investor presentation q3 2015 - pkc group...wiring systems segment, q3 2015 pkc investor...

Investor Presentation Q3 2015EBITDA remained stable

PKC Investor Presentation Q3 2015 October 29, 2015 Matti Hyytiäinen, President & CEO

• New truck order activity slowed slightly in North America, but production volumes have continued on a healthy level

• Truck demand in Europe continued to recover while Brazilian market deteriorated even further

Q3 2015 Highlights

PKC Investor Presentation Q3 2015

Business Environment

PKC’s Operations

PKC’s Financial Performance

• Overheated Mexican job market’s negative impact has eased up somewhat

• Curitiba, Brazil factory to be closed by end of 1st quarter of 2016

• Wiring Systems segment’s comparable EBITDA continued to improve

• Balance sheet includes rolling stock acquisition values and Chinese JV start-up impact

North American Market


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014

Production units

+21%

+12%

+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

Q1/13Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15

Heavy Duty Trucks Medium Duty Trucks

+13%

-4%

Source: LMC Automotive forecasting Q3/2015, ACT Build History October 2015, 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)

+9% +6%

59%

41%35%

65%


Market Share 1-9/2015

Production units

Production units

-5%

-14%

EPA 2014 2st stage EPA 2014 1st stage

EU27 + EFTA 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

-10%

-18%

+14%

-3%

EURO 6

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1/13Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15


EURO 6

+11%

+5%

Source: LMC Automotive forecasting Q3/2015, PKC Group

43%

57%

22%

78%



Production units

-1%

-10%

Brazilian 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

-27%

-22%

+14%

-3%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Q1/13Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15


-36%

-28%


31%

69%

2%

98%



Production units

+64%

-6%

PKC estimates production volume to be clearly lower than previous year

China Market


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty Trucks chinaSource: LMC Automotive forecasting Q4/2014

Production units

-2%

-13%

+14%

-3%

0

50,000

100,000

150,000

200,000

250,000

Q1/13Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15


-31%

-28%


9%

91%

0%

100%



Production units

-24%

+1%

EURO 4 EURO 4

China market share since September 2015,

joint venture started operations

Revenue


17 17 20 13 12 9 90

50

100

150

200

250

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

South America

189 191 195 197 206 209 212

15 15 15 1321 15 14

0

50

100

150

200

250

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

Total GroupEUR million EUR million

55 52 46 53 54 58 64

10 10 10 8 8 8 8

0

50

100

150

200

250

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

EuropeEUR million

115 121 129 129 138 142 136

0

50

100

150

200

250

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

North AmericaEUR million

Average Number of Personnel


11,081 11,507 12,265 12,212 12,306 12,713 12,304

0

5,000

10,000

15,000

20,000

25,000

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

North America

4,676 4,661 5,131 5,362 5,248 5,4667,501

236 242 233 233 252 253232

0

5,000

10,000

15,000

20,000

25,000

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

Europe

2,838 2,766 2,668 2,520 2,213 1,736 1,553

0

5,000

10,000

15,000

20,000

25,000

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

South America

18,659 19,004 20,136 20,164 19,835 19,979 21,651

616 652631 583 580 610

559

0

5,000

10,000

15,000

20,000

25,000

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

Total Group

• European heavy-duty and medium-duty truck production is estimated to grow by 10% compared to previous year’s level.

• North American heavy-duty and medium-duty truck production is estimated to grow by 6% compared to previous year’s level.

• Brazilian heavy-duty and medium-duty truck production is estimated to be clearly lower than previous year.

• The market demand for Electronics segment’s products is expected to remain on the current level at the most.

Market Outlook – Full Year 2015


• PKC Group estimates that with prevailing exchange rates 2015 revenue will be higher than previous year level, and that comparable EBITDA will be higher than in 2014.

• Revenue and EBITDA estimates are based on current business structure.

• In 2014, PKC’s revenue was EUR 829.5million and comparable EBITDA before non-recurring items was EUR 48.6 million.PKC Group has reclassified certain financial items and operating expenses as of the beginning of 2015. The changes are minor and comparison periods have been adjusted accordingly.

PKC Group’s Outlook


Key Figures


EUR million 7-9/15 7-9/14 Change

%

1-9/15 1-9/14 Change

%

1-12/14

Revenue 225.9 210.2 +7.4 676.3 620.3 +9.0 829.5

EBITDA1)15.9 15.2 +4.1 48.3 40.0 +20.9 48.6

EBITDA%1)7.0 7.2 7.1 6.4 5.9

Non-recurring items -1.8 -12.4 -7.7 -16.6 -28.4

Operating profit (loss) 5.6 -4.0 16.9 3.2 +429.1 -7.0

EPS (EUR) 0.08 -0.73 0.21 -0.59 -1.21

Cash flow from operations -13.6 6.5 -38.7 6.6 41.0

Gross capital expenditure 26.9 4.4 +504.9 32.3 16.0 +102.2 19.9

Core working capital2) 124.5 99.8 +29.0 124.5 99.8 +29.0 70.2

ROCE, %3) 11.2 9.2 7.7

Gearing, % 65.0 12.9 -5.6

1) Excluding non-recurring items2) Inventories + trade receivables - trade payables3) ROCE, % = Adjusted operating profit (excl. NRIs) / ((Total equity + interest-bearing liabilities)(average))

• Revenue increased +9% including FX impact of +9%

– Light-vehicle build-outs reduced revenue in North America while truck revenue grew

– European revenue grew while revenue in Brazil decreased substantially due to poor market conditions

– KTP acquisition increased revenue by 7.4% while Chinese JV impact was not significant

• Adjusted EBITDA continued to improve– Lower losses in Brazil and favorable FX

translation impact

– Development program in Europe and Brazil continuing

– The recent transactions in Poland and China included in Wiring Systems segment

Wiring Systems Segment, Q3 2015


188.6191.3

195.4 196.7

205.7209.3

212.0

170

180

190

200

210

220

230

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

Revenue

EUR million

11.7 13.5 15.510.7

15.3 16.5 16.9

-2.1 -1.0 -7.4 -9.7

0.0

-5.0

0.0

6.27.1 7.9

5.5

7.4 7.9 7.9

-4

-2

0

2

4

6

8

-10

-5

0

5

10

15

20

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

EBITDA excl. NRIs

NRIs

EBITDA excl. NRIs, % of revenue

EUR million %

Electronics Segment, Q3 2015


15.4 14.7 14.8

12.5

20.8

14.7 13.9

0

5

10

15

20

25

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

Revenue

EUR million

1.20.8 1.0

0.2

2.8

0.7 0.7

8.0

5.26.5

1.4

13.6

4.7 4.7

0

2

4

6

8

10

12

14

16

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

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

EBITDA excl. NRIs EBITDA excl. NRIs, % of revenue

EUR million %

• Revenue was down 7% in the quarter, but up 10% YTD

• Lower quarterly EBITDA impacted by unfavorable product mix of ODM products due to a change in a customer's product strategy

Net Working Capital


105.7 102.8 112.389.0

116.8 99.6 116.6

80.4 82.283.4

79.4

89.494.1

100.7

-87.0 -86.3 -95.9 -98.3 -102.7 -97.3 -92.8

-17.6 -20.5-32.9 -44.0 -41.2 -36.7 -27.6

0

2

4

6

8

10

12

14

16

18

-200

-150

-100

-50

0

50

100

150

200

250

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

Trade payables Other liabilities and receivables***

NWC* % of Revenue** Core working capital* % of Revenue**

Inventories Trade receivables

* Average of previous four quarters ** Revenue of previous 12 months *** Related to employee benefits, taxes and financial

items. Since Q3/14 includes additional tax liability of EUR

8.3 million and non-recurring items booked, but not paid.

EUR million %

81.6 78.266.9

26.2

Core working capital = Inventories + trade receivables – trade payables

62.3 59.896.9

Cash Flow


6.6

-38.7

-16.7

-9.4-10.0

-48.2

0.0

-22.0

-10.0

-70.2

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

1-9/14 1-9/15Cash from operationsNet capex (organic)Cash after net capexAcquisitionsFree cash flow

EUR million EUR million

-18.4

-31.8

7.4

1.60.9

-17.9

30.7

-40

-30

-20

-10

0

10

20

30

40

50

2014 2015

Q1 Q2 Q3 Q4

Free cash flow excl. acquisitions

EUR million

Balance Sheet and Return


34.738.0

29.3

0

5

10

15

20

25

30

35

40

2014 Q3/14 Q3/15

Equity ratio, %

-5.6

12.9

65.0

-10

0

10

20

30

40

50

60

70

80

90

100

2014 Q3/14 Q3/15

Gearing, %

-8.9

22.8

99.9

48.654.0 56.9

-20

0

20

40

60

80

100

120

2014 Q3/14 Q3/15

Net debt EBITDA*

7.7

9.2

11.2

0

2

4

6

8

10

12

2014 Q3/14 Q3/15

ROCE, %

%

EUR million %

%

*EBITDA of previous 12 months excl. NRIs ROCE % = Adjusted operating profit (excl. NRIs) /

((Total equity + interest-bearing liabilities)(average))

• Commercial activities for

worldwide expansion started.

• Great feedback from rolling

stock customers.

• Sourcing synergies identified

and future savings assumed.

• Supply chain and technology

best practices in

implementation.

KTP Acquisition

- Integration Executed as Planned


KTP Acquisition 1st of July

• KTP develops and manufactures electrical cabinets, power packs and electrical distribution systems for rolling stock manufacturers.

• The acquisition has been consolidated into PKC Group as of 1 July 2015 according to the so-called anticipated acquisition method.

• The acquired Wiring & Controls business is included into PKC Group’s Wiring Systems business segment.

• The enterprise value was EUR 50 million.

• The preliminary goodwill EUR 5.8 million reflects the value of know-how and expertise in rolling stock business.

• Group 1-9/2015 proforma revenue EUR 702 million and EBITDA EUR 50 million.

• PPA assets total EUR 22.9 million and related depreciation and amortization equal to EUR 3.2 million per year in the beginning.


MEUR

Preliminary consideration transferred 36.6

Consideration paid in cash 22.4

Cash and cash equivalents of the

acquired companies -0.5

Total cash flow from the acquisition 22.0

Provisional values of assets 67.3

Provisional values of liabilities 36.6

Total net assets 30.8

Preliminary goodwill 5.8

PKC’s Strategy Captures Growth

Opportunities



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


• Doubling the addressable market

• Strong market position in western truck markets and improving manufacturing footprint

• New business awards from global customers

• Expanding into rolling stock segment through recently closed acquisition

• First breakthrough into China EDS market through joint venture which commenced operations during Q3

• Entry into rolling stock and China JV provide opportunities to further organic and inorganic growth

Strategy Execution Proceeding

PKC Group Plc

Bulevardi 7

FI-00120 Helsinki, Finland

www.pkcgroup.comPKC Investor Presentation Q3 2015

investor presentation q3 2015 - pkc group...wiring systems segment, q3 2015 pkc investor...

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