TECHNOLOGY PRESENTATION Milano November 28th, 2017 Laurent - - PowerPoint PPT Presentation

TECHNOLOGY PRESENTATION

Milano – November 28th, 2017

Laurent HEBENSTREIT

Chief Executive Officer

3 I

Agenda

Introduction Technology Profitable Growth Strategy

1 2 3

Introduction

5 I

• Young automotive company created in 1980 by Carlo De Benedetti
• Listed in Milano Stock Exchange since 1986
• Strong Entrepreneurship DNA
• Developed through:
• a series of strategic moves
• tight cost control
• Joined the best automotive suppliers in 2005
• Generated 31M€ of Cash in 2016

Who is Sogefi?

6 I

3 Business Units

€ 563M

• Stabilizer Bars
• Coil Springs

MAIN PRODUCTS

€ 1,574M 2016 Sales

36%

Suspensions Filtration Air & Cooling

• Oil Filters
• Engine Air Filters
• Fuel Filters
• Cabin Air Filters
• Manifolds
• Coolant Pumps
• Coolant Outlet

Housings

€ 535M

34%

€ 480M

30%

Main Competitors

7 I

Sogefi Customers

CARS TRUCKS 2 WHEELERS 3 WHEELERS AFTERMARKET

MAIN BRANDS

8 I

Ford Renault/Nissan FCA/CNH Industrial PSA GM Daimler Volkswagen/Audi BMW Toyota Volvo

Geely/Volvo

Well balanced clients mix

2015 2016

5% 10%

Sogefi Top 10 Clients – In % of Total Sales

9 I

Supplying premium customers & models

PORSCHE CAYENNE JAGUAR F-PACE MASERATI QUATTROPORTE MERCEDES GLK VOLVO XC90 AUDI A6 BMW 5-serie FERRARI 599 CORVETTE

Technology

11 I

Current Trends

Higher technology requirements

Fuel Consumption Reduction Weight Reduction

Suspensions Air & Cooling Filtration Air & Cooling Filtration Filtration

CO2 Emissions Reduction Air Quality Fine Particles Reduction

12 I

Stabilizer Bar content

Entry Middle High

Weight reduction

Indicative weight by vehicle:

Content

by vehicle

Variable wall thickness Tube Tube Solid Bar Suspensions

TECHNOLOGY LEVEL

45% 35% ~6kg 24€ 20€ 16€

13 I

Coil Spring content

Weight reduction Composite Steel + high performance process Steel

Entry Middle High

Suspensions

TECHNOLOGY LEVEL

50% 25% ~10kg 50€ 23€ 20€ Content

by vehicle Indicative weight by vehicle:

14 I

4 Disruptive Future Trends

CONNECTIVITY

• Connected, Autonomous and Shared trends have limited direct

impact for Sogefi

• Powertrain electrification is a key trend

for Filtration and Air & Cooling

• Sogefi developed with Mc Kinsey support a detailed world data base

and model to create alternative powertrain scenarios

1 2 3

AUTONOMOUS DRIVING

ELECTRIFICATION

SHARED MOBILITY

Higher technology requirements

15 I

Different types of powertrains

Electrification

Pure ICE

Battery Hybrid Fuel Cell

New Energy Vehicle (NEV) Internal Combustion Engine (ICE) Electric Vehicle (EV)

16 I

Different types of powertrains

Electrification

MHEV PHEV FHEV

• ICE:

Internal Combustion Engine vehicle, operating on fuel.

• MHEV:

Mild-Hybrid Electric Vehicle, 48V system. (e.g. New Renault Scenic dCi 110).

• FHEV:

Full Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Non rechargeable (e.g. Toyota Prius).

• PHEV:

Plug-in Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Rechargeable (plugged in to grid) (e.g. New Golf GTE).

• BEV:

Battery Electric Vehicle, i.e., pure EV, with no ICE content (e.g. Renault ZOE, Nissan LEAF, Tesla).

• FCEV:

Fuel Cell Electric Vehicle (e.g. Toyota Mirai).

Pure ICE BEV Hybrid FCEV

17 I

1% 6% 12% 81% 1% 3% 41% 54%

Estimated volume, including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T (LCV > 3.5T excluded)

2017 Powertrain by region

EUROPE Rest of the World

Source: Sogefi and Mc Kinsey

1% 6% 7% 87% 2% 3% 6% 90%

2% 4% 17% 78%

CHINA 1% 6% 22% 72%

20.8 19.9 28.0

92.3

8.7 14.9

LV sales (M units)

Type of engine

EV Hybrid Diesel Gasoline

NAFTA Rest of Asia

WORLD

18 I

1 2

Diesel disruption mainly affecting Europe due to

• More stringent regulations
• Consumers turning away from Diesel
• Politics
• Diesel circulation restrictions in large cities

Diesel/Electric disruption trends

WW EV + Hybrid share: from 6% in 2017 to 30% in 2027 in Base case scenario (33% in Strong case)

Electrified powertrain evolution

• Technology improvements
• Politics
• France & UK to ban Diesel/Petrol cars from 2040
• China to significantly increase EV

Diesel share in Europe: from 41% in 2017 to 25% in 2027 in Base case scenario (20% in Strong case)

19 I

11% 13% 9% 68% 11% 13% 13% 64% 11% 13% 17% 60% 7% 9% 10% 75% 7% 9% 18% 66% 6% 10% 10% 75% 6% 10% 14% 71% 6% 10% 18% 67% 7% 9% 14% 71% Share of 2022 sales per type of engine, LV1 global

All scenarios predict a reduction of ICE from 98% in 2017 to 93% in Base Case and 89% in Strong Case in 2022

2022 Sogefi Forecast

Base case Strong case

Source: Sogefi and Mc Kinsey

Type of engine

EV Hybrid Diesel Gasoline

Scenario

Diesel Low Diesel High

EV Low EV scenarios EV High Diesel scenarios

1 including PC and LCV (<3.5 tons)

20 I

Share of 2027 sales per type of engine, LV1 global

All scenarios predict a reduction of ICE to reach 86% in Base Case and 81% in Strong Case in 2027

2027 Sogefi Forecast

Source: Sogefi and Mc Kinsey

Type of engine

Diesel Low Diesel High

EV Low EV scenarios EV High Diesel scenarios

1 including PC and LCV (<3.5 tons)

19% 15% 7% 59% 18% 15% 11% 56% 18% 15% 14% 53% 14% 16% 8% 63% 10% 16% 8% 66% 14% 16% 11% 60% 14% 16% 15% 56% 10% 16% 12% 62% 10% 16% 15% 59%

EV Hybrid Diesel Gasoline

Base case Strong case

Scenario

21 I

Powertrain Forecast by region (Sogefi Base Case)

2017 2022 2027

EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 7% 6% 5% ICE Gasoline 87% 80% 69%

Source: Sogefi and Mc Kinsey

NAFTA

2017 2022 2027

EV 1% 6% 13% Hybrid 3% 7% 14% ICE Diesel 41% 32% 25% ICE Gasoline 54% 55% 49%

2017 2022 2027

EV 2% 8% 17% Hybrid 3% 11% 18% ICE Diesel 6% 5% 4% ICE Gasoline 90% 76% 61%

2017 2022 2027

EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 22% 21% 18% ICE Gasoline 72% 65% 56%

2017 2022 2027

EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 12% 10% 8% ICE Gasoline 81% 76% 66%

2017 2022 2027

EV 2% 6% 14% Hybrid 4% 9% 16% ICE Diesel 17% 14% 11% ICE Gasoline 78% 71% 60%

EUROPE CHINA Rest of Asia Rest of the World

WORLD

22 I

• Strong growth of Hybrid powertrains and Electric Vehicles (EV)
• But total Internal Combustion Engine (ICE) remains flat

Light Vehicles Sales Forecast (Sogefi Base Case)

2017 2022 2027 CAGR 17/22 CAGR 22/27

Total Vehicles (M units) 92 99 110 1.4% 2.1% EV 1 6 15 35% 19% Hybrid 4 9 17 19% 14% ICE Diesel 15 14 12

• 2%
• 2%

ICE Gasoline 72 70 66 0%

• 1%

91 93 95 0.4% 0.5%

Source: Sogefi and Mc Kinsey Volume including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T

Total ICE

23 I

Sogefi Filtration / Air&Cooling Main Products

Air & Cooling Filtration

Manifold Coolant Pump Coolant Outlet Housing Oil Filter Fuel Filter Cabin Air Filter

OEM AFTERMARKET

European Car Park 10 years average age

Engine Air

24 I

Hybrid Powertrain

Filtration

Manifold New Product Coolant Pump Coolant Outlet Housing

VOLUME X2

Oil Filter Engine Air Volume Effect Battery Pack Coolant Valve Thermal Pack

Air & Cooling

Fuel Filter Battery Pack coolant Manifold High performance Cabin Air Filter

25 I

BEV Powertrain

Air & Cooling Filtration

High performance Cabin Air Filter Battery Pack Electric Cooling Module Coolant Valve Electric Coolant Pump

VOLUME X2

Coolant Outlet Housing Battery Thermal Pack New Product Volume Effect Battery Pack Coolant Manifold Module

26 I

FCEV Powertrain

Filtration

Fuel Cell Air Filter Fuel Cell Filters Water Separator Coolant Valve Electric Coolant Pump Coolant Outlet Housing

Air & Cooling

New Product High performance Cabin Air Filter

27 I

SOGEFI on Hybrid and Electric Powertrain

3-serie MALIBU S-CLASS PANAMERA A8 PACIFICA ZOE B-CLASS FORTWO TX5 500

28 I

• Even if all scenarios predict an increase of EV, the total ICE powertrains

could remain flat or a substantial part of the market until 2027.

• Hybrid powertrain is a first step towards a world of multiple powertrains.
• The rise of EV is depending on key evolving factors (vehicle range,

battery costs, infrastructures development,…)

• The rise of Hybrid, BEV and FCEV offers opportunities for SOGEFI.

More volume of Cooling products New Sogefi products Higher content for existing Sogefi products

Sogefi Filtration / Air&Cooling products offer opportunities

29 I

Oil Filter content

Oil Filter Module + Oil Cooler + Valves Oil Filter Element + Cap Oil Filter Spin-on Filtration 23€ 2€ 1€ Content

Entry Middle High

TECHNOLOGY LEVEL

30 I

Engine Air Filter content

Engine Air Intake System Filter Element + Box Filter Element Filtration Content

TECHNOLOGY LEVEL

28€ 9€ 2€

Entry Middle High

31 I

Air Cabin Filter content

Particles and

• dours

Pollen Filtration Content

TECHNOLOGY LEVEL

3€ 2€ 1€

Entry Middle High

Synthetic media with activated carbon Synthetic media with activated carbon + anti-allergen properties + high performance

Anti-allergen

Synthetic media

32 I

Aftermarket Pricing Power

Premium Mid Range Private Label Filtration Price Index

TECHNOLOGY LEVEL

100 85 80

Entry Middle High

33 I

Air Intake Manifold content

With Actuator and Cooler With Actuator Simple Air & Cooling Content

Cooled Air flow Cooled Air flow Hot Air flow Cooled Air flow

TECHNOLOGY LEVEL

40€ 23€ 10€

Entry Middle High

34 I

Coolant Pump content

Smart Coolant Pump Pump module with Cooler + Thermostat Mechanical pump

Inlet Outlet Impeller

• utlet

Flow control with e-valve

• r e-motor

+ +

Air & Cooling Content

TECHNOLOGY LEVEL

25€ 20€ 8€

Entry Middle High

35 I

Coolant Outlet Housing content

Coolant Outlet Housing Smart Multi Way Valves Electric Thermostat Thermostat

M

Air & Cooling Content

TECHNOLOGY LEVEL

25€ 13€ 8€

Entry Middle High

36 I

Startups are becoming key players

• f the automotive world

Sogefi Ventures

disrupting existing business creating new business

Generate profits Add value to existing Sogefi products Generate new Sogefi products 1. Monitor the fields relevant to Sogefi: Air and Cooling, Filtration, Suspensions 2. Build joint development agreements with startups 3. Buy minimum 5% to 10% equity 4. Secure active minority shareholders’ role 5. Cash investment of 3 ~ 5 M€ per year OBJECTIVES HOW

Profitable Growth Strategy

38 I

Profitability improvement plan

3

5 performance drivers to increase operational efficiency

• Cost reduction

through technical modifications

• Pluriannual price

and productivity negotiations

• Low Cost Country

sourcing

• Scrap reduction
• Direct labor

productivity

• Higher

automatization

• Shorter reaction

times to deviations

• Indirect labor

productivity increase

• Lean organizations
• Price increases

for technical modifications

• Systematic price

increases for volume fluctuations

• Development and

tooling cash payment

1

PURCHASING

• Polyvalence and

Polycompetence

• Process redesign
• Industrial excellence
• Plant competitivity

plan

SHOPFLOOR

2 3

PROGRAM MANAGEMENT

4

INDIRECT COSTS REDUCTION COMPETITIVE FOOTPRINT

5

39 I

• A deep analysis of the

cost base has been done

• On € 100m addressable

costs some productivity potential have been identified with expected saving in the next 3 years

Strategic cost reduction initiative

Sogefi Excellence System

1245 380 290 100 945

TOTAL Material for final product Transformation costs Costs analized Adressable costs 100% 64% 23% 36% 8%

VALUATION OF POTENTIALS TOTAL COSTS

Data: 2016 cost base

40 I

Leader Challenger Harvest

Worldwide

N°2

Worldwide

N°4

Growth Strategies : Harvest, Challenger, Leader

Air & Cooling Filtration

Manifold Coolant Pump Coolant Outlet Housing

OEM AFTERMARKET

European Car Park 10 years average age

✓

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Oil Filter Fuel Filter Cabin Air Filter Engine Air

✓ France

N°1

✓ ✓ ✓

41 I

Geographical Expansion and cost competitive footprint

Air & Cooling Filtration Suspensions

ASIA

China India

✓ ✓ ✓

EMEA NAFTA

Mexico

✓

Morocco Romania

✓ ✓✓ ✓ ✓ ✓

EMEA project

✓

42 I

Health & Safety, Quality, Capacity increase, Efficiency, New products, New plants

Tangible Investments 2014-2017E

36 42 51 59 70

2013 2014 2015 2016 2017E

43 I

Value Creation Through ROCE Increase

10.2% 12.8% 17.5%

Q3 2015 Q3 2016 Q3 2017

EBIT: 12 months rolling * Lazard – Roland Berger: global automotive suppliers study. ROCE of ~600 key suppliers

Benchmark*

13.5%

2015

44 I

3.7 2.3 1.6

Q3 2015 Q3 2016 Q3 2017

DEBT/EBITDA Ratio Improved

DEBT: Net debt (end of period) EBITDA: 12 months rolling

Leverage now supports Profitable Growth Strategy

45 I

Sogefi Strengths

1.

Entrepreneurship DNA

2.

Intimacy with R&D, Purchasing and Top Management of vehicle manufacturers

3.

Recognized technical credibility to develop, launch and ramp-up innovative products

4.

Multi-brand Aftermarket provides resilience to OEM volumes fluctuations

Higher Technology Requirements

EV expected to increase but total ICE will remain a substantial part of the market NEV offer opportunities in terms of more volume of cooling products, new products and higher content

Profitable Growth Strategy

Cost reduction plan to sustain profitability and cash generation Differentiated product strategies between Harvest, Challenger, Leader External growth opportunities researched to complement organic growth

Executive Summary