Concentric AB
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Concentric AB Ian Dugan/David Bessant 20 May 2011
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Concentric AB. Ian Dugan/David Bessant. 20 May 2011. Introductions. Ian Dugan – Chief Executive David Bessant – Chief Financial Officer David Woolley – Senior Vice President, Europe and India Len Mason – Senior Vice President, Americas - PowerPoint PPT Presentation
Transcript of Concentric AB
Concentric AB
Ian Dugan/David Bessant
20 May 2011
Introductions
Ian Dugan – Chief Executive
David Bessant – Chief Financial Officer
David Woolley – Senior Vice President, Europe and India
Len Mason – Senior Vice President, Americas
David Williams – Group Technical Director (Engine Products)
Bill Pizzo – Vice President, Global Hydraulics Engineering
2 20 May 2011
Concentric AB - Agenda
A global leader in the design and manufacture of pumps for diesel engines and hydraulic systems
Concentric – built on a solid foundation
A streamlined business
A focused strategy towards growth
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Concentric AB
Built on a solid foundation
A streamlined business
A focused strategy towards growth
4 20 May 2011
5 20 May 2011
Concentric AB – Overview
Concentric AB is organized regionally Two regions – Americas and Europe and ROW Manufacturing occurs in the UK, India, China, Sweden, Germany and the
US close to customers The company employs 1,156 people Focus on four end markets – Truck, Agricultural machinery,
Construction equipment and Industrial applications
We make pumps for diesel engines, used for pumping lubricating oil, coolants and diesel fuel Concentric AB is the global market leader in engine pumps in the 0.8 - 2
litre per cylinder niche Largest customers are engine manufacturers and large truck
manufacturers which produce diesel engines for their own trucks and construction machinery
We make gear pumps for a broad range of hydraulic pump applications Concentric AB is a market leader in niches such as fan drives and
supplementary power steering Largest customers are OEMs of a wide range of industrial vehicles,
agricultural machinery and construction equipment
History
1921 Concentric founded in Birmingham, England
1929 JS Barnes Company founded in Rockford, USA
1948 Concentric makes first engine pump
1977 JS Barnes focuses on hydraulic pumps
Mid 1980s Hesselman, Haldex and Garphyttan consolidates under the name Haldex AB
1987 Haldex acquires JS Barnes
1991 Haldex acquires Reichert, a Vickers company
2002 Group of companies comprising Barnes, Vickers and Hesselman is renamed Haldex Hydraulic Systems Division
April 2008 Haldex Hydraulic Systems Division acquires Concentric
Spring 2011 Haldex Hydraulic Systems Division is renamed Concentric AB to prepare for demerger and listing on OMX NASDAQ
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End Markets
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Diverse spread of platforms across four end markets
Multiple growth opportunities
Source: 2010 Group sales
EXAMPLES OF CONCENTRIC’S PRODUCTS BY END MARKET
TRUCKS CONSTRUCTION
Alfdex: Oil mist separator
Variable oil pump
Variable water pump Axle Cooling Fuel pump Fan Drive
AGRICULTURE INDUSTRIAL EQUIPMENT
Seeder motor Oil pump Implement pumps
DC Pack Lift/ Lower
Transmission Low noise pump
Blue Chip – Customer Base
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Top 10 customers account for 64% - reflects engine products customer concentration
Other customers account for 36% - reflects diverse base in hydraulics products (700+)
Source: 2010 Group sales
Top 10 Customers
Extensive Product Portfolio
We offer best in class technologies, focused on fuel economy, emissions reduction and noise management, with the major products including:
Oil pumps, fixed and variable displacement, mechanical or electronic control Water pumps, fixed and variable control with future stretch for electrification Fuel transfer pumps, mechanical with electrification options Hydraulic pumps and motors featuring low noise, low speed and high power density
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Key new products include: Alfdex oil mist separators Hydraulic Hybrid drive systems offering 40-50% fuel savings and engine downsizing
options Varivent EGR pumps to provide greater mass of re-circulated exhaust gas, reducing
emissions Variable Flow Coolant Pump
Alfdex:Oil mist separator
Variable Flow Oil Pump
Hydraulic Hybrid Drive
System
Hof, GermanyManufacturing
Skånes Fagerhult, SwedenManufacturing
Rockford, Illinois USAManufacturing
Suzhou, ChinaManufacturing
Landskrona, SwedenManufacturing
Itasca, IllinoisManufacturing & Distribution
Birmingham, UKHeadquarters Manufacturing & Distribution
Pune, IndiaManufacturing
Global Infrastructure
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Global Manufacturing
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Birmingham, UK
Production Sites
Rockford, USA
Skånes Fagerhult, Sweden
Hof, Germany
Itasca, USA
Suzhou, China
Landskrona, Sweden
Pune, India
A Solid Financial Position(Key Metrics)
Q1 2011 2010
Sales SEK 554m SEK 1,977m
Sales growth 1) 11% 53%
Material % of sales 52% 49%
EBITDA margin 15.1% 12.7%
Operating income 2) SEK 66m SEK 151m
Operating margin 2) 11.9% 7.6%
Operating free cash flow SEK 44m SEK 272m
Working capital as % of sales 3) 0.4% 0.3%
ROCE 2) 16.5% 12.1%
Debt/equity ratio 3) 39.0% 41.5%
1) Like-for-like sales growth, constant currency
2) Before items affecting comparability (demerger costs, restructuring expenses and capital losses)
3) Pro forma financial information
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Q1 2011 Comments
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Profit development
Sales development
Cash flow development
Constant currency 11.5% above Q4 2010
11.9% EBIT vs10.2% in Q4
- Currency- Growth pressure on accounts receivable- CAPEX to fund growth
- Material price pressure- Double corporate costs (SEK 3m)- Listing advisor costs (SEK 5m)- Drag-through benefit of restructuring- Supply constraints
SEK 44m Free cash flow
Concentric AB
Built on a solid foundation
A streamlined business
A focused strategy towards growth
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Strongly impacted by the downturn...
In Q1 2009 sales fell by 31% versus Q1 2008
Reaching a low point in Q3, 2009 where sales fell 46% year-on-year
Throughout this difficult period, robust management action ensured that the business remained consistently cash generative
In 2009, the business generated SEK 64m of operating free cash flow despite the fall in sales
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... but decisive actions have been taken
Blue Collar staff and variable overheads were flexed in line with sales
Reduced headcount from 2,662 employees in April 2008 to 1,156 employees by the end of 2010
Protected key staff and know-how, to secure growth post the Recession
Material escalator pass through agreements, were driven through the customer base
Won opportunistic new contracts from competitor distress
Removed surplus and non value adding capacity
Sold majority interest in operation in Qingzhou, China and closed a manufacturing plant in Statesville, USA
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R o ck fo rd Ita sca
A m e ricasL e n M ason
F in a nce , IR & ITD a v id B e ssa nt
B irm in g h am H o f S kan es P une
E u ro peD a v id W o o lley
H RM e lissa D u nn
S u zh ou
C h inaK e vin Joh an son
E n g in e eringD a v id W illia m s /B ill P izzo
L a nd skro na
A lfd ex JVM a ts E ke ro th
S tra te gyB ria n N e lson
Ia n D ug an
Lean Operational Structure
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Decentralized organization - all sites profit and cash accountable
Supported by best practice, in design and manufacturing
USA USA UK Germany Sweden India China Sweden
Concentric AB
Built on a solid foundation
A streamlined business
A focused strategy towards growth
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Vision - Leading the Way
Mission
Vision
Values
Concentric AB is a global company specialising in fluid dynamics and fluid power technologies that provide better fuel economy, emissions reduction, vehicle control and productivity in trucks, buses and agricultural and other off-road vehicles
We are a global leader specialising in engines and hydraulics, delivering custom solutions in application niches where we add value to the customer’s products
To remain the industry global leader providing innovative energy saving technology via a global manufacturing footprint adjacent to our customer
Technology + Innovation = Sustainability
Strong sense of ethics
Respect for the individual
Elimination of waste
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Environment and Regulation
Global infrastructure growth
Concentric pursues a strategy of continuous product development to enable our customers to meet and exceed increasingly stringent environmental requirements. The company is a world leader in this area and offers a portfolio of competitive products that contribute to more efficient emission control, superior fuel economy and noise reduction
Continued infrastructure growth, particularly in developing economies will continue to stimulate long-term growth for the Company’s products used in transportation, mining, construction, agriculture and power generation sectors, above GDP growth
Market Drivers
Positive Underlying Growth
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Forecasted Real GDP growth (% change, year on year)
Country/ region 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Brazil 3.2 4 6.1 5.2 -0.6 7.5 4.5 4.1 4.1 4.2 4.2
China 11.3 12.7 14.2 9.6 9.2 10.3 9.6 9.5 9.5 9.5 9.5
Euro area 1.7 3.1 2.9 0.4 -4.1 1.7 1.6 1.8 1.8 1.9 1.8
India 9.2 9.7 9.9 6.2 6.8 10.4 8.2 7.8 8.2 8.1 8.1
Japan 1.9 2 2.4 -1.2 -6.3 3.9 1.4 2.1 1.7 1.5 1.3Unites States 3.1 2.7 1.9 0 -2.6 2.8 2.8 2.9 2.7 2.7 2.7Source: International Monetary Fund, World Economic Outlook Database, April 2011
Emission limit, Regulation
A Focused Strategy
Market leading positions in both diesel engine and hydraulic pumps, enables Concentric to take full advantage of strong underlying market growth and to leverage its technology to meet increasingly stringent environmental demands
Maintain a diverse spread of end-markets and geographic activity to
reduce economic and legislative cyclicality of revenues a competitive cost structure and maximize operational leverage
to drive profit and cash conversion a leading position in the premium hydraulic pumps segment in
both North America and Europe Use the existing infrastructure to expand the scope for specialist
hydraulic gear pumps in India, China and Brazil Actively explore complimentary bolt on acquisitions
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Financial Targets
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Operating income (EBIT)
Organic GrowthCalculated on a constant currency basis and driven by new emissions legislation and global infrastructure growth
Calculated on a constant currency basis and driven by a lean manufacturing operation supported by global sourcing and cost effective design
Capital structure
Dividend
11% EBIT
margins
7% CAGR
1/3 of net
income
CommentsTargets (over a business cycle)
Debt/equity
ratio < 1.0
2011 Outlook Comment
Applied to Concentric’s business mix, underlying market statistics currently indicate around 11 percent growth in constant currencies for the full year 2011 versus the full year 2010
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Summary – Well Positionedfor Growth
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Experienced management, decisive and quick to actMaintaining lean structures to maximise drop-through as volumes recover
Streamlined during the financial crisis
Built on a solid foundation
A clear history of delivering profit and cash through the business cycle
A focused strategy towards growth
- Products, people, resources, markets and customers, all developed and moving forward
- Clear and transparent drivers of growth, strong history of successful execution
Appendix
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AppendixFinancial Performance
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Key figures 2011 2010 2010 2009
SEK m Q1 Q4 Full year Full year
Net sales 554 520 1,977 1,406
EBITDA 1) 84 73 252 28
Operating income 1) 66 53 151 -79
Operating free cash flow 44 125 272 64
Working capital 2) 8 6 6 50
Capital employed 2) 1,077 1,132 1,132 1,363
Net debt 2) 282 312 312 510
1) Before items affecting comparability (demerger costs, restructuring expenses and capital losses)
2) Pro forma financial information
AppendixFinancial Performance
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Key metrics 2011 2010 2010 2009
Q1 Q4 Full year Full year
Sales Growth 1) 11.5% 53.0%
EBITDA margin 2) 15.1% 14.0% 12.7% 2.0%
Operating margin 2) 11.9% 10.2% 7.6% (5.6)%
ROCE 2) 16.5% 12.1% 12.1% (4.4)%
Working capital as % of sales 3) 0.4% 0.3% 0.3% 0.6%
Debt/equity ratio 3) 39.0% 41.5% 41.5% 67.5%
1) Like-for-like sales growth, constant currency2) Before items affecting comparability (demerger costs, restructuring expenses and capital losses)
3) Pro forma financial information
Any Questions
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