PKC Group Oyj Investor Presentation Q1/2011 May 2011 Harri - - PowerPoint PPT Presentation

1

PKC Group Oyj

Investor Presentation Q1/2011

May 2011 Harri Suutari President & CEO

1

2

PKC Group

• PKC Group provides design and

manufacturing services for wiring harnesses and electronics

• The Group’s products and services

are delivered mainly to the automotive, telecommunications and electronics industries

• PKC Group employs 7,213

employees*) globally at the end of Q1/2011

• The Group’s net sales amounted

to EUR 96.9 million in 1-3/2011

• PKC Group Oyj is listed in

NASDAQ OMX Helsinki Ltd.

2

*) rented employees included

3

Outstanding Growth Track Record Through Focused Investments

1997 1998 2000 2002 2003 2004 2006 2007 2008 2009

Brazilian factory

was opened

Acquisition of

electronics business

Acquisition of

Estonian operations

Electronics business

established as separate subgroup

Electronics

• perations started in

China

Wiring Harnesses

business established as separate subgroup

PK Cables listed in

the Helsinki Stock Exchange

Acquisition of

Russian operations

Acquisition of North

American

• perations

Acquisition of Polish

• perations

in Starachowice

8.9 12.0 15.0 13.5 9.6 15.3 24.3 25.7 32.3 30.6 35.8 38.3 16.0 42.2 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

• Adj. EBITDA(1) EUR million Development Over Time

(1) Illustrated net of non-recurring items

2010 2011

Acquisition of SEGU

• perations

in Germany, Poland, Ukraine

4

PKC Group’s Locations

4

Green Valley, USA Green Valley, USA Nogales, Mexico Nogales, Mexico Kempele (HQ), Finland Kempele (HQ), Finland Raahe, Finland Raahe, Finland Kostomuksha, Russia Kostomuksha, Russia Keila & Haapsalu, Estonia Keila & Haapsalu, Estonia Starachowice, Poland Starachowice, Poland Suzhou, China Suzhou, China Wiring Harnesses Office Electronics Curitiba, Brazil Curitiba, Brazil São Bento do Sul, Brazil São Bento do Sul, Brazil Sosnowiec, Poland Sosnowiec, Poland Mukachewo, Ukraine Mukachewo, Ukraine Barchfeld, Germany Barchfeld, Germany

5

Acquisition of Segu Companies

• PKC Group announced on 28 February 2011 that it had signed

an agreement for the purchase of shares in the Segu companies. The requirements of closing have been fulfilled and the closing became effective on April 30, 2011.

• The Segu companies in Germany, Poland and Ukraine

manufacture and develop wiring harnesses for the automotive and construction equipment sectors.

• In 2010, the Segu companies generated consolidated net sales
• f EUR 37.9 million (EUR 26.5 million in 2009), EBITDA was

EUR 3.8 million (EUR 3.0 million in 2009) and had 1,078 employees at the end of the year (876 at the end of 2009).

6

Financial Items, Tax Items and EPS Net Sales and Operating Profit

1-3/2011 Highlights

Net sales amounted to EUR 96.9 million (60.8 million), up 59.3% compared to 1-3/10. Depreciation amounted to EUR 2.8 million (2.8 million). Consolidated comparable EBITDA before non- recurring items was 12.5 EUR million (6.2 million). Operating profit totalled EUR 9.7 million (2.8 million), accounting for 10.0% (4.6%) of net

• sales. The result is burdened by non-recurring

expenses of EUR 0.6 million on the comparison period. Comparable operating profit without non-recurring expenses totalled EUR 9.7 million (3.5 million), accounting for 10.0% (5.7%) of net sales. Financial items amounted to EUR -0.3 million (-2.5 million). Financial items consist of EUR 0.5 million interest expenses, as well as exchange rate profit caused mainly by Group’s internal liabilities totalling EUR 0.2 million net. Profit for the report period totalled EUR 7.6 million (0.2 million). Earnings per share were EUR 0.38 (0.01). Cash Flows, Gearing, ROI and Net Debt Cash flows after investments were EUR 0.1 million (-2.8 million). Gearing was -3.8% (40.4%) ROI 28.3% (17.4%) Net debt were EUR -4.6 million (32.1 million).

7

Key Figures, 1-3/11

• 2.1

32.1

• 4.6

Net debt (EUR million) 5,765 38.0 4,492 6,197

• No. of employees at closing 1)
• 1.7

40.4

• 3.8

Gearing, % 25.8 17.4 28.3 ROI, % 1.09 3,700.0 0.01 0.38 EPS, (EUR) 19,683 2,986.2 246 7,592 Net result (EUR 1,000) 9.4 4.6 10.0 % of net sales 29,689 242.1 2,827 9,670 EBIT (EUR 1,000) 316,081 59.3 60,835 96,886 Net sales (EUR 1,000)

1-12/10 Change % 1-3/10 1-3/11

1) Rented employees not included

8

Cost Savings, 1-3/11

32.6 19,993 26,505 Operating expenses excluding one time expenses

• 600

Non-recurring expenses 27.0 6,125 7,780 Other operating expenses 29.4 14,468 18,725 Staff expenses 59.3 60,835 96,886 Net sales

Change % 1-3/10 1-3/11

9

7,213 Employees in total incl. rented at the end of Q1 R&D Personnel Personnel excl. rented employees Net Sales by Geographical Areas

Key Figures, 1-3/11

5,311 5,625 4,077 5,765 6,197 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2007 2008 2009 2010 Q1/11

+7.5%

284 416 817 1,143 1,251 1,616 1,686 200 400 600 800 1,000 1,200 1,400 1,600 1,800 China Finland North America Russia Estonia Poland Brazil 10.8 15.6 29.3 54.8 4.9 6.4 11.9 15.8 3.9 4.3 0.0 20.0 40.0 60.0 80.0 100.0 120.0 1-3/2010 1-3/2011 Finland Other Europe North America South America Other countires 90 101 114 110 110 20 40 60 80 100 120 2007 2008 2009 2010 Q1/11

EUR, million at the end of report period

10

Adjusted Operating Profit Adjusted EBITDA % and EBIT % Net Sales Earnings per Share (EPS)

Key Figures, 1-3/11

53.8 60.8 96.9 45.8 81.0 46.8 82.3 55.4 91.9 20 40 60 80 100 120 2009 2010 2011 Q1 Q2 Q3 Q4

MAN acquisition

0.4 3.4 9.7

• 1.1

7.6 3.8 10.5 1.9 9.9

• 2

2 4 6 8 10 12 2009 2010 2011 Q1 Q2 Q3 Q4

• 0.20

0.01 0.38

• 0.25

0.24 0.39 0.56 0.19 0.29

• 0.30
• 0.20
• 0.10

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 2009 2010 2011 Q1 Q2 Q3 Q4

Illustrated net of non-recurring items, EUR million Illustrated net of non-recurring items, % EUR, million EUR

2 4 6 8 10 12 14 16 18 97 99 01 03 05 07 09 Q1/11 EBITDA % Operating profit %

Segu acquisition

11

Cash Flows after investments R&D Expenditures Investments Return on Investment ROI,%

Key Figures, 1-3/11

4.8 8.1 1.3 2.3 1 2 3 4 5 6 7 8 9 2009 2010 Q1/2010 Q1/2011 37.6 14.9

• 2.8

0.1

• 5

5 10 15 20 25 30 35 40 2009 2010 Q1/2010 Q1/2011 6.4 25.8 17.4 28.3 5 10 15 20 25 30 2009 2010 Q1/2010 Q1/2011 5.5 5.7 1.4 1.6 1 2 3 4 5 6 2009 2010 Q1/2010 Q1/2011

EUR, million EUR, million % EUR, million

12

Wiring Harnesses Business Segment

12

13

Key Customer Segments

Customer Segments Business Description

• The wiring harnesses business segment develops

and manufactures wiring harnesses for the commercial vehicle, telecommunication and electronics industries

• Service concept comprises cost-effective contract

manufacturing and expert product development and design services. Provision of full supply chain management for customers with sourcing, procurement, manufacturing and sequence deliveries on global basis

• WH for Trucks &

Buses

• Engine Harnesses
• WH for Recreational

Products

• WH for Agricultural,

Forestry and Construction Equipment

• Wiring of Electronics

14

Market Development of Wiring Harnesses Segment 1-3/2011

• Truck markets in Europe strengthened during the report period.

The registrations of heavy-duty trucks increased in Europe (the EU countries, Switzerland and Norway) by 65% over the comparison period.

• Vehicle orders received by our customers exceeded the

deliveries made during the report period by about 9%.

• In the first quarter, a total of almost 58,000 new heavy-duty

trucks were registered, and sales for the whole year are forecast to increase to between 220,000 and 240,000 vehicles.

15

Market Development of Wiring Harnesses Segment 1-3/2011

• The Brazilian commercial vehicles market profited from the

strong economic growth and the increased overall demand for capital goods.

• Vehicle orders received by our customers exceeded the

deliveries made during the report period by about 20%.

• In addition, the Brazilian government continued its investment

subsidy program, which also applies to trucks.

• In Brazil, the registrations of heavy-duty trucks increased by

about a fifth over the previous year’s first quarter.

• The changes in emissions regulations scheduled to enter into

force at the end of this year are expected to increase production towards the end of the year.

• In 2010, about 110,000 heavy-duty trucks were registered in
• Brazil. Industry expects registrations for the whole year to

increase by about 10% over the previous year.

16

Market Development of Wiring Harnesses Segment 1-3/2011

• Orders for heavy-duty trucks continued to be very strong in North

America during the first quarter.

• The order book of manufacturers increased to 108,000 vehicles,

which is 150% more than the same time a year ago, and it is estimated that whole-year sales will reach between 230,000 and 250,000 vehicles.

• PKC’s deliveries of wiring harnesses for recreational vehicles

increased in the first quarter in North America by 38% over the corresponding period the previous year.

17

Market Development of Wiring Harnesses Segment 1-3/2011

• The sales of agricultural tractors in Europe increased by 18%

boosted by the price increase of food grain.

• A growth in demand for energy wood and an increased market

price for pulp have also boosted demand for forestry equipment in Europe.

• Production volumes of these machines increased over the

corresponding period the previous year.

• Although PKC Group does not have its own wiring harness

production in Asia, growing export to Asia by our customers is supporting the growth of PKC’s production volumes.

• The natural catastrophe in Japan had no effect on PKC’s Wiring

Harnesses business in the first quarter.

18

Operating Profit Wiring Harnesses 1-3/2011 Net Sales

Key Figures, Wiring Harnesses

• Net sales during the report period amounted to EUR 78.2

million (45.7 million) and was 70.9% more than in 1-3/10.

• The segment’s share of consolidated net sales was 80.7%

(75.2%).

• Comparable EBITDA was EUR 12.2 million (4.8 million).

41.7 45.7 78.2 33.1 64.1 34.2 61.8 40.3 70.8 10 20 30 40 50 60 70 80 90 2009 2010 2011 Q1 Q2 Q3 Q4 MAN acquisition

• 0.6

2.0 10.1

• 6.3

7.0 2.0 6.8 1.0 8.7

• 8
• 6
• 4
• 2

2 4 6 8 10 12 2009 2010 2011 Q1 Q2 Q3 Q4

EUR, million EUR, million

Segu acquisition

Wiring Harnesses 1-3/2011

• Operating profit was EUR 10.1 million (2.0 million),

equivalent to 12.9% (4.4%) of the segment’s net sales. The result is burdened by non-recurring expenses of EUR 0.6 million on the comparison period.

• Operating profit before non-recurring items was EUR 10.1

million (2.6 million), equivalent to 12.9% (5.7%) of the segment’s net sales.

19

Truck Deliveries and Order Intakes, Q1/2011 Heavy Trucks Registration EU27 (incl. Bulgaria & Romania)

Truck Market is Recovering

20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MAN Group Volvo Group VW/Scania 29 172 17 562 16 823 31 234 17 354 21 244 5 000 10 000 15 000 20 000 25 000 30 000 35 000 Volvo Europe + Latin America Scania Global MAN (excluding Brazil) Deliveries Order intake

5 000 10 000 15 000 20 000 25 000 30 000 35 000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 2009 2010 2011 +7.1%

• 1.2%

Total +9.9%

Source: MAN, Volvo, Scania Source: ACEA

Heavy Trucks Production, EU27+ EFTA

Trucks > 16t, units Trucks, units Trucks >16t, units Source: J.D. Power Automotive forecasting Q1/2011

Heavy Trucks Production by Marque, EU27+ EFTA

20 000 40 000 60 000 80 000 100 000 120 000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MAN Volvo Scania

Trucks 16t, units Source: J.D. Power Automotive forecasting Q1/2011

+26.3%

20 100 200 300 400 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 50 100 150 200 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 100 200 300 400 500 600 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Source: J.D. Power Automotive Forecasting, Q1 2011, Note: Europe comprised of EU27 + Efta

Forecasted Heavy Truck Production: EU27+ EFTA Forecasted Heavy Truck Production: NAFTA Forecasted Heavy Truck Production: Global Forecasted Heavy Truck Production: South America

500 1 000 1 500 2 000 2 500 3 000 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Asia-Pacific Central/East Europe Western Europe North America South America

Number of trucks (‘000) Number of trucks (‘000) Number of trucks (‘000) Number of trucks (‘000)

CAGR 11-18 7.2%

Wiring Harnesses Market Estimates Show Clear Signs of Recovery

CAGR 11-18 2.7% CAGR 11-18 2.7% CAGR 11-18 4.9%

21

Strong Wiring Harnesses Business Fundamentals

• Solid customer and industry experience
• Long-term customer relationships with major

manufacturers in the field

• Volume of a large corporation combined with

the small company’s flexibility

• Worldwide production network close to the

customer

• Strong expertise in tailoring product variations

with short delivery times

Forecasted Heavy Truck Production: Global

500 1 000 1 500 2 000 2 500 3 000 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Other NAFTA EU27 + Efta South America Number of trucks (m)

CAGR 11-18

CAGR 11-17 2.7% 7.2% 2.7% 4.6%

5.0%

Source: J.D. Power Automotive Forecasting, Q1 2011

We have:

63 817 906 1,251 1,616 1,686 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Finland North America Russia Estonia Poland Brazil

99% of 6,339 personnel in low cost locations

22

Electronics Business Segment

22

23

• Electronics business segment provides contract design and

manufacturing services for the telecommunication, commercial vehicle and electronics industries

• Services cover the entire product life cycle – high-quality, reliable

and cost-efficient services tailored according to customer-specific requirements

Product Lifecycle Management Overview Business Areas

• Electronics Manufacturing Services, EMS

– Contract manufacturing including sourcing, prototyping, manufacturing, testing, logistics, after sales services – Design made by customer

• Original Design Manufacturing, ODM

– Total solution including design, sourcing, prototyping, manufacturing, testing, logistics, after sales services – Design made by PKC Pre-study Design Prototypes Manufacturing Cost Reduction Sourcing Supply Chain Management & Logistics After Sales Idea Development Launch After Sales Services Manufacturing Production ramp-down

One-Stop-Shop – Full Lifecycle Support

24

Industrial Segments Products

• Power supply units
• Electronics control units
• Electrical distribution units
• Testing equipment
• Electronics service devices
• Vehicle computers
• Security products
• Industrial electronics
• Telecommunication
• Vehicle electronics
• Energy
• Security

Full service – from design to total solutions

Products and Industrial Segments

25

Market Development of Electronics Segment During Q1/2011

• Deliveries by PKC’s Electronics business increased over the

comparison period, but fell from the level of the previous quarter

• n account of the postponement of some customer projects.
• Due to the global growth of the electronics industry, there have

still been problems in the availability of electronics components.

• The natural catastrophe in Japan had no significant effect on

PKC’s Electronics business in the first quarter.

26

Operating Profit Electronics 1-3/2011 Net Sales

Key Figures, Electronics

• Net sales during the report period amounted to

EUR 18.7 million (15.1 million) and was 23.9% more than in 1-3/10.

• The segment’s share of consolidated net sales

was 19.3% (24.8%).

12.1 15.1 18.7 12.7 16.9 12.7 20.5 15.1 21.1 5 10 15 20 25 2009 2010 2011 Q1 Q2 Q3 Q4 0.7 1.3 0.4 0.7 1.1 1.5 3.3 1.7 2.0 0.5 1 1.5 2 2.5 3 3.5 2009 2010 2011 Q1 Q2 Q3 Q4

EUR, million EUR, million

Electronics 1-3/2011

• Comparable EBITDA was EUR 1.0 million (EUR

1.8 million).

• Operating profit was EUR 0.4 million (1.3 million),

equivalent to 2.4% (8.6%) of the segment’s net sales.

27

Leading Nordic EMS and ODM Provider

• Long-term and successful key customer relationships
• Low-cost manufacturing in Russia and China
• World class R&D competence in Finland and China
• Unique footprint in the electronics and

telecommunications industries through strong know- how

40 80 120 160 200 2008 2009 2010 2011 2012 2013 2014

EMS ODM

Total EMS and ODM Market: Global

US$bn

10-14 EMS CAGR 10-14 ODM CAGR 7.9% 9.2%

Source: IDC: Worldwide Electronics Manufacturing Services Industry Forecast, 2005-2014, April 2010

We have…

237 284 336 50 100 150 200 250 300 350 400 Russia China Finland 857 employees in total

Number of employees at the end of Q1/2011, rented employees included

28

• 20
• 10

10 2008 2009 2010 2011 2012 2013 2014 EMS ODM 40 80 120 160 200 2008 2009 2010 2011 2012 2013 2014 EMS ODM

Source: IDC: Worldwide Electronics Manufacturing Services Industry Forecast, 2005-2014, April 2010

Total EMS and ODM Market: Global Key Trends Estimated Growth of EMS and ODM Market: Global

US$bn

• Economic recovery – world wide market situation is challenging
• Consolidation – benefit of scale (competitors, customers,

suppliers)

• Electronics manufacturing and also design moving to low cost

countries

• Global customers demand local services globally

10-14 EMS CAGR 10-14 ODM CAGR

• Larger entities – full service – one-stop-shop
• Outsourcing of manufacturing and R&D functions
• Green values – creates new business possibilities and

rules

• Component related risks

7.9% 9.2%

Strong Future Growth Expected in the Overall Electronics Market…

%

29

500 1,000 1,500 2,000 2,500 3,000 2008 2009 2010 2011 2012 2013 2014 EMS ODM

Source: IDC: Worldwide Electronics Manufacturing Services Industry Forecast, 2005-2014, April 2010 (1) Source: Frost & Sullivan 2009 & The Worldwide Market for Low Voltage Motor Drives – 2009 Edition from IMS Research

Automotive Electronics Market: Global Telecommunications Electronics Market: Global AC Drives Market: Global(1)

US$m US$m

5,000 10,000 15,000 2008 2009 2010 2011 2012 2013 2014

10-14 CAGR 10-14 EMS CAGR 10-14 ODM CAGR

Industrial Electronics Market: Global

US$m

5,000 10,000 15,000 20,000 25,000 30,000 2008 2009 2010 2011 2012 2013 2014 EMS ODM

10-14 EMS CAGR 10-14 ODM CAGR 9.5% 6.7% 12.2% 9.9% 4.8%

… and Also in the Segments Where PKC is Active

30

Growth Path Competitive Advantages

• Innovative and proactive product development
• perations in Finland and China
• Product life-cycle support – shortening time-to-

market

• High-quality, experienced and flexible partner
• Low cost manufacturing in Russia and China
• Capability to serve global customers locally in

Europe and Asia

• Long term customer relationship and strong

understanding of the market

• Deepening customer co-operation
• Expanding business in China, Russia and India
• Expanding ODM businesses
• Utilizing global sourcing in China
• Expanding PKC’s niche business areas, e.g. in

testing equipment and power supply sectors

• Expanding customer base – focus on industrial and

commercial vehicle, energy and security electronics as well as “Green Business”

• Continuous development of competence (personnel

training, adapting new technologies, utilizing co-

• peration networks)

Electronics Business is Well Positioned to Leverage Market Recovery

31

Outlook for the Future

• During the first quarter, the customers of PKC’s Wiring

Harnesses business received significantly more new orders than the average level the previous year.

• We expect that net sales of the Wiring Harnesses business will

grow in comparison with the previous year.

• During the first quarter, sales of customers of the Electronics

business increased over the average level of the previous year.

• We expect that the net sales of the Electronics business will

grow in comparison with the previous year.

32

Outlook for the Future

• PKC Group estimates that its net sales and comparable
• perating profit will increase in 2011 from the previous year’s

level.

• In 2010, net sales amounted to EUR 316.1 million, and operating

profit before non-recurring items was EUR 31.5 million.

33

Thank You!

www.pkcgroup.com