Ampco-Pittsburgh Corporation East Coast IDEAS Investor Conference - - PowerPoint PPT Presentation

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Ampco-Pittsburgh Corporation East Coast IDEAS Investor Conference - - PowerPoint PPT Presentation

Ampco-Pittsburgh Corporation East Coast IDEAS Investor Conference Boston, MA May 18, 2017 The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for forward- looking statements made by or on our behalf. This


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East Coast IDEAS Investor Conference

Boston, MA May 18, 2017

Ampco-Pittsburgh Corporation

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The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward- looking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statements in this document other than statements of historical fact are statements that are,

  • r could be, deemed forward-looking statements within the meaning of the Act. In this document,

statements regarding future financial position, sales, costs, earnings, cash flows, other measures

  • f results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets,

guidance or goals are forward-looking statements. Words such as “may,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “forecast” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking

  • statements. Forward-looking statements speak only as of the date on which such statements are

made, are not guarantees of future performance or expectations, and involve risks and

  • uncertainties. For Ampco-Pittsburgh, these risks and uncertainties include, but are not limited to,

those described under Item 1A, Risk Factors, of Ampco-Pittsburgh’s Annual Report on Form 10-K. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.

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Agenda

 Introduction to Ampco-Pittsburgh  Recent acquisitions  Financial performance and challenges  Strategies for improving performance

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Ampco-Pittsburgh Corporation

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  • Headquarters: Carnegie, PA, U.S.
  • 2016 Revenue: $332M
  • Forged and Cast Engineered Products Segment (75% of 2016 revenues)
  • A world leading manufacturer of cast and forged steel rolls – Union Electric Åkers
  • 90+ years of experience
  • Manufacturing and Service Facilities: 7 in U.S., 3 in Europe, 1 in Canada, 3 JVs in

China

  • Global Sales Network: 12 sales offices
  • Air and Liquid Processing Segment (25% of 2016 revenues)
  • Custom-designed, specialty heat exchangers, air handling systems, and

centrifugal pumps

  • Manufacturing Plants: 3 in U.S. (2 Virginia, 1 New York)
  • NYSE: AP
  • 1,900 employees

A manufacturer of highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the

  • world. The Company was incorporated in 1929.
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Ampco-Pittsburgh Global Footprint

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Locations

Manufacturing Sales Office

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Ampco-Pittsburgh Corporation (cont’d)

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Two Segments Reported: 2015 Revenue 2016 Revenue

Forged and Cast Engineered Products $152.3M $247.7M*

  • Forged and Cast Rolls
  • Open Die Forged Products

Air and Liquid Processing $86.2M $84.2M

  • Aerofin- Heat Exchangers
  • Buffalo Air Handling - Custom Air Handling Systems
  • Buffalo Pumps – Specialty Centrifugal Pumps

The Corporation

$238.5M $331.9M

* Revenues for 2016 include that of Åkers and ASW from their respective dates of acquisition in 2016. For the ten months ended December 31, 2016, net sales for Åkers approximated $121.1M. For the two months ended December 31, 2016, net sales for ASW approximated $7.5M.

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Forged and Cast Engineered Products Segment

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Key Customers

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Backup Roll Work Roll

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Rolls Staged in Hot Strip Mill (HSM)

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2016 Global Roll Market

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($ Billions USD/yr)

Cast Rolls ~1.3 Forged Rolls ~0.8 Total ~2.1 U.S. Roll Market ~0.3

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Competing companies in global roll industry are mostly small, private regional companies

Cast Rolls Forged Rolls

*Ampco-Pittsburgh completed acquisition of Åkers in Q1 2016. 12

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Air and Liquid Processing Segment (A&LP)

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Aerofin

Heat Transfer Products

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Buffalo Air Handling

Custom Air Handling Systems

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Buffalo Pumps

Specialized Centrifugal Pumps

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Åkers and ASW Steel Inc. Acquisitions

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Benefits of Åkers Acquisition

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 International roll producer and largest former competitor  Acquired March 3, 2016 for $74.2M  Revenue from roll business should grow substantially  Should contribute to stabilizing and improving performance of

Ampco

 Cost reduction and other synergies estimated in range of

~$15M on full year run-rate basis when complete

 Provides improved currency “balance”  Combined new product development capability

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ASW Steel Inc.

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 Acquired November 1, 2016 for $13.1M  Located in Welland, Ontario, Canada  Premier specialty steel-making facility  Offers a unique combination of carbon, stainless, and other

specialty steelmaking capabilities

 Flexible steel refining methods include:

 Argon oxygen decarburization, vacuum oxygen decarburization,

vacuum degassing, ladle metallurgical station

 ASW Steel's specialty metals and flexible steel refining methods

allow for the production of various high-quality products

 “Bolt-on” acquisition  Annual revenue approximately CAD 65 million

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Benefits of ASW Acquisition

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 ASW’s broad expertise in flexible steel refining methods provide

us with the capabilities to manufacture the additional chemistries needed to expand our reach into the open-die forging market

 Enhances our ability to grow and add new markets for

customers in the following markets:

 Oil & Gas  Power generation  Aerospace  Transportation  Construction

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Recent Financial Performance and Challenges

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Ampco’s financial performance has deteriorated in recent years primarily due to Forged & Cast Engineered Products’ performance

 Global steel market depressed since 2011  Roll business sales, margins, and profits have declined as

customers reduced production and costs

 Contraction of forged products for the oil & gas industry (2015)  Air and Liquid Processing profitable, consistent performer, but

lacks growth

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Sales and Operating Results Trend

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Operating Income/(Loss) Sales

2013 2014 2015 2016

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Key Factors Impacting 2016 Profitability

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 Low roll product volume demand  Low manufacturing capacity utilization  Unfavorable pricing  Non-recurring M&A-related costs, acquisition

integration & restructuring

 Impairment charge (Goodwill) ($26.7M)  Asbestos charge, net ($4.6M)  Tax valuation allowance reserve ($30.4M)

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Q1 2017 Summary Financials

($ Millions USD) Q1 2017 Q1 2016

Net sales $103.5 $63.6 Cost of products sold $84.7 $51.1 Selling and administrative $15.3 $13.5 Depreciation and amortization $5.9 $3.9 (Loss) income from operations ($2.4) ($5.0) Interest expense ($1.2) ($0.2) Other income (expense) – mainly FX (loss) gain ($1.0) $1.2 Income tax (provision) benefit ($0.1) $0.9 Equity income (losses) in Chinese JV $0.1 $0.2 Net (loss) income ($4.8) ($2.9) E.P.S ($0.39) ($0.26)

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  • $32.6M higher sales for businesses acquired in 2016
  • $7.5M or 18% YOY organic sales growth in Forged & Cast Engineered Products Segment
  • Improved underlying sequential operating performance vs Q4 2016

~($4.2M) swing

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Strategies to Improve Ampco Performance

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Strategies to Improve Performance are in Process

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 Diversify into open die market (in addition to rolls and frac

blocks)

 Bifurcate roll pricing model: commodity vs. high-performance  Launch new products (rolls and open die)  Pricing strategy  Increase plant efficiency, utilization, and cost reductions  Replace Aerofin fossil fuel market lost sales

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Reasons For Diversification

 Cyclicality of steel and aluminum industries drove

decision to strategically diversify the company

 Lack of market size growth  Manufacturing requirements for open die forge market

are strong match for our manufacturing assets

 Four year successful record in penetrating the oil field

services industry

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Source: FIA

Roll Market ASW Acquisition

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Ampco-Pittsburgh Revenue Trend Expectations

7.7% CAGR

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Reasons to Expect Improved Performance Beginning in 2017

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 Steel industry increased profitability (tariffs, pricing)  Order increases for cast and forged rolls  Renewed order activity in oil field services industry  Roll product price increases (late Q2/Q3)  U.S. cast roll foundry idling (April 2017) – utilization up at

remaining plants

 Åkers acquisition synergy impact  Low cost plants acquired for non-differentiated rolls  Various manufacturing cost and efficiency initiatives

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Thank you

Questions Ampco-Pittsburgh Corporation