PKC Group Oyj Investor Presentation Q3/2011 November 2011 Harri - - PowerPoint PPT Presentation

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PKC Group Oyj

Investor Presentation Q3/2011

November 2011 Harri Suutari President & CEO

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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 8,618

employees*) globally at the end of Q3/2011

• The Group’s net sales amounted

to EUR 308.2 million in 1-9/2011

• PKC Group Oyj is listed in

NASDAQ OMX Helsinki Ltd.

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*) rented employees included

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Growth Through Focused Investments

1997 1998 2000 2002 2003 2004 2006 2007 2008 2009

Brazilian factory was

• pened

Acquisition of electronics

business

Acquisition of

Estonian production

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 production

Acquisition of

Electro Canada

Acquisition of MAN

WH production in Poland

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 in

Germany, Poland, Ukraine

Acquisition of AEES

in North America, Brazil and Ireland

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PKC locations today

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Acuna, Mexico Barchfeld, Germany Curitiba, Brazil Dallas, Texas Dundalk, Ireland Green Valley, Arizona Farmington Hills, Michigan Haapsalu, Estonia Itajuba, Brazil Jeffersontown, Kentucky Juarez, Mexico Keila, Estonia Kempele, Finland (HQ) Kirkland, Washington Kostomuksha, Russia Mukachewo, Ukraine Nogales, Mexico Piedras Negras, Mexico Portland, Oregon Raahe, Finland San Antonio, Texas São Bento do Sul, Brazil Sao Paolo, Brazil Sosnowiec, Poland Starachowice, Poland Suzhou, China Torreon, Mexico Traverse City, Michigan

22,860 employees

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Financial Items and EPS Net Sales and Operating Profit

1-9/2011 Highlights

Net sales amounted to EUR 308.2 million (224.1 million), up 37.5% compared to 1-9/10. Depreciation amounted to EUR 9.3 million (8.2 million). Consolidated comparable EBITDA before non- recurring items was EUR 38.9 million (29.8 million). Operating profit totalled EUR 25.7 million (19.9 million), accounting for 8.3% (8.9%) of net sales. During the report period were reported EUR 3.8 million (1.6 million) in non-recurring items. Comparable operating profit without non-recurring items totalled EUR 29.6 million (21.6 million), accounting for 9.6% (9.6%) of net sales. Financial items amounted to EUR – 4.0 million (-1.5 million). Financial items contain EUR 2.1 million interest expenses, EUR 0.4 million interest income and EUR 2.3 million net exchange rate loss. Profit for the report period totalled EUR 17.6 million (14.4 million). Earnings per share were EUR 0.87 (0.81). Cash Flows, Gearing, ROI and Net Debt Cash flows after investments were EUR -16.7 million (13.9 million). Gearing was 109.2% (22.9%) ROI 19.3% (27.3%) Net debt were EUR 140.0 million (20.9 million).

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Key Figures, 1-9/11

1-9/11 1-9/10 Change % 1-12/10

Net sales (EUR 1,000) 308,207 224,140 37.5 316,081 EBIT (EUR 1,000) 25,711 19,913 29.1 29,689 % of net sales 8.3 8.9 9.4 Net result (EUR 1,000) 17,582 14,411 22.0 19,683 EPS, (EUR) 0.87 0.81 7.4 1.09 ROI, % 19.3 27.3 25.8 Net debt (EUR million) 140.0 20.9

• 2.1

Gearing, % 109.2 22.9

• 1.7
• No. of employees at closing 1)

7,937 5,701 39.2 5,977

1) Rented employees not included

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Key Figures, 7-9/11

7-9/11 7-9/10 Change % 1-12/10

Net sales (EUR 1,000) 102,014 82,301 24.0 316,081 EBIT (EUR 1,000) 8,967 9,498

• 5.6

29,689 % of net sales 8.8 11.5 9.4 Net result (EUR 1,000) 3,728 9,973

• 62.6

19,683 EPS, (EUR) 0.19 0.56

• 66.1

1.09 25.8 Net debt (EUR million) 140.0 20.9

• 2.1

Gearing, % 109.2 22.9

• 1.7
• No. of employees at closing 1)

7,937 5,701 39.2 5,977

1) Rented employees not included

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Non-recurring Items, 1-9/11

(EUR 1,000)

Wiring Harness Electronics Unallocated amounts and eliminations Group total

Donations to the universities 150 150 Advisor fees 2,354 1,656 4,010 Cancellation of the write-down of inventories

• 317
• 317

Total non-recurring items 2,037 150 1,656 3,843 Estimate for the non-recurring items during Q4 2011 is ca. EUR 4.0 million

Key financials of AEES

AEES has the past years successfully implemented a comprehensive rationalisation programme to enhance the company’s overall efficiency and competitiveness Costs related to the rationalisation programme have burdened the 2010 and 1-9/2011 profitability

Expected growth in profitability Key financials

9 Note: Financials as per US GAAP. USD/EUR exchange rate average for a given period. Balance sheet items converted at rate of the balance sheet date.

AEES GROUP, €m 1-12/2010 Profit and loss

Net sales 454.0 EBITDA (excl. rationalisation costs) 14.7 % of net sales 3.2% EBITDA (reported) (4.8) % of net sales (1.1%)

Balance sheet

Fixed assets 25.7 Net working capital

1-9/2011

397.6 23.0 5.8% 8.0 2.0% 25.6 48.5 37.4

7-9/2011

131.9 9.6 7.3% 2.9 2.2% 25.6 48.5

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Headcount 14,248 end of September 2011

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8,618 Employees in total incl. rented at the end of Q3 R&D Personnel Personnel excl. rented employees Net Sales by Geographical Areas

Key Figures, 1-9/11

5,311 5,652 4,423 5,977 7,937 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2007 2008 2009 2010 Q3/11

+32.8%

278 281 324 391 831 1,155 1,304 1,804 2,250 500 1,000 1,500 2,000 2,500 G e r m a n y U k r a i n e C h i n a F i n l a n d N

• r

t h A m e r i c a R u s s i a E s t

• n

i a B r a z i l P

• l

a n d 38.2 46.8 111.4 176.3 16.6 19.4 42.6 50.7 15.4 15.1 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 1-9/2010 1-9/2011 Finland Other Europe North America South America Other countires 90 101 114 120 133 20 40 60 80 100 120 140 2007 2008 2009 2010 Q3/11

EUR, million at the end of report period

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

Key Figures, 1-9/11

53.8 60.8 96.9 45.8 81.0 109.3 46.8 82.3 102.0 55.4 91.9 20 40 60 80 100 120 2009 2010 2011 Q1 Q2 Q3 Q4

MAN acquisition

0.4 3.4 10.0

• 1.1

7.6 8.9 3.8 10.5 10.7 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 0.31 0.39 0.56 0.19 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 Q3/11 EBITDA % Operating profit %

Segu acquisition

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

Key Figures, 1-9/11

4.8 8.1 4.1 21.1 5 10 15 20 25 2009 2010 Q3/2010 Q3/2011 Other Investments Acquisition 37.6 14.9 13.9

• 16.7
• 20
• 10

10 20 30 40 50 2009 2010 Q3/2010 Q3/2011 6.4 25.8 27.3 19.3 5 10 15 20 25 30 2009 2010 Q3/2010 Q3/2011 5.5 5.7 4.1 4.8 1 2 3 4 5 6 2009 2010 Q3/2010 Q3/2011

EUR, million EUR, million % EUR, million

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Wiring Harnesses Business Segment

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Key Customer Segments

Customer Segments Business Description

• The wiring harnesses business segment develops

and manufactures wire, wiring components, wiring harnesses and cablings globally for the automotive and commercial vehicle industry

• Trucks & Buses
• Light vehicles
• Engines
• Recreational Products
• Agricultural, Forestry

and Construction Equipment

Unique customer portfolio

Supplier to all the six leading Western truck OEM groups

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OEM Group 1 OEM Group 2 OEM Group 3 OEM Group 4 OEM Group 5 OEM Group 6 Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6

• Acquisition of AEES provides PKC with access to some of the leading truck OEM accounts in North America, i.e.

Daimler Trucks, Navistar and PACCAR

• Unique position achieved, as no other competitor supplies wiring harnesses to all of the six leading Western

customer accounts

Note: OEM groups in alphabetical order. Including both heavy and medium duty truck groups. 15

PKC-AEES Truck Market Share Globally

16 Source: Truck Statistics: J.D. Power Automotive Forecasting, Q3 2011 , ACT Forecasting September 2011, Note: Europe comprised of EU27 + Efta,

North America South America Europe Medium Trucks Heavy Trucks

Source: ACT and PKC

Europe Heavy Truck Market >16t

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Brazil Heavy Truck Market >16t

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Source: ACT N.A. Commercial Vehicle Outlook October 2011

Source: ACT and PKC

North American Class 8 Market

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North America Q3 2011 Heavy-duty Trucks, Production

• North America heavy-duty trucks’ markets strengthened during the

report period. During the first three quarters of the year, production of heavy-duty trucks increased in North America by 64% over the comparison period.

• All in all, about 180,709 heavy-duty trucks were produced during the first

three quarters of the year. During the third quarter, a total of 68,750 new heavy-duty trucks were produced.

• Order backlogs are approximately 123,000 units as of the end of

September which is up 137% over the comparison period.

• Production volumes for the full year are forecasted to increase to

240,000 – 260,000 units.

• For 2012 the total production is expected to grow by about 15%.

N.A. Class 8 Production

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Source: ACT N.A. Commercial Vehicle Outlook October 2011

Units, Thousands

North America Q3 2011 Heavy-duty Trucks, Deliveries

• Customer deliveries of heavy-duty trucks in North American increased

during the first nine months of the year by about 55% over the corresponding period the previous year, to about 163,000 vehicles.

• Truck manufacturers’ combined order book was about 123,000 heavy-

duty trucks at the end of September, which is about 137% more than a year earlier. This corresponds to about 5 months’ production at current production volumes.

• It is estimated that customer deliveries for the present year will total

210,000 vehicles. For 2012 the total market is expected to grow by about 20%.

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N.A. Class 8 Retail Sales

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Units, Thousands

Source: ACT N.A. Commercial Vehicle Outlook October 2011

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North America Q3 2011 Medium-duty Trucks

• During the first three quarters of the year, production of medium-duty

trucks increased in North America by 44% over the comparison period. Overall, about 122,609 medium-duty trucks were produced during the first three quarters of the year.

• Retail sales of medium-duty trucks in North America continue to be

strong and have increased 41% over the first three quarters of 2010. At the current level of inventory and sales, the inventory to sales ratio stands at 2.9 months. This represents a 4 month decrease in the inventory to sales ratio when compared to this time last year. Given where the ratio has been the past several years, this reading represents solid progress.

• Production volumes for the full year are forecasted to increase to

160,000 – 170,000 units. For 2012 the total production is expected to grow by about 10%.

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N.A. Class 5-7 Production

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Source: ACT N.A. Commercial Vehicle Outlook October 2011

Units, Thousands

North America Truck Market

Source: Automotive World

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North America Q3 2011 Light Vehicle

• North American Light Vehicle sales improved for the fourth consecutive

month in September. Overall, September Light Vehicles sales in North America were up 8.7% for the month, following a 7.2% jump realized in August.

• North America Light Vehicle 2011 year to date sales were up 9.4% to

979,337 units over the comparison period. September’s seasonally adjusted selling rate was 13.2 million units which is the highest since April 2011 and reflects the expectations that pent-up demand, improving inventory levels and an aging fleet of vehicles needing replacement can build momentum even in the face of economic headwinds.

• North America Light Vehicle sales forecast for the full-year 2011 is

forecasted at 15.2 -15.7 million units, an increase of 6.5% over full-year 2010.

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The US LV market, 1970-2015

Source: Automotive World

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Europe Q3 2011 Heavy-duty Trucks 1/2

• The registration of heavy-duty trucks increased in Europe (the EU

countries, Switzerland and Norway) by 44% during the first nine months

• f the year over the comparison period. All in all, about 175,000 heavy-

duty trucks were registered during the first nine months of the year. During the third quarter, a total of about 55,000 new heavy-duty trucks were registered.

• During the third quarter, the number of vehicle orders received by our

customers exceeded 3% the number delivered to their customers.

• Deliveries for the full year are forecast to increase to about 240,000
• vehicles. In Europe, the order books of our customers are forecast to be
• n a level equivalent to 2-3 months’ production.

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Europe Q3 2011 Heavy-duty Trucks 2/2

• Some of our customers have reported that they will cut production

volumes by 10-15% at the end of this year and the beginning of next year.

• In an uncertain market situation, estimates on the 2012 production

volumes in Europe show a fall by about 10% in comparison with 2011. The industry has also released forecasts according to which demand in Europe will remain high next year.

EU freight by mode, Market share

Source: Europe’s new vehicle market: prospects to 2015, Automotive World

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South America Q3 2011 Heavy-duty Trucks 1/2

• In South America, our key customers’ heavy-duty truck deliveries

increased by 20% during early 2011 over the comparison period.

• During the third quarter, the number of vehicle orders received by our

customers exceeded 5% the number delivered to their customers.

• In 2010, about 110,000 heavy-duty trucks were registered in Brazil. The

industry expects the number of registrations over the full year to increase to about 120,000.

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South America Q3 2011 Heavy-duty Trucks 2/2

• A change in exhaust gas emission regulations that will enter into force at

the turn of the year may cause a temporary drop in sales at the start of

• 2012. It is believed, however, that as a result of the strong growth in the

Brazilian economy, demand will rapidly recover, and the total number of registrations for 2012 is expected to be in the region of 110,000 heavy- duty trucks.

• Institutos Ilos, the Brazilian research institute for logistics, forecasts that

in the coming years the country’s present truck production volume will not be able to satisfy the growing need for trucks. The institute says that the average delivery time for a truck is now about 12 months. Several truck manufacturers have reported significant new investments in the Brazilian truck industry.

Forecast Heavy-duty Trucks, Brazil

Source: Anfavea & Automotive Reports

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South America Q3 2011 Light Vehicle

• The South America light vehicle market sales reached 467,254 units in

September 2011, an increase of 8.7% over September 2010.

• The Brazilian government recently increased the IPI tax by 30

percentage points on cars that are not made with at least 65% local content, excluding those from companies that produce locally or in Mercosul partners, in an attempt to stop the growth in vehicle imports.

• Even with Brazil’s new tax on some imported vehicles, daily sales

increased in September 2011 and reached 13,981 units compared to 13,383 units in August 2011.

• Year to date 2011 sales in South America are up 10.3% versus year to

date 2010.

• It is anticipated that sales increases will be smaller in the remaining

months of 2011 due to stabilization in the Brazilian market and strong sales in the fourth quarter of 2010 in Brazil.

• South America sales forecast for full-year 2011 is forecasted at 5 – 5.2

million units, an increase of 6.5% over full-year 2010.

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Forecast Light Vehicle, Brazil

Source: Anfavea & Automotive Reports

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Tractors and Machinery Q3 2011

• Sales of agricultural tractors in Europe increased during the first nine

months of the year by 12% over the comparison period the previous

• year. Full year sales are forecast to grow by 10-15%. In 2010, about

141,000 agricultural tractors were sold in Europe.

• Sales of construction equipment increased during the first eight months
• f the year by 36% in Europe and by 26% in South America over the

comparison period the previous year. Full year sales are forecast to grow by 20-25% in Europe and by 15-20% in South America.

• Production volumes of forestry equipment in Europe increased during

the first nine months of the year by 35% over the comparison period the previous year.

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Operating Profit Wiring Harnesses 1-9/2011 Net Sales

Key Figures, Wiring Harnesses

• Net sales during the report period amounted to EUR 252.7

million (171.6 million) and was 47.3% more than in 1-9/10.

• The segment’s share of consolidated net sales was 82.0%

(76.6%).

• Comparable EBITDA was EUR 36.1 million (23.8 million).
• Operating profit was EUR 26.7 million (15.8 million),

equivalent to 10.6% (9.2%) of the segment’s net sales. The result contains non-recurring items of EUR 2.0 million (1.6 million).

• Operating profit before non-recurring items was EUR 28.8

million (17.4 million), equivalent to 11.4% (10.1%) of the segment’s net sales.

41.7 45.7 78.2 33.1 64.1 90.2 34.2 61.8 84.3 40.3 70.8 10 20 30 40 50 60 70 80 90 100 2009 2010 2011 Q1 Q2 Q3 Q4 MAN acquisition

• 0.6

2.0 10.1

• 6.3

7.0 9.6 2.0 6.8 7.1 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 7-9/2011

• Net sales during the report period amounted to EUR 84.3

million (61.8 million) and was 36.4% more than in 7-9/10.

• Operating profit was EUR 7.1 million (6.8 million), equivalent

to 8.4% (11.0%) of the segment’s net sales. During the quarter EUR 1.9 million in non-recurring items were

• reported. In the comparison period the result contains non-

recurring items of EUR 1.0 million.

• Operating profit before non-recurring items was EUR 9.0

million (7.8 million), equivalent to 10.7% (12.6%) of the segment’s net sales.

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Truck Deliveries and Order Intakes, Q3/2011 Heavy Trucks Registration EU27 (incl. Bulgaria & Romania)

Truck Market

20 000 40 000 60 000 80 000 100 000 120 000 140 000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MAN Group Volvo Group VW/Scania 27 236 16 812 19 176 30 320 17 109 16 886 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 +11.3% +1.8% Total +1.7%

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 Q3/2011

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 Q3/2011

• 11.9%

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Electronics Business Segment

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• 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

Electronics Business Segment

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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

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Electronics Segment Q3 2011

• Demand for the products of PKC’s key industrial electronics

customers increased in the first half of the current year, but started to fall during the third quarter in both Europe and China. The weakening was a result of economic uncertainty in Europe and a reduction in wind power investments in China. New regulations introduced in China concerning wind power have temporarily reduced wind power investments.

• As a result of a change in product strategy by a customer

manufacturing telecommunications equipment, demand for design and contract manufacturing services (ODM) in PKC’s Electronics business fell during the third quarter in comparison with the corresponding previous in previous year, but improved from the weak position of the start of the year.

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Operating Profit Electronics 1-9/2011 Net Sales

Key Figures, Electronics

• Net sales during the report period amounted to EUR 55.5

million (52.5 million) and was 5.7% more than in 1-9/10.

• The segment’s share of consolidated net sales was 18.0%

(23.4%).

• Comparable EBITDA was EUR 4.4 million (EUR 7.2

million).

• Operating profit was EUR 2.6 million (5.7 million), equivalent

to 4.6% (10.8%) of the segment’s net sales. The result contains non-recurring expenses of EUR 0.2 million.

• Operating profit before non-recurring items was EUR 2.7

million (5.7 million), equivalent to 4.9% (10.8%) of the segment’s net sales.

12.1 15.1 18.7 12.7 16.9 12.7 20.5 17.7 15.1 21.1 19.1 5 10 15 20 25 2009 2010 2011 Q1 Q2 Q3 Q4 0.7 1.3 0.4 0.7 1.1 0.4 1.5 3.3 1.7 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 7-9/2011

• Net sales during Q3/2011 amounted to EUR 17.7 million

(20.5 million) and was 13.7% less than in 7-9/10.

• Operating profit was EUR 1.7 million (3.3 million), equivalent

to 9.8% (15.9%) of the segment’s net sales.

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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 We have…

210 324 323 50 100 150 200 250 300 350 Russia China Finland 857 employees in total

Number of employees at the end of Q3/2011, rented employees included

Key Trends

• 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
• 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

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Outlook for the Future

• During the first nine months of the year, the customers of PKC’s Wiring

Harnesses segment received more new orders than during the comparison period and, therefore, PKC expects that the net sales of the Wiring Harnesses business will grow organically in comparison with the previous year. In addition, the acquired Segu and AEES companies will increase the net sales of the Wiring Harnesses business in comparison with the previous year.

• During the first nine months of the year, sales of PKC’s industrial electronics

customers (EMS services) increased over the level of previous year’s comparison

• period. During the first nine months of the year, demand for PKC’s electronics

design and manufacturing services (ODM services) has been lower than in the comparison period in 2010. PKC expects that the net sales of the Electronics business will grow in comparison with the previous year.

• PKC expects that its net sales and comparable operating profit in 2011 will be

greater than the level in 2010. Net sales in 2010 amounted to EUR 316.1 million and operating profit without non-recurring items was EUR 31.5 million.

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Thank You!

www.pkcgroup.com