GRUPO IN INDUSTRIAL SALTILLO, S.A .A.B. DE C.V. Corporate - - PowerPoint PPT Presentation

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GRUPO IN INDUSTRIAL SALTILLO, S.A .A.B. DE C.V. Corporate Presentation February, 2018 1 Forward Looking Statement This presentation and discussion may contain forecasts or projections in accordance with the vision and expectations of the

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SLIDE 1

GRUPO IN INDUSTRIAL SALTILLO, S.A .A.B. DE C.V.

Corporate Presentation

February, 2018

1

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SLIDE 2

Forward Looking Statement

2

This presentation and discussion may contain forecasts or projections in accordance with the vision and expectations of the Administration with respect to the performance of the Company, the businesses and future

  • events. These forecasts and projections are subject to risks, uncertainties and assumptions that are uncertain.

Several factors can cause actual results to differ materially from those forecasts, projections and plans of the Administration, including, without limitation, business development and marketing of new products, the demand for and acceptance of the Company’s products, economic conditions in the product markets and the different regions, the cost of raw materials and energy and the fluctuation of the exchange rate. FINANCIAL EXPECTATIONS The financial expectations, forecasts and projections in this presentation reflect the current beliefs of the Company and its Administration. The Company is not required and does not acquire duty to update this presentation or any forecast, projection or expectation as a result of new information, events or circumstances subsequent to this date.

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SLIDE 3

Diversification

3

Auto Parts

Casting and machining of auto parts in gray iron, ductile iron, and aluminum; for brake, engine, transmission and suspension systems.

Construction

Ceramic and Porcelain Tiles, Water Heaters* and Pipe Fitting products*.

Housewares

Kitchen and tableware in aluminum, enamel on steel and ceramic.

* In process of Divestment. * Subject to COFECE authorization.

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SLIDE 4

Breakdown

4

Sales EBITDA

Auto Parts 2010 to 2017:

Over $650 Million USD CAPEX for Organic growth and

  • Acquisitions. *

Iron Casting Annual Capacity grew from 78 k to +550 K tons. * AUTO PARTS CONSTRUCTION HOUSEWARES

GIS figures 2017 including Calorex

59% 33% 8% 79% 17% 4%

* Including Evercast (JV with TRW)

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SLIDE 5

GISSA at a Glance

5

90 90 Year St Story 40 40+ + years lis listed in in BMV + + 80 8000 00 em employees 25 25 man anufacturin ing facili litie ies in in 7 7 cou

  • untr

trie ies & 3 3 conti tinents $1 $1B USD Sa Sale les 15 15% EBIT ITDA Mar argin in fr from 20 2014 14 to

  • 20

2017 17 Sa Sale les dou

  • uble

led an and EBIT ITDA trip triple led

GIS figures including Calorex

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SLIDE 6

Strategic Repositioning

6

2010 2012 2014-2015 2011 2012-2013 2015

millions Acquisition Auto Parts facility in SLP

USD $50

millions To double the installed capacity of SLP facility

USD $65

millions JV with Fagor Ederlan for machining of iron parts

USD $50

Up to millions To increase capacity in Saltillo and Irapuato

USD $30

millions JV with TRW for casting and machining of parts for brake systems

USD $120 USD $88

Millions to Acquire ACE Group Facilities in Spain, Poland and the Czech

  • Republic. Iron casting and Aluminum

casting and machining. Leader in parts for brake systems in Europe millions of Divestment of Blocks and Heads Division

USD $439

2016

millions to Acquire INFUN Group design, casting y machining of parts for engine, transmission and suspension – Auto Industry. Facilities in Spain, Italy and China *

USD $308

2017

Millions Water Heaters BU Divestiture Announcement **

USD $210

* US $352 including Net Debt * Subject to COFECE authorization

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SLIDE 7

Global Footprint

7

GIS figures 2017 including Calorex

Pre e Inf nfun Ac Acquisi sition Pro-forma Inf nfun Ac Acquisi sition

Re Revenue by by G Geography Re Revenue by by Curr urrency

Europe

17%

America

83%

Europe

30%

Asia

4%

America

66% 39%

EUR USD MXN

17% 44%

MXN

33% 30%

EUR CNY

4% 33%

USD

Pre e Inf nfun Ac Acquisi sition Pro-forma Inf nfun Ac Acquisi sition

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SLIDE 8

Highlights of Globalization

8

  • Auto Parts developed a Di

Differentiated Valu alue Proposal.

  • Expansion in the Auto Parts Industry: Ne

New Ge Geographie ies and growing our customer base

  • Exposition to Nafta market is reduced because of Di

Diversification to to Europe an and Chin ina.

  • Alu

lumin inum Cas astin ing process added to portfolio.

  • Machining + Co-design (R&D): Valu

lue Chain ain In Integration.

  • Chall

allengin ing year of Transit ition and Focus on In Integration.

  • Tale

alent development to achieve Synergies an and Best Practic ices.

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SLIDE 9

AUTO PARTS SECTOR

9

5 Business Units and facilities in Mexico, Spain, Italy, Poland, Czech Republic and China, we supply iron and aluminum components to our customers at the most important regions in the world. Mexican and European leaders in the production of calipers for brake systems and engine crankshafts.

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SLIDE 10

Auto Parts Business Units

10

6 Business Units in North America, Europe and China. Installed capacity of +550 k tons iron foundry, + 10 k tons aluminum & + 15 machined million pieces.

Iron Foundry Iron & Aluminum Foundry + Machining Iron Foundry + Machining Iron Foundry + Machining Machining Machining México Spain, Poland & Czech Rep. Spain, Italy & China México México China 235k tons 82k tons (Iron) 10k tons (Alum) 3.5 Mill. Pc. (Mac) 193k tons 2.5 Mill. Pc. 52k tons 6 Mill. Pc. 3.5 Mill. Pc. 2.5 Mill. Pc. 85% Tiers 15% OEM 100% Tiers 74% OEM 26% Tiers 100% Tiers 100% Tiers 100% Tiers Brake, Engine, Suspension & Transmission Brake Engine, Suspension and Transmission Brake Suspension, Transmission & Brake Suspension

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SLIDE 11

Auto Parts Product Portfolio

  • Differential Case
  • Yokes
  • Gear box
  • Clutch Plates

Transmission (16%)

  • Rotor / disk
  • Drums
  • Spacers
  • Brackets
  • Calipers
  • Cylinder Wheel

Brake (44%)

  • Crankshafts
  • Bearings
  • Exhaust manifolds
  • Flywheels
  • Dampers

Engine (27%)

  • Knuckles
  • Control arms

Suspension (13%)

11

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SLIDE 12

Auto Parts Highlights

12

  • Largest independent manufacturer of Crankshafts in the world

rld.

  • La

Largest independent Foundry in Mexic xico.

  • From 2010 to 2017 the Iron Casting Annual Ca

Capacit ity grew from 78K to 550K tons.

  • Co-Design + R&D + Casting + Machining: In

Integrated Valu lue Chain in.

  • 60

60% Revenues Europe + Ch Chin ina and 40% Revenues in North America.

  • EBI

BITDA margin in exp xpansio ion.

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SLIDE 13

Differentiated Value Proposal

13

Co-Designing Strategic Global Footprint Focus on 6 Strategic Products R&D Efficiency based Competitiveness

Customer Oriented

Material Diversification Iron Molding Process Diversification Machining Value Added Process Multi-region Platforms

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SLIDE 14

INDUSTRY OVERVIEW

14

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SLIDE 15

Industry Cycle – North America

15

  • 2017 Light Vehicles Production ~ 17.1 million
  • 2017-2021 CAGR 1.3% *
  • Production Growth Driver: México
  • SUV’s most dynamic category

* IHS Automotive Light Vehicle Production Forecast @ August 2017

Our Posit ition:

  • Iron Foundry Market Share in México ~ 30%
  • Future

demand growth in Mexican Iron Foundry Capacity – Expansion Opportunity

  • ~ 75% of GIS NA Auto Parts Sales to Pickups & SUVs

Competitiv ive Advantage:

  • Machining (value added) capabilities
  • Recognized

as experts in safety critical components

  • Strategic Facilities Location
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SLIDE 16

NAFTA Negotiations

16

KE KEY ISS ISSUES OF OF CONTROVERSY

  • Regional Content (62.5% to 85%)
  • US Content (50%)
  • Sunset Clause

NAFTA CA CANCELLATION MIT ITIGATING FACT CTORS

  • GIS NA Auto Parts ~ 90% (Average) of Regional

Content

  • Long lifecycles / Limited capacity in the US
  • Structured review vs Automatic termination
  • Tactics as dramatic rhetoric
  • Will
  • nly

raise vehicle prices for American consumers

  • ~ 3% tariffs under WTO rules (MFN)

60% of GIS Auto Parts Sales made in Europe and China

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SLIDE 17

Industry Cycle - Europe

17

  • 2017 Passenger Cars Production ~ 19.8 million
  • 2017-2021 CAGR 2.6% *
  • Production Growth Driver: Eastern Europe
  • German OEMs increasing Market Share

* PWC July 2017 Passenger Cars / PanEurope: Europe, Turkey and Russia

Our Posit ition:

  • ACE Brakes Market Share ~ 25%
  • Iron & Aluminum (Foundry & Machining)
  • Ongoing Capacity Expansion in Czech Republic and Spain

Competitiv ive Advantage:

  • Strong and specialized European supplier
  • Leading

edge capabilities in new products development

  • Western and Central Eastern Europe Presence
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SLIDE 18

Industry Cycle - China

18

  • 2017 Vehicle Production ~ 28 million
  • 2017-2021 CAGR 3.1% *
  • World´s production leader
  • Japan & Korea production decreasing

Our Posit ition:

  • Iron Foundry & Machining
  • Possible Capacity Expansion
  • Machining JV with Fagor Ederlan

Competitiv ive Advantage:

  • Local Customers Access
  • Regional Export Capabilities
  • World Class Facilities (Customer Awarded)

* IHS

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SLIDE 19

INDUSTRY TRENDS

19

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SLIDE 20

Industry Disruptive Trends

20 * UBS, IHS, ACEA, CAAM, Fourin, May- 17

  • Elect

lectrif ification ‐ * 2025 Global Sales ~ 104 million vehicles, expected mix: ‐ 86% ICE + Hybrid ‐ 14% Electric ‐ GIS Components compatible to ICE + Hybrid (including Crankshaft) ‐ Our customer, Chassis Brakes International (CBI) assigned Fuchosa (an ACE facility) a platform for electrical vehicles to supply Volkswagen. The operations are expected to begin by mid

  • 2019. We believe this will be approximately 3,000 tons/year program.

‐ Ongoing negotiations to capture additional volume for electrical vehicles (not only in Brakes auto parts).

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SLIDE 21

Industry Disruptive Trends

21 * Deloitte “Future of Mobility, whats next” ** Deloitte “Supplying the future of mobility”

  • Div

Diverse Mob

  • bilit

ity ‐ Shared mobility could expand demand on cars. * ‐ We supply the same parts to hybrids as we do to ICE

  • Autonomous Dr

Drivin ing ‐ Tiers concentration in new technologies could allow us to consolidate Design, Foundry and Machining processes (CAPEX restrictions & preferences).

  • Con

Connectivit ity ‐ Technology will push efficiency levels and complexity, creating barriers of competitiveness within the actual market participants. **

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SLIDE 22

Auto Parts Strategic Priorities

22

  • Follow on Globalization Strategy – Assuring Synergies Execution.
  • Guarantee Technical Talent Development.
  • Profitable and Sustainable Growth in each Business Unit.
  • Designing Capabilities + R&D.
  • Supply capabilities in various technologies & value added processes.
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SLIDE 23

CONSTRUCTION SECTOR

23

Ceramic Tiles

60%

Water Heaters

40%

Sector Sales Distribution:

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SLIDE 24

Ceramic Tiles Highlights

24

  • Market Value: *

‐ México: ~ US $1.0 billion ‐ US: ~ US $3.7 billion

  • Demand Expected Growth: ~ 4% CAGR (16-21), for both markets.

* FCW Magazine, U.S. Floor Report 2017 and internal estimates

Our Posit ition:

  • ~ 17% Mexican Market Share
  • ~52 million sq. meter installed capacity (México)
  • Exports (mainly US) ~ 25% of Total Sales

Competitiv ive Advantage:

  • Strong Distribution Channels
  • 100% Decoration on Digital Printing Tech.
  • Brand positioning
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SLIDE 25

Vitromex Evolution

25

  • 50

50 years in the market.

  • #13

13 largest manufacturer worldwide. *

  • CAPEX for Ca

Capacit ity Transform rmatio ion and Digi igital Decoratio ion.

* Resource: The Ceramic World Review magazine

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SLIDE 26

Ceramic Tiles Strategic Priorities

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  • Focus on Productivity.
  • US Sales Team Consolidation.
  • Product Portfolio Segmentation.
  • Capacity Transformation.
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SLIDE 27

Water Heaters Highlights

27

  • Market Value: *

‐ México: ~ $2,650 million MXP ‐ US: ~ US $4.2 billion

* Internal estimates

Our Posit ition:

  • ~ 3% NAFTA Market Share
  • Multi region – channel distribution in México
  • Exports (mainly US) ~ 20% of Total Sales

Competitiv ive Advantage:

  • Market Share Leader in México
  • Strong Branding Positioning
  • Segmentation & Wide Product Portfolio
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SLIDE 28

Calorex Leadership

28

  • 60

60 years in the market.

  • New Technolo

logie ies in in Product develo lopment.

  • Ameri

rican St Standard brand license in US sales.

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SLIDE 29

Water Heaters Strategic Priorities

29

  • Preserve Mexican Market Leadership
  • Develop Retail Plumbing Distribution Channel
  • US Market Focus (products & regions)
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SLIDE 30

HOUSEWARES SECTOR

30

Manufacture and market diverse cookware & tableware products. Also trade kitchenware accessories & appliances.

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SLIDE 31

Housewares Highlights

31

  • México Market Value: *

‐ Cookware: ~ $4,000 million MXP ‐ Tableware: ~ $2,800 million MXP

* Internal estimates

Our Posit ition:

  • ~ 18% México Cookware Market Share
  • ~ 11% México Tableware Market Share
  • Multi region – channel distribution in México

Competitiv ive Advantage:

  • Strong Branding Positioning
  • Segmentation & Wide Product Portfolio
  • Competitive

manufacturing cost vs regional producers

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SLIDE 32

Cinsa Continuous Innovation

32

  • GIS orig

rigin ins.

  • Most recognized kit

itchenware brands in Mexico.

  • In

Innovatio ion of products and Enamel St Steel Reposit itio ionin ing.

  • Co

Consis istent Ca Cash Flo low generation.

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SLIDE 33

Housewares Strategic Priorities

33

  • Profitable Sustained Growth
  • Preserve or Increase Market Share of each category
  • US Expansion Strategy Development
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SLIDE 34

FINANCIAL PERFORMANCE

34

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SLIDE 35

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Accelerated and Profitable Growth

35

AUTO PARTS CONSTRUCTION HOUSEWARES

8,845 19,466 974 11% 2,819 14.5%

NET SALES CAGR 2013 - 2017 + 21.5% EBITDA CAGR 2013 - 2017 + 32.4%

MXP Millions

9,687 11,275 14,552 1,031 10.6% 1,434 12.7% 2,111 14.5%

Margin Expansion because

  • f Auto Parts contribution

growth

GIS figures 2017 including Calorex

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SLIDE 36

Financial Highlights

36

  • “AA -” Credit Rating (Fitch & HR)
  • Net Debt to EBITDA: 2.4x
  • Debt Composition: 31% USD, 49% Euros & 20% MXP
  • Average Debt Maturity: 3.8 years
  • Debt Maturity Profile:

USD Million % 2018 154 34% 2019 47 10% 2020 80 18% 2021 71 16% 2022 - 100 22%

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SLIDE 37

37

Stock Performance

60% 70% 80% 90% 100% 110% 120% 130% 140% 01-jul.-16 22-jul.-16 12-ago.-16 02-sep.-16 23-sep.-16 14-oct.-16 04-nov.-16 25-nov.-16 16-dic.-16 06-ene.-17 27-ene.-17 17-feb.-17 10-mar.-17 31-mar.-17 21-abr.-17 12-may.-17 02-jun.-17 23-jun.-17 14-jul.-17 04-ago.-17 25-ago.-17 15-sep.-17 06-oct.-17 27-oct.-17 17-nov.-17 08-dic.-17 29-dic.-17 GISSA NEMAK RASSINI A RASSINI CPO LAMOSA * CERAMIC D VASCONI *

  • Most defensive stock in a volatility period
  • Average Daily Trading (90 days):

‐ 200,000 shares / $6.5 million MXP

  • vs July 2016 (Avg 90 days):

‐ 5.5x Daily Transactions improvement ‐ Triple Daily Trading Volume ‐ Double Analyst Coverage

  • Liquidity

Index (IB) 72nd place, an improvement of 25 positions vs Nov-16

  • Active Market Maker & Buy-back Program
  • Stock price upside: 14% - 38% *

* Analyst Coverage Estimates – GISSA 2018 Price Target

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SLIDE 38

FOCUS AND PORTFOLIO SIMPLIFICATION

38

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SLIDE 39

Press Release Highlights

39

  • In May 23rd, GISSA informed the market about the agreement with Rheem Manufacturing Co.

for the div

ivestment of

  • f the Water Heaters Busin

iness.

  • The tr

transactio ion in inclu ludes the subsid idiarie ies Calentadores de América S.A. de C.V., Fluida

S.A. de C.V. y Water Heating Technologies Corp., dedicated to the manufacture and market of water heating and pipe fitting solutions.

  • Transaction size: MXP$3,915 mil

illio lions.

  • Su

Subje ject to to COFECE au authoriz izatio ion.

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SLIDE 40

Rational & Strategic Fit

40

  • This represents for GIS an opportunity to focus and sim

simpli lify fy the busin iness port rtfoli lio.

  • This transaction brings along fin

financia ial fle flexib ibil ilit ity.

  • Proceeds will be used to pay Debt and support Organic Growth.
  • Since June 2017, Calorex has been reported as Dis

iscontin inued Operatio ion.

  • Ongoin

ing process – so far, GIS have complied with all information requirements from COFECE.

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SLIDE 41

Pro forma Contribution

41

  • Strong fo

focus an and con concentration in

Auto Parts.

  • Vitromex focus: Cap

apacity Tra ransformation.

  • Auto Parts working on Sy

Synergie ies.

AUTO PARTS CONSTRUCTION HOUSEWARES

GIS figures 2017 excluding Calorex

Sales EBITDA

69% 22% 9% 89% 8% 3%

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SLIDE 42

Revenue Distribution – Pro forma

42

GIS figures 2017 excluding Calorex Pre Pre Di Divestiture Pos Post t Div Divestiture

Rev even enue by Geo eography Revenue by cu currency

America

5

Asia

35%

Europe

60%

EUR MXN

5 35%

USD

25%

CNY*

35% Pre Pre Di Divestiture Po Post t Div Divestiture 30% 66% 4%

America Europe Asia

4%

MXN RMB EUR

30% 34%

USD

32%

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SLIDE 43

2016 2017 2016 2017

Calorex Divestiture

43

GIS Estimates of Calorex Divestiture AUTO PARTS CONSTRUCTION HOUSEWARES

14,552 19,466

PRE DIVESTITURE POST DIVESTITURE

12,011 16,954

MXP Millions

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SLIDE 44

¿WHY GISSA?

44

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SLIDE 45

45

¿WHY GISSA?

  • Auto Parts Business Differentiated value proposal.
  • Accelerated Growth and Margin Expansions.
  • Strategic Diversification into European and Asian Markets.
  • Recognized Brands,Leaders.
  • Solid Corporate Governance.
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SLIDE 46

GRUPO IN INDUSTRIAL SALTILLO, S.A .A.B. DE C.V.

Corporate Presentation

February, 2018

46