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Investor Presentation Q1 2015 Profitability improved significantly, - - PowerPoint PPT Presentation

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Investor Presentation Q1 2015 Profitability improved significantly, strategy execution proceeding May 6, 2015 Matti Hyytiinen, President & CEO PKC Investor Presentation Q1 2015 Q1 2015 Highlights Business Environment Record

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SLIDE 1

Investor Presentation Q1 2015

Profitability improved significantly, strategy execution proceeding

PKC Investor Presentation Q1 2015

May 6, 2015 Matti Hyytiäinen, President & CEO

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SLIDE 2
  • Record freight demand and expansion
  • f fleet capacity continue to drive

class 8 truck demand in North America

  • More optimism in Europe emerging

while Brazilian market deteriorating further

Q1 2015 Highlights

May 6, 2015 PKC Investor Presentation Q1 2015 2

Business Environment PKC’s Operations PKC’s Financial Performance

  • Increased labor force within an
  • verheated job market in North America

resulted in suboptimal productivity and premium freight expenses

  • Development program progressing in

Europe and South America

  • Comparable EBITDA increased

substantially

  • Negative cash flow due to seasonally

increased working capital

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SLIDE 3

North American Market

May 6, 2015 PKC Investor Presentation Q1 2015 3

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 Trucks

Source: LMC Automotive forecasting Q4/2014

Production units +21% +12%

+14%

  • 3%

EPA 2014

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Heavy Duty Trucks Medium Duty Trucks EPA 2014 +14%

  • 1%

Source: LMC Automotive forecasting Q1/2015, ACT Build History April 2015, PKC Group

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% +3%

58% 42% 34% 66% Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2015

Production units Production units +6%

  • 5%
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SLIDE 4

EU27 + EFTA Market

May 6, 2015 PKC Investor Presentation Q1 2015 4

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 Heavy Duty Trucks Medium Duty Trucks

Source: LMC Automotive forecasting Q4/2014

Production units

  • 8%
  • 19%

+14%

  • 3%

EURO 6

20,000 40,000 60,000 80,000 100,000 120,000

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Heavy Duty Trucks Medium Duty Trucks EURO 6 +6% +5%

Source: LMC Automotive forecasting Q1/2015, PKC Group

41% 59% 25% 75% Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2015

Production units

  • 5%
  • 2%

PKC estimates production volume to remain on previous year’s level

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SLIDE 5

Brazilian Market

May 6, 2015 PKC Investor Presentation Q1 2015 5

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2011 2012 2013 2014 2015 2016 2017 2018 Heavy Duty Trucks Medium Duty Trucks

Source: LMC Automotive forecasting Q4/2014

Production units

  • 13%
  • 13%

+14%

  • 3%

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Heavy Duty Trucks Medium Duty Trucks

  • 8%
  • 4%

Source: LMC Automotive forecasting Q1/2015, PKC Group

30% 70% 2% 98% Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2015

Production units

  • 35%
  • 5%

PKC estimates production volume to be clearly lower than previous year

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SLIDE 6

China Market

May 6, 2015 PKC Investor Presentation Q1 2015 6

100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 2011 2012 2013 2014 2015 2016 2017 2018 Heavy Duty Trucks Medium Duty Trucks

Source: LMC Automotive forecasting Q4/2014

Production units

  • 2%
  • 13%

+14%

  • 3%

50,000 100,000 150,000 200,000 250,000

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Heavy Duty Trucks Medium Duty Trucks

  • 20%
  • 11%

Source: LMC Automotive forecasting Q1/2015, PKC Group

1% 99% 0% 100% Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2015

Production units

  • 23%
  • 37%

EURO 4 EURO 4

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SLIDE 7

Revenue

May 6, 2015 PKC Investor Presentation Q1 2015 7

114.5 120.5 129.4 129.4 138.2 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

North America

17.0 16.7 19.5 12.7 12.3 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

South America

188.6 191.3 195.4 196.7 205.7 15.4 14.7 14.8 12.5 20.8 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

Total Group

EUR million EUR million EUR million 54.5 51.9 45.5 53.3 53.9 9.7 9.6 9.6 7.8 8.4 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

Europe

EUR million

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SLIDE 8

Average Number of Personnel

May 6, 2015 PKC Investor Presentation Q1 2015 8

11,081 11,507 12,265 12,212 12,306 5,000 10,000 15,000 20,000 25,000 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

North America

4,676 4,661 5,131 5,362 5,248 236 242 233 233 252 5,000 10,000 15,000 20,000 25,000 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

Europe

2,838 2,766 2,668 2,520 2,213 5,000 10,000 15,000 20,000 25,000 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

South America

18,659 19,004 20,136 20,164 19,835 616 652 631 583 580 5,000 10,000 15,000 20,000 25,000 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15

Total Group

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SLIDE 9
  • European heavy-duty and medium-duty

truck production is estimated to remain

  • n previous year’s level.
  • North American heavy-duty truck

production is estimated to increase by 14% and medium-duty truck production to decline by 1% compared to 2014.

  • 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 slightly decrease compared to the current level.

Market Outlook – Full Year 2015

May 6, 2015 PKC Investor Presentation Q1 2015 9

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SLIDE 10
  • PKC Group estimates that with

prevailing exchange rates 2015 revenue will be close to previous year level, and that comparable EBITDA will be higher than in 2014.

  • Revenue and EBITDA estimates are based
  • n current business structure.
  • In 2014, PKC’s revenue was EUR 829.5

million 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

May 6, 2015 PKC Investor Presentation Q1 2015 10

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SLIDE 11

Key Figures

May 6, 2015 PKC Investor Presentation Q1 2015 11

EUR million 1-3/15 1-3/14 Change % 1-12/14 Revenue 226.5 204.1 +11.0 829.5 EBITDA1) 16.7 11.8 +41.7 48.6 EBITDA1) % 7.4 5.8 5.9 Non-recurring items

  • 0.6
  • 2.7
  • 28.4

Operating profit (loss) 8.6 2.6 +230.7

  • 7.0

EPS (EUR) 0.18 0.04 +379.3

  • 1.21

Cash flow from operations

  • 29.7
  • 12.8

41.0 Gross capital expenditure 2.4 6.5

  • 63.4

19.9 Core working capital2) 103.5 99.2 +4.4 70.2 ROCE, %3) 13.3 7.2 7.7 Gearing, % 8.8 8.6

  • 5.6

1) Excluding PPA depreciation and amortisation and non-recurring asset impairment and write-downs 2) Inventories + trade receivables - trade payables 3) ROCE, % = Adjusted operating profit (excl. NRIs) / (Total equity + interest-bearing liabilities)(average))

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SLIDE 12
  • Revenue increased +9% including

FX impact of +13%

– Light-vehicle build-outs reduced revenue in North America which was compensated by higher truck revenue – Europe close to previous year level – Revenue in Brazil decreased due to poor market conditions

  • Adjusted EBITDA improved clearly

– Lower losses in Brazil and favorable FX translation impact – Additional expenses in North America to meet increased demand of trucks – Development program in Europe and Brazil continuing as planned

Wiring Systems Segment, Q1 2015

May 6, 2015 PKC Investor Presentation Q1 2015 12

188.6 191.3 195.4 196.7 205.7 170 180 190 200 210 220 230 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Revenue EUR million 11.7 13.5 15.5 10.7 15.3

  • 2.1
  • 1.0
  • 7.4
  • 9.7

0.0 6.2 7.1 7.9 5.5 7.4

  • 4
  • 2

2 4 6 8

  • 10
  • 5

5 10 15 20 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 EBITDA excl. NRIs NRIs EBITDA excl. NRIs, % of revenue EUR million %

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SLIDE 13

Electronics Segment, Q1 2015

May 6, 2015 PKC Investor Presentation Q1 2015 13

15.4 14.7 14.8 12.5 20.8 5 10 15 20 25 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Revenue EUR million 1.2 0.8 1.0 0.2 2.8 8.0 5.2 6.5 1.4 13.6 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 EBITDA excl. NRIs EBITDA excl. NRIs, % of revenue EUR million %

  • Revenue increased 35% from

comparison period

  • Increased revenue of own

products had a favorable impact

  • n profitability
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SLIDE 14

Net Working Capital

May 6, 2015 PKC Investor Presentation Q1 2015 14 105.7 102.8 112.3 89.0 116.8 80.4 82.2 83.4 79.4 89.4

  • 87.0
  • 86.3
  • 95.9
  • 98.3
  • 102.7
  • 17.6
  • 20.5
  • 32.9
  • 44.0
  • 41.2

2 4 6 8 10 12 14 16 18

  • 200
  • 150
  • 100
  • 50

50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 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 78.2 66.9 26.2

Core working capital = Inventories + trade receivables – trade payables

62.3

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SLIDE 15

Cash Flow

May 6, 2015 PKC Investor Presentation Q1 2015 15 41.0

  • 12.8
  • 29.7
  • 20.3
  • 5.5
  • 2.1

20.7

  • 18.4
  • 31.8
  • 40
  • 30
  • 20
  • 10

10 20 30 40 50 2014 1-3/14 1-3/15 Cash from operations Capital expenditure Free cash flow EUR million EUR million

  • 18.4
  • 31.8

7.4 0.9 30.7

  • 40
  • 30
  • 20
  • 10

10 20 30 40 50 20142 2015 Q1 Q2 Q3 Q4 Free cash flow EUR million

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SLIDE 16

Balance Sheet and Return

May 6, 2015 PKC Investor Presentation Q1 2015 16

34.7 43.3 35.8 5 10 15 20 25 30 35 40 45 50 2014 Q1/14 Q1/15 Equity ratio, %

  • 5.6

8.6 8.8

  • 10

10 20 30 40 50 60 70 80 90 100 2014 Q1/14 Q1/15 Gearing, %

  • 8.9

16.9 15.5 48.6 63.5 53.5

  • 20
  • 10

10 20 30 40 50 60 70 2014 Q1/14 Q1/15 Net debt EBITDA* 7.7 7.2 13.3 2 4 6 8 10 12 14 2014 Q1/14 Q1/15 ROCE, % % EUR million % %

*EBITDA of previous 12 months excl. NRIs ROCE % = Adjusted operating profit (excl. NRIs) / (Total equity + interest-bearing liabilities)(average))

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SLIDE 17

PKC’s Strategy Captures Growth Opportunities

May 6, 2015 PKC Investor Presentation Q1 2015 17

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SLIDE 18

PKC Investor Presentation Q1 2015

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 equals 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 market about EUR 4 billion

Truck Agriculture Construction Bus 1.0 2.0 2.0

New market opportunities about EUR 5 billion

APAC Truck Rolling stock Aerospace 18 May 6, 2015

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SLIDE 19

PKC to acquire Wiring & Controls business of Grocling S.A. and enters rolling stock business

PKC Investor Presentation Q1 2015

The business to be acquired manufactures electrical cabinets, power packs and wire harnesses to leading rolling stock, on/off highway commercial vehicle and energy OEMs. All factories are in Poland. Acquisition is in line with PKC strategy and adds rolling stock (RS) business segment to PKC portfolio.

  • Sizeable global RS market of EUR 2 billion
  • RS customers globalising operations – PKC’s capacity

footprint to be utilised

  • Good European market prospects – Business to be

acquired has good standalone growth prospects Transaction EV totals EUR 50 million. The deal was signed

  • n 12 Feb 2015 and the closing is expected on 30 Jun 2015.

Andre Gerstner, the current president of Groclin S.A., will continue managing the business to be acquired.

24 32 35 51 56 10 20 30 40 50 60 70 2010 2011 2012 2013 2014

Revenue Development of Business to be Acquired, EUR million

19 May 6, 2015

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SLIDE 20

PKC establishes 50-50% joint venture with Jiangsu Huakai Wire Harness Co. Ltd.

PKC Investor Presentation Q1 2015

Huakai manufactures wire harnesses to leading Chinese truck, construction vehicle and bus OEMs. Huakai’s biggest customer Foton (and Beijing Foton Daimler Automotive) is #4 biggest truck manufacturer in China. Huakai factories are in Danyang and Beijing. The joint venture is in line with PKC strategy and strenghthens PKC’s presence in China.

  • China is the world’s biggest trucks market – PKC’s market share

in medium and heavy trucks in China rises by 8%-points

  • Government regulation and higher customer demands raise wire

harness content – The sales price impact totals 30%. PKC shall provide required technology and knowhow

  • Good Chinese market outlook – The joint venture has good

prospects to expand to new customers / product categories The joint venture equity value totals EUR 44 million. The frame agreement was signed on 28 March 2015 and the finalisation of the joint venture is expected in the latter part of 2015. Gu Weikai, the current majority share holder and Vice President, will continue managing the joint venture.

19 24 25 34 43 10 20 30 40 50 2010 2011 2012 2013 2014

Revenue development, EUR million*

* Latest RMB/EUR exchange rate

20 May 6, 2015

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SLIDE 21

May 6, 2015 PKC Investor Presentation Q1 2015 21

  • 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 recent published acquisition

  • First breakthrough into China EDS

market through recent published joint venture agreement

Strategy Execution Proceeding

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SLIDE 22

PKC Group Plc Bulevardi 7 FI-00120 Helsinki, Finland www.pkcgroup.com

PKC Investor Presentation Q1 2015 May 6, 2015