Capital Markets Day 2014 Kongsberg Automotive ASA, December 3, 2014
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Capital Markets Day 2014 Kongsberg Automotive ASA, December 3, 2014 1 Agenda 09:00 Achievements, strategy for growth & targets 09:30 Financial review 09:50 Automotive market outlook 10:05 Break 10:25 Automated Transmission trends in the Commercial Vehicle segment 11:00 Comfort feature trends in the Automotive seating segment 11:35 Summary and closing remarks 11:45 Lunch 2 Who we are Enhancing the driving experience Hans Peter Havdal, President & CEO 3 A true global supplier World class Revenues of Global presence products to the ca. EUR 1 40 locations in global vehicle Billion 20 countries industry Global R&D and More than testing 10 0000 capabilities employees 4 2014 KEY EVENTS Market Finance Operational ▸ Market still weak in ▸ Continued company ▸ Increased focus on Europe deleverage and financial innovation improvements ▸ NA remains healthy. SA is ▸ Starting to pay off in new very challenging for CV ▸ Delivering good cash flow business wins segment ▸ Secured new loan ▸ Continue to secure global ▸ China at more normalized agreement contracts growth, but increasingly important for KA going forward 5 Executive Committee 2015 Changes to senior management team Hans Peter Havdal, CEO ▸ Lovisa Söderholm, EVP Purchasing Lovisa comes from the role as Chief Purchasing Officer at SKF. Has solid Trond Stabekk, CFO automotive experience from Ford of Europe, Volvo, Jaguar and Aston Martin Lovisa Söderholm, EVP Purchasing ▸ Interior : EVP, Anders Nyström (formerly EVP Purchasing) Jarle Nymoen, Anders moves from Purchasing to run KA’s Interior business bringing solid EVP Human Resources OEM experience from Ford and Volvo Cars Philippe Toth, ▸ SVP Business Dev. & IR Driver Control: EVP, Scott Paquette, (formerly EVP Interior) Scott Paquette moves from KA’s Interior business to head DCS. With his Anders Nyström, strong automotive experience, Scott will drive continuous improvements in EVP Interior operations and quality Joachim Magnusson, ▸ Business Development & IR: SVP, Philippe Toth EVP Driveline As business development & new growth opportunities become increasingly important, this role has been included in KA’s Exec. Committee. Scott Paquette, EVP Driver Control Jonathan Day, EVP Fluid Transfer 6 Recap from 2012 CMD Group Targets Revenue Selective growth focus Margin Gradually improving margin ROCE 15% by 2015 NIBD/EBITDA < 2x by 2015 7 2015 Business environment ▸ We continue to see a challenging market in 2015, main concerns are EU and Brazil ▸ At the same time we need to build a platform for growth through increased innovation efforts ▸ R&D and Sales & Marketing efforts increasing, but new programs launching in 1 to 2 years ▸ Strong growth opportunities identified within comfort systems and efficient powertrains 8 Weaker Market than we expected in 2012 CVP in Million Units LVP in Million Units 4,5 115 110 4 105 100 3,5 95 90 3 85 2,5 80 75 2 70 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 Total CVP 2012 CMD Forecast Total CVP 2013 CMD Forecast Total LVP 2012 CMD Forecast Total LVP 2013 CMD Forecast New forecast LMC New forecast LMC 9 Increased investments in R&D R&D of sales MEUR ▸ Increased R&D effort on 7% 70 developing new technology 6% 60 ▸ Supporting future growth plans 5% 50 4% 40 3% 30 2% 20 1% 10 0% 0 2011 2012 2013 2014 2015 R&D R&D of sales 10 The increased innovation efforts are starting to pay off Expected business awards in 2014 ▸ Order intake increasing, fueling future organic growth Driver Control 23% 33% ▸ Expected new business account for Driverline 220* about 22 % of 2014 estimated revenue MEUR Fluid Interior 10% 34% * Expected per annum value 11 Revised 2015 targets Group Revenue In line with 2014 ROCE 13% in 2015 NIBD/EBITDA < 2x by 2015 Delivering 15% ROCE would require cut backs in R&D, hurting growth potential 12 NEXT MOVES 13 Platform in place to capture future growth Profitable Growth 1987 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM 2015- beyond 3Q14 Entering the Establishing top three positions in attractive Operational automotive Consolidation and recovery segments improvements Growth market 14 Key growth trends ACTIVE CONNECTED EFFICIENCY & GLOBALIZATION COMFORT SAFETY VEHICLES EMISSIONS BRIC • Zero casualty • Always connected • Adaptive driver • CO2 / Fuel • Fewer, but bigger vision assistance Economy global platforms • Information & • Focus on accident Entertainment • Increased comfort • Downsizing • Customers expect avoidance features in 2nd row to source where • Self driving cars, • Electrification they build • Driver Assistance road use • More features in optimization lower segments •Size is getting increasingly • Self driving cars • Total cost of important to afford • Software upgrades • Aging population ownership global set up on the run willing to spend more on features 15 Key businesses growth trends – KA well positioned CONNECTED EFFICIENCY & GLOBALIZATION SAFETY COMFORT VEHICLES EMISSIONS BRIC INTERIOR DRIVELINE DRIVER CONTROL FLUID TRANSFER 16 Interior KA growth 2014 estimated sales Product lines expectations ▸ Comfort part of the business will grow above the global light vehicle production due to increased Above fitment rates of support and market 13% climate systems in cars 22% 21% 290 ▸ MEUR Light duty cables for automotive In line business will grow in line with With global light vehicle production market 44% HR&AR Comfort LDC Auto Non Auto ▸ Head & Arm rest will decline over the period as Interior will prioritize Below its comfort segment market LVP CAGR (2014-2020); 3% 17 Driveline KA growth 2014 estimated sales Product lines expectations ▸ SbW share of AT segment is Powertrain 84% expected to grow above average SbW due to more electronic controlled Above 2% market transmissions 43% ▸ MT segment would grow at par with 250 MEUR Global industry average as DS In line 39% would increase its market share in With B(RI)C countries market 15% MT AT Other LVP CAGR (2014-2020); 3% 18 Driver Control KA growth 2014 estimated sales Product lines expectations Powertrain ▸ AMT segment is expected to 84% grow above the global CVP Above growth market 5% 35% 240 47% ▸ HMI should enjoy an MEUR In line average industry growth rate With market 13% ▸ MT segment will slow down HMI Other MT AMT as AMT penetration rate is Below increasing globally market CVP CAGR (2014-2020); 6% 19 Fluid KA growth 2014 estimated sales Product lines expectations ▸ CV OEMs further adoption of lightweight couplings should yield an above average global CVP Above market growth for this segment 38% 40% ▸ Dedicated sales organization for 190 MEUR the Industrial business should allow for a doubling in sales over Above market a 5-year period 22% Couplings Industrial ▸ Niche player in high temperature Tube assemblies materials Below market CVP CAGR (2014-2020); 6% PCP CAGR (2014-2020): 3% 20 Financials CAPITAL STRUCTURE, DIVIDENDS & TARGETS 21 Capital structure target 4 3,5 3 2,5 Current level x2,2 2 1,5 Target x1,5 1 0,5 0 2012 2013 2014 2015 2016 leverage ratio ▸ KOA favours debt repayment and solidity ▸ Company targets a gearing ratio of 1.5 22 Dividend Policy for Kongsberg Automotive ASA ▸ Kongsberg Automotive shall create good value for its shareholders, employees and society ▸ Returns to shareholders will be a combination of changes in share price and dividends ▸ The Board of Directors’ intention is that dividends will be approximately 30% of the company’s net income provided that the gearing ratio is below 1.5 and the company has an efficient capital structure 23 Beyond 2015 targets KPI Targets KA expects an organic growth ratio of Organic 3 – 5% annually 3 – 5 % annually given the present growth market outlook KA have the ambition to deliver above ROCE > 13% 13 % ROCE NIBD/ KA will continue to deleverage to < 1.5 EBITDA increase financial robustness ▸ Our ambition is to continue to grow earnings, improve our return on capital, and enhance our financial flexibility 24 Financials Trond Stabekk, EVP & CFO 25 Since last capital markets day...... ▸ Strengthened profit margins ▸ Improved return on capital employed ▸ Reduced debt further through solid cash flow 26 Group revenue and EBIT (LTM=last twelve months) Revenues EBIT and EBIT Margin EUR Million EUR Million and percent 982 991 995 987 981 57.8 57.9 57.6 52.5 53.2 5,8% 5,9% 5,9% 5,3% 5,4% Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 27 Free cash flow (LTM=last twelve months) Free cash flow Free cash flow yield EUR Million Percent 51 48 16% 15% 43 44 41 13% 13% 13% Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 28 SEGMENTS 29 Revenues and EBIT margin per segment (LTM) Revenues EBIT Margin EUR Million percent 13,0% 297 302 282 10,9% 270 253 251 9,4% 8,8% 7,7% 184 194 7,2% 1,6% 1,0% Driveline Interior Fluid Transfer DCS Driveline Interior Fluid Transfer DCS EBIT (margin) 2013 EBIT margin 2014 Revenues LTM 2013 Revenues LTM 2014 30 GEARING, ROCE, LIQUIDTY & FUNDING 31 Continue focus on reducing gearing level NIBD/EBITDA Times 4,50 ▸ Gearing significantly reduced over 4,00 3.9 the last years 3,50 3.8 3,00 ▸ Trend towards target of Net 2,50 2.5 Debt/EBITDA ratio below 2x by 2015 2,00 2.3 on track 2.0 [VALUE] 1,50 1,00 ▸ Focus: continue to reduce the gearing ratio towards below 1.5 0,50 times 0,00 2011 2012 2013 Q3 2014 2015 20xx 32 Targeting > 13% ROCE by 2015 and beyond ▸ Multiple levers for improvement Return on Capital Employed (ROCE) Percent 18% – Revenue growth in high-margin 16% Target: segments > 13 % 14% 12% – Improved margins in currently 10% low-yielding segments 8% 6% – Higher capital efficiency, i.e.