PKC Group Oyj Investor Presentation Financial Year 2010 February - - PowerPoint PPT Presentation

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PKC Group Oyj

Investor Presentation Financial Year 2010

February 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 6,473

employees*) globally at the end of 2010

• The Group’s net sales amounted

to EUR 316.1 million in 1-12/2010

• PKC Group Oyj is listed in

NASDAQ OMX Helsinki Ltd.

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*) rented employees included

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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

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

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PKC Group’s Locations

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Green Valley Green Valley Nogales Nogales Kempele (HQ) Kempele (HQ) Raahe Raahe Kostomuksha Kostomuksha Keila & Haapsalu Keila & Haapsalu Starachowice Starachowice Suzhou Suzhou Wiring Harnesses Office Electronics Curitiba Curitiba São Bento do Sul São Bento do Sul

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Business Segments

Wiring Harnesses, ~75% of the net sales

The Wiring Harnesses business develops and manufactures wiring harnesses and cabling for automotive, telecommunications, and electronics industries

Electronics, ~25% of the net sales

The Electronics business provides design and contract manufacturing services for the telecommunications, electronics, and automotive industries

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PKC Group operates in two core business segments:

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Proven and Tested Group Strategy

Offer customers the best service Generate economic value add for shareholders Offer employees a rewarding job with ongoing development

Values Vision

Provider of flexible and high quality solutions in close cooperation with customers Customer-oriented, proactive contract manufacturer and R&D partner Competitive pricing Commitment Quality Profitability Cooperation

Mission

• Increase profitability by deepening existing customer relationships and acquiring new

customers

• Highest customer satisfaction by providing competitive, high quality products and global

services

• Ensuring competitiveness through multi-skilled, committed personnel and continuous

development

Strategic Objectives

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PKC’s Financial Drivers and Targets for 2011-2013

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Annual Top Line Growth

• f 10- 40%

Volume rebound Potential acquisitions New product initiatives and business wins

Gross Margin

• f 28-29%

Reduced operative expenses by production relocations Raw material and component cost reductions

Operating Income Margin

• f 9-13%

Reduced SG&A expenses through reorganization and relocation

ROIC

• f 30%

Effective capital usage

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

1-12/2010 Highlights

Net sales amounted to EUR 316.1 million (201.8 million), up 56.6% compared to 1-12/09. Depreciation amounted to EUR 10.7 million (11.0 million). Consolidated comparable EBITDA before non- recurring items was 42.2 EUR million (16.1 million). Operating profit totalled EUR 29.7 million (0.7 million), accounting for 9.4% (0.3%) of net sales. The result is burdened by non-recurring expenses

• f EUR 1.8 million (4.3 million).

Comparable operating profit without non-recurring expenses totalled EUR 31.5 million (5.1 million), accounting for 10.0% (2.5%) of net sales. Financial items amounted to EUR -4.7 million (0.4 million). In addition to EUR 2.0 million interest expenses, a translation loss of EUR 1.0 million related to the translation of subsidiaries’ financial statements as well as exchange rate losses caused mainly of Group’s internal liabilities totalling EUR 1.8 million have been entered into the financial items. Profit for the financial year totalled EUR 19.7 million (2.3 million). Earnings per share were EUR 1.09 (0.13). Cash Flows, Gearing, ROI and Net Debt Cash flows after investments were EUR 14.9 million (37.6 million). Gearing was -1.7% (35.9%) ROI 25.8% (6.4%) Net debt were EUR -2.1 million (28.2 million).

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Key Figures, 1-12/10

28.2

• 2.1

Net debt (EUR million) 41.4 4,077 5,765

• No. of employees at closing 1)

35.9

• 1.7

Gearing, % 6.4 25.8 ROI, % 738.5 0.13 1.09 EPS, (EUR) 737.9 2,349 19,683 Net result (EUR 1,000) 0.3 9.4 % of net sales 4253.2 682 29,689 EBIT (EUR 1,000) 56.6 201,814 316,081 Net sales (EUR 1,000)

Change % 1-12/09 1-12/10

1) Rented employees not included

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Key Figures, 10-12/10

28.2 28.2

• 2.1

Net debt (EUR million) 4,077 41.4 4,077 5,765

• No. of employees at closing 1)

35.9 35.9

• 1.7

Gearing, % 0.13 61.1 0.18 0.29 EPS, (EUR) 2,349 62.5 3,245 5,272 Net result (EUR 1,000) 0.3 4.8 10.6 % of net sales 682 271.4 2,632 9,776 EBIT (EUR 1,000) 201,814 66.0 55,390 91,940 Net sales (EUR 1,000)

1-12/09 Change % 10-12/09 10-12/10

1) Rented employees not included

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Cost Savings, 1-12/10

29.1 72,439 93,538 Operating expenses excluding one time expenses

• 4,300
• 1,810

Non-recurring expenses 23.8 23,355 28,906 Other operating expenses 24.5 53,384 66,442 Staff expenses 56.6 201,814 316,081 Net sales

Change % 1-12/09 1-12/10

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6,473 Employees in total incl. rented at the end of Q4 R&D Personnel Personnel excluding rented employees Net Sales by Geographical Areas

Key Figures, 1-12/10

3,570 4,775 5,311 5,625 4,077 5,765 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2005 2006 2007 2008 2009 2010

+41.4%

251 453 622 1,135 1,222 1,378 1,412 200 400 600 800 1,000 1,200 1,400 1,600 China Finland North America Russia Estonia Brazil Poland 40.5 53.7 99.9 154.6 18.9 20.7 26.5 57.0 16.0 30.1 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 1-12/2009 1-12/2010 Finland Other Europe North America South America Other countires 90 101 114 110 20 40 60 80 100 120 2007 2008 2009 2010

EUR, million

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

Key Figures, 1-12/10

85.1 53.8 60.8 88.6 45.8 81.0 73.4 46.8 82.3 64.7 55.4 91.9 20 40 60 80 100 2008 2009 2010 Q1 Q2 Q3 Q4

MAN acquisition

9.3 0.4 3.4 11.1

• 1.1

7.6 6 3.8 10.5 3.7 1.9 9.9

• 2

2 4 6 8 10 12 2008 2009 2010 Q1 Q2 Q3 Q4 0.24 0.26

• 0.20

0.01 0.30 0.41

• 0.25

0.24 0.25 0.17 0.39 0.56 0.19

• 0.53

0.19 0.29

• 0.6
• 0.4
• 0.2

0.2 0.4 0.6 0.8 2007 2008 2009 2010 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 98 99 00 01 02 03 04 05 06 07 08 09 10 EBITDA % Operating profit %

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

Key Figures, 1-12/10

9.9 4.8 8.0 21.6 5 10 15 20 25 30 35 2008 2009 2010 Net Investments Acquisition

• 6.2

37.6 14.9

• 10
• 5

5 10 15 20 25 30 35 40 2008 2009 2010 20.8 6.4 25.8 5 10 15 20 25 30 2008 2009 2010 5.8 5.5 5.7 5.35 5.4 5.45 5.5 5.55 5.6 5.65 5.7 5.75 5.8 5.85 2008 2009 2010

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 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

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Product Portfolio Overview

Wiring of Electronics Vehicle Harnesses

Batch harnesses Engine harnesses Chassis harnesses Instrument harnesses

• Vehicle wiring harnesses are used in demanding

conditions

• The wiring harnesses business develops and

manufacturers high-quality, reliable and cost- efficient products tailored to the customers requirements

• Wiring harnesses and wiring of electronics for

medical, telecommunication and automation industries

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Market Development of Wiring Harnesses Segment 1-12/2010

• Registrations of heavy trucks increased in Europe (EU, Norway

and Switzerland) in 2010 by about 8% compared to 2009. About 179,000 heavy trucks were registered during the financial year. The number of registrations in Europe is still exceptionally low. The industry and analysts expect the number to increase to about 220,000–230,000 registrations in 2011.

• In Brazil, deliveries of heavy trucks increased by about 64% from

the previous year, totalling about 110,000 vehicles. Our customers’ order volumes from the final quarter support the automotive industry’s general assumption of the markets remaining at least at the current level in 2011.

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Market Development of Wiring Harnesses Segment 1-12/2010

• Registrations of heavy trucks in North America increased in 2010

by about 20% from the previous year, totalling about 140,000

• trucks. The industry and analysts expect the number to increase

to about 220,000 registrations this year. The order intake from the last four months (October 2010 to January 2011), about 100,000 vehicles, shows signs of strong growth in North America.

• In North America, the recreational vehicle deliveries of our

customers increased in 2010 by about 50% from the previous year’s level.

• Although PKC Group has no wiring harness production of its own

in Asia, the increasing export to Asia by our customers supports the growth of PKC’s production volumes.

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Market Development of Wiring Harnesses Segment 1-12/2010

• The sales of construction equipment increased in Europe by

about 4% from the previous year. The market is expected to growth a further 5–15% during 2011.

• Sales of agricultural tractors declined in Europe in 2010 by 10%

from the previous year’s sales. By contrast, forestry equipment sales increased from the exceptionally weak comparison year.

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Wiring Harnesses Q4/2010 Operating Profit Wiring Harnesses 1-12/2010 Net Sales

Key Figures, Wiring Harnesses

• Net sales during the financial year amounted to EUR 242.4

million (149.4 million) and was 62.3% more than in 1-12/09.

• The segment’s share of consolidated net sales was 76.7%

(74.0%).

• Comparable EBITDA was EUR 34.6 million (9.5 million).
• Operating profit was EUR 24.5 million (-3.9 million),

equivalent to 10.1% (-2.6%) of the segment’s net sales.

• The result is burdened by non-recurring expenses of EUR

1.8 million (4.3 million).

• Operating profit before non-recurring items was EUR 26.2

million (0.5 million), equivalent to 10.8% (0.3%) of the segment’s net sales.

• Net sales during Q4/2010 amounted to EUR 70.8 million

(40.3 million) and was 75.7% more than in Q4/09.

• Operating profit was EUR 8.7 million (1.0 million), equivalent

to 12.3% (2.4%) of the segment’s net sales.

• The result is burdened by non-recurring expenses of EUR

0.2 million (item of 0.7 million).

• Operating profit before non-recurring items was EUR 8.9

million (0.3 million), equivalent to 12.5% (4.2%) of the segment’s net sales.

69.3 41.7 45.7 69.3 33.1 64.1 57 34.2 61.8 57.8 40.3 70.8 10 20 30 40 50 60 70 80 2008 2009 2010 Q1 Q2 Q3 Q4 MAN acquisition 7.0

• 0.6

2.0 5.1

• 6.3

7.0 3.9 2.0 6.8

• 6.2

1.0 8.7

• 8.0
• 6.0
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 2008 2009 2010 Q1 Q2 Q3 Q4

EUR, million EUR, million

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Truck Deliveries and Order Intakes, Q4/2010 Heavy Trucks Registration EU27

Truck Market is Recovering

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MAN Group Volvo Group VW/Scania 29,080 13,119 33,383 14,575 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Volvo Europe + Latin America Scania Global 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 HCVs > 16t in 2008 HVCs > 16t in 2009 HVCs > 16t in 2010 +14.8% +11.1% Total +13.6%

Source: MAN, Volvo, Scania Source: ACEA

Heavy Trucks Production, EU27+ EFTA

Trucks, units Trucks, units Trucks, units Source: J.D. Power Automotive forecasting Q3/2010

Heavy Trucks Production by Marque, EU27+ EFTA

20,000 40,000 60,000 80,000 100,000 120,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MAN Volvo Scania

Trucks, units Source: J.D. Power Automotive forecasting Q3/2010

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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

0.0 0.5 1.0 1.5 2.0 2.5 3.0 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E

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

CAGR 10-17

CAGR 10-17 9.7% 13.2% 4.7% 4.1%

6.2%

Source: J.D. Power Automotive Forecasting, Q2 2010

We have:

74 622 907 1,222 1,378 1,412 200 400 600 800 1,000 1,200 1,400 1,600 China Finland North America Russia Estonia Brazil Poland

99% of 5,615 personnel in low cost locations

24 50 100 150 200 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 100 200 300 400 500 600 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E

Source: J.D. Power Automotive Forecasting, Q2 2010, Note: Europe comprised of EU27 + Efta

Forecasted Heavy Truck Production: Europe Forecasted Heavy Truck Production: NAFTA Forecasted Heavy Truck Production: Global Forecasted Heavy Truck Production: South America

0.0 0.5 1.0 1.5 2.0 2.5 3.0 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E Asia-Pacific Central/East Europe Western Europe North America South America

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

CAGR 10-17 13.2%

Wiring Harnesses Market Estimates Show Clear Signs of Recovery

CAGR 10-17 9.7% CAGR 10-17 4.7% CAGR 10-17 6.2% 100 200 300 400 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E

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Construction and Agricultural OEMs PKC is one of the main players within Heavy Trucks Truck OEMs and Competition Competitive Landscape within Commercial Vehicles

Competitive Landscape

(Italy) (USA) (USA) (Ger) (Germany) (Japan) (USA) (Japan) Brazil (Fin)

In order of estimated WH sales In order of group sales

Cabind (ITA) (AUT) (Norge) (Finland) (USA) (USA) (Italy) (USA) (Germany) (Japan) (USA) (AUT)

In order of estimated WH sales In order of group sales

Rying

In order of estimated WH sales in Heavy Trucks segment (above 16tn and Class 8)

Licom TCA

• Scale advantages
• Global services
• R&D resources
• Flexibility
• Low overheads

Rying

In order of estimated WH sales in CV segment

Licom TCA

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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

One-Stop-Shop – Full Lifecycle Support

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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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Market Development of Electronics Segment During Q4/2010

• The recovery of the global economy and revival of the electronics

industry increased the demand for the design and manufacturing services of PKC’s Electronics business in 2010. In particular, customers in the industrial electronics and energy segments increased their sales during the latter half of the year.

• Due to the global growth in the electronics industry, there have

still been problems in the availability of electronics components.

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Electronics Q4/2010 Operating Profit Electronics 1-12/2010 Net Sales

Key Figures, Electronics

• Net sales during the financial year amounted to

EUR 73.7 million (52.5 million) and was 40.4% more than in 1-12/09.

• The segment’s share of consolidated net sales

was 23.3% (26.0%).

• Comparable EBITDA was EUR 9.7 million (EUR

6.5 million).

• Operating profit was EUR 7.7 million (4.6 million),

equivalent to 10.4% (8.7%) of the segment’s net sales.

• Net sales during Q4/2010 amounted to EUR 21.1

million (15.1 million) and was 39.7% more than in Q4/2009.

• Operating profit was EUR 2.0 million (1.7 million),

equivalent to 9.6% (12.2%) of the segment’s net sales.

15.8 12.1 15.1 19.3 12.7 16.4 12.7 20.5 13.9 15.1 21.1 16.9 5 10 15 20 25 2008 2009 2010 Q1 Q2 Q3 Q4 2.3 0.7 1.3 4.5 0.7 1.1 2.1 1.5 3.3 2.3 1.7 2.0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2008 2009 2010 Q1 Q2 Q3 Q4

EUR, million EUR, million

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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

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…

228 251 363 50 100 150 200 250 300 350 400 Russia China Finland 842 employees in total

Number of employees at the end of Q4/2010, rented employees included

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• 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…

%

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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

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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

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Outlook for the Future

• The number of orders received by our automotive industry

customers during the final quarter exceeded the number of vehicles they delivered within the same period. The industry is anticipating significant growth this year on the recovering European and North American markets. Markets in the developing countries are also expected to keep growing. Based

• n this, we are expecting an increase in the net sales of the

Wiring Harnesses segment compared to last year.

• Customers in the industrial electronics and energy segment

steadily increased their sales last year, and we expect this growth to continue. We also estimate that the net sales generated by the electronics design and manufacturing services will increase this year.

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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
• perating profit before non-recurring items was EUR 31.5 million.

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Thank You!

www.pkcgroup.com