PKC Group Oyj...• PKC Group employs 6,473 employees*) globally at the end of 2010 • The...
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1 PKC Group Oyj Investor Presentation Financial Year 2010 February 2011 Harri Suutari President & CEO 1
Transcript of PKC Group Oyj...• PKC Group employs 6,473 employees*) globally at the end of 2010 • The...
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PKC Group OyjInvestor Presentation Financial Year 2010
February 2011
Harri SuutariPresident & 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 openedAcquisition of electronics business
Acquisition of Estonian operations
Electronics business established as separate subgroup
Electronics operations 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 operations
Acquisition of Polish operations
8.912.0
15.0 13.59.6
15.3
24.3 25.7
32.3 30.635.8
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 ValleyGreen Valley
NogalesNogales
Kempele (HQ)Kempele (HQ)
RaaheRaahe KostomukshaKostomuksha
Keila & HaapsaluKeila & Haapsalu
StarachowiceStarachowice
SuzhouSuzhou
Wiring Harnesses
OfficeElectronics
CuritibaCuritiba
São Bento do SulSão Bento do Sul
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Business Segments
Wiring Harnesses, ~75% of the net salesThe Wiring Harnesses business develops and manufactures wiring harnesses and cabling for automotive, telecommunications, and electronics industries
Electronics, ~25% of the net salesThe Electronics business provides design and contract manufacturing services for the telecommunications, electronics, and automotiveindustries
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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
ValuesVision
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 of 10- 40%
Volume rebound
Potential acquisitions
New product initiatives and business wins
Gross Margin of 28-29%
Reduced operative expenses by production relocations
Raw material and component cost reductions
Operating Income Margin of 9-13%
Reduced SG&A expenses through reorganization and relocation
ROIC of 30%
Effective capital usage
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Financial Items, Tax Items and EPSNet 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 of 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 14.9million (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
28.2-2.1Net debt (EUR million)
41.44,0775,765No. of employees at closing 1)
35.9-1.7Gearing, %
6.425.8ROI, %
738.50.131.09EPS, (EUR)
737.92,34919,683Net result (EUR 1,000)
0.39.4% of net sales
4253.268229,689EBIT (EUR 1,000)
56.6201,814316,081Net sales (EUR 1,000)
Change %1-12/091-12/10
1) Rented employees not included
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Key Figures, 10-12/10
28.228.2-2.1Net debt (EUR million)
4,07741.44,0775,765No. of employees at closing 1)
35.935.9-1.7Gearing, %
0.1361.10.180.29EPS, (EUR)
2,34962.53,2455,272Net result (EUR 1,000)
0.34.810.6% of net sales
682271.42,6329,776EBIT (EUR 1,000)
201,81466.055,39091,940Net sales (EUR 1,000)
1-12/09Change %10-12/0910-12/10
1) Rented employees not included
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Cost Savings, 1-12/10
29.172,43993,538Operating expensesexcluding one time expenses
-4,300-1,810Non-recurring expenses
23.823,35528,906Other operating expenses
24.553,38466,442Staff expenses
56.6201,814316,081Net sales
Change %1-12/091-12/10
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6,473 Employees in total incl. rented at the end of Q4
R&D PersonnelPersonnel excluding rented employees
Net Sales by Geographical Areas
Key Figures, 1-12/10
3,570
4,7755,311
5,625
4,077
5,765
0
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
1,1351,222
1,378 1,412
0
200
400
600
800
1,000
1,200
1,400
1,600
China Finland NorthAmerica
Russia Estonia Brazil Poland
40.5 53.7
99.9
154.618.9
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
90101
114 110
0
20
40
60
80
100
120
2007 2008 2009 2010
EUR, million
13
Adjusted Operating Profit
Adjusted EBITDA % and EBIT %
Net Sales
Earnings per Share (EPS)
Key Figures, 1-12/10
85.1
53.860.8
88.6
45.8
81.073.4
46.8
82.3
64.7
55.4
91.9
0
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
0
2
4
6
8
10
12
2008 2009 2010
Q1 Q2 Q3 Q4
0.24 0.26
-0.20
0.01
0.300.41
-0.25
0.240.250.17
0.39
0.56
0.19
-0.53
0.190.29
-0.6
-0.4
-0.2
0
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
0
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
9.94.8
8.0
21.6
0
5
10
15
20
25
30
35
2008 2009 2010
Net Investments Acquisition
-6.2
37.6
14.9
-10
-5
0
5
10
15
20
25
30
35
40
2008 2009 2010
20.8
6.4
25.8
0
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 SegmentsCustomer SegmentsBusiness 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 OverviewWiring of ElectronicsVehicle 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 2010by 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 supportsthe 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
41.745.7
69.3
33.1
64.157
34.2
61.857.8
40.3
70.8
0
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, Q4/2010Heavy Trucks Registration EU27
Truck Market is Recovering
0
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
0
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
0
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, ScaniaSource: ACEA
Heavy Trucks Production, EU27+ EFTA
Trucks, unitsTrucks, units
Trucks, units
Source: J.D. Power Automotive forecasting Q3/2010
Heavy Trucks Production by Marque, EU27+ EFTA
0
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
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
Other NAFTA EU27 + Efta South America
Number of trucks (m)
CAGR 10-17CAGR 10-17
9.7%
13.2%
4.7%
4.1%
6.2%
Source: J.D. Power Automotive Forecasting, Q2 2010
We have:
074
622
907
1,2221,378 1,412
0
200
400
600
800
1,000
1,200
1,400
1,600
China Finland NorthAmerica
Russia Estonia Brazil Poland
99% of 5,615 personnel in low
cost locations
24
0
50
100
150
200
2007
2008
2009
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
0
100
200
300
400
500
600
2007
2008
2009
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
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
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
Asia-Pacif ic Central/East Europe Western EuropeNorth 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%
0
100
200
300
400
2007
2008
2009
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
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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 salesIn order of group sales
Cabind (ITA) (AUT)
(Norge)
(Finland)
(USA)
(USA)
(Italy)
(USA)
(Germany)
(Japan)
(USA)
(AUT)
In order of estimated WH salesIn order of group sales
Rying
In order of estimated WH sales in Heavy Trucks segment (above 16tn and Class 8)
LicomTCA
• Scale advantages
• Global services
• R&D resources
• Flexibility
• Low overheads Rying
In order of estimated WH sales in CV segment
LicomTCA
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Electronics Business Segment
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27
• 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 ManagementOverview
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 SegmentsProducts
• 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 havestill 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
13.915.1
21.1
16.9
0
5
10
15
20
25
2008 2009 2010
Q1 Q2 Q3 Q4
2.3
0.7
1.3
4.5
0.71.1
2.1
1.5
3.3
2.3
1.72.0
0
0.51
1.5
22.5
3
3.5
44.5
5
2008 2009 2010Q1 Q2 Q3 Q4
EUR, millionEUR, million
31
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
0
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014
EMS ODM
Total EMS and ODM Market: Global
US$bn
10-14 EMS CAGR
10-14 ODM CAGR
7.9%
9.2%
Source: IDC: Worldwide Electronics Manufacturing Services Industry Forecast, 2005-2014, April 2010
We have…
228251
363
0
50
100
150
200
250
300
350
400
Russia China Finland
842 employees in total
Number of employees at the end of Q4/2010, rented employees included
32
-20
-10
0
10
2008 2009 2010 2011 2012 2013 2014
EMS ODM
0
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014
EMS ODMSource: IDC: Worldwide Electronics Manufacturing Services Industry Forecast, 2005-2014, April 2010
Total EMS and ODM Market: Global
Key Trends
Estimated Growth of EMS and ODM Market: Global
US$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…
%
33
0
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: GlobalAC Drives Market: Global(1)
US$m
US$m
0
5,000
10,000
15,000
2008 2009 2010 2011 2012 2013 2014
10-14 CAGR
10-14 EMS CAGR10-14 ODM CAGR
Industrial Electronics Market: GlobalUS$m
0
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 PathCompetitive Advantages
• Innovative and proactive product development operations 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-operation networks)
Electronics Business is Well Positioned to Leverage Market Recovery
35
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 on 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.
36
Outlook for the Future
• PKC Group estimates that its net sales and comparable operating 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.
37
Thank You!
www.pkcgroup.com
