
positively impacted by higher
activities 3.2 4.8 2.9 18.0 depreciation and other non-
cash effective expenses and
Cash flow from investing
activities income
- tangible and intangible
assets -6.7 -5.0 -16.4 -21.6 > Operating cash flow
negatively impacted by lower
Operating free cash flow -3.5 -0.1 -13.5 -3.6 net income for the period,
cash-effective changes in
Cash flow from investing
activities inventories, receivables,
- financial assets 0.0 0.0 0.0 -8.9 other assets and liabilities
and a change in provisions
Total free cash flow -3.5 -0.1 -13.5 -12.5
Other (esp. capital
increase/dividend payment) 0.0 -0.1 -6.6 17.9
Change in net cash -3.6 -0.2 -16.5 5.5
1 Figures include rounding adjustments
Strong focus on operating free cash flow in the future
26Sound financial profile
Assets Liabilities > Non-current assets
decreased; depreciation
242.8m 233.4m 242.8m 233.4m
above investments year-to-
date
113.3
> Current assets decreased
136.9 119.5 due to accounts receivable
133.5
management and lower
sales
27.7
26.1
> Short-term liabilities
14.7
10.8 7.7 influenced by lower sales
11.4 and comparatively low asset
104.2 96.3 additions
76.4 68.8
> Equity ratio increased from
1.7 3.6 46.6 per cent to 51.2 per
30.09.2015 30.09.2016 cent mainly triggered by net
30.09.2015 30.09.2016
Equity Bank debt
Non-current assets Pensions Other short-term liabilities period surpluses of the last
Current assets
Cash
Other long-term liabilities
12 months
Sound balance sheet safeguards strategic flexibility
27Sales and earnings forecast for FY 2016 confirmed
Guidance 2016
Sales approx. € 410 m to € 430 m
thereof P&EC approx. € 320 m to 340 m
thereof Brake Discs approx. € 90 m
EBITDA € 43 m to € 47 m
Capex € 25 m to € 28 m (previously: € 32 m to € 35 m)
28Disclaimer
No offer or investment recommendation
This document, which has been issued by SHW AG (the “Company” or “SHW”), does not constitute an offer to sell, or the solicitation of an offer to subscribe for or
buy, any shares in the Company, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or
investment decision in relation thereto.
The contents of this presentation are may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part,
for any purpose. Neither the Company nor any other party is under any duty to update or inform you of any changes to such information. In particular, it should be
noted that financial information relating to the Company contained in this document has not been audited and in some cases is based on management information
and estimates.
This material is given in conjunction with an oral presentation and should not be taken out of context.
Certain market data and financial and other figures (including percentages) in this document were rounded in accordance with commercial principles. Figures
rounded may not in all cases add up to the stated totals or the statements made in the underlying sources. For the calculation of percentages used in the text, the
actual figures, rather than the commercially rounded figures, were used. Accordingly, in some cases, the percentages provided in the text may deviate from
percentages based on rounded figures.
Future Oriented Statements
Certain statements in this presentation are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and
assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward‐looking statements. These risks,
uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein.
No obligation to update the information
The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, except as otherwise required by applicable laws and regulations. You should not place undue reliance on forward-looking statements, which speak as
only of the date of this presentation. Statements contained in this presentation regarding past trends or events should not be taken as a representation that such
trends or events will continue in the future.
29You can also read
