AEP Capital Markets Day 12 June Precision Polymers. Allen Cubell, Divisional Managing Director. Fenner PLC Board Away Day

Transcription

1 AEP Capital Markets Day 12 June 2014 Precision Polymers Allen Cubell, Divisional Managing Director Fenner PLC Board Away Day

2 Introduction to Precision Polymers Precision Polymers produces high value-added polymer based products for niche industrial markets We have long-standing relationships with blue-chip OEM customers and distributors Precision Polymers represents around 40% of AEP (by revenue) with four similarly sized businesses Fenner Drives is the exemplary business here, achieving profitable growth both organically and through acquisition over the last 30 years Mandals, a recent acquisition, is growing fast and we are doubling plant capacity Fenner Precision and James Dawson are also part of Precision Polymers Fenner PLC AEP Capital Markets Day June

3 Allen Cubell Work experience Sept Present Divisional Managing Director, Precision Polymers : Armstrong World Industries Americas Floor Products, Various executive level product management, general management and sales and marketing positions : RR Donnelley Various strategy, manufacturing, business development and general management roles Education : MBA, Harvard Business School : BSc, Industrial Management, Carnegie Mellon University Fenner PLC AEP Capital Markets Day June

4 Overview of Precision Polymers Fenner PLC AEP Capital Markets Day June

5 Precision Polymers is comprised of niche polymer based businesses Precision Polymers produces high value-added components, broadly classified as belts and hoses, for niche industrial markets. Hoses Belts Catalogue Bespoke Fenner PLC AEP Capital Markets Day June

6 Precision Polymers each business has a broad array of products for specialised applications Belts for Power Transmission Hoses for Hydraulic Fracturing, Agriculture, Emergency Belts for Printers, ATMs, etc. Hoses for Large Diesel Engines Fenner PLC AEP Capital Markets Day June

7 Precision Polymers revenue breakout Precision Polymers accounts for 38% of AEP revenue 6% 8% 11% 13% 62% Fenner Drives James Dawson AEP other Fenner Precision Mandals 2013 figures Fenner PLC AEP Capital Markets Day June

8 Precision Polymers revenue by market served and destination Revenue by market served Revenue by destination 2% 2% 1% 8% 15% 10% 34% 12% 36% 49% 13% 18% General Industrial Transportation Automation Construction Americas Asia Pacific EMEA Oil & Gas Agriculture Medical Mining Fluid Power Source: Fenner Analysis 2013 figures Source: Fenner Analysis. Fenner PLC AEP Capital Markets Day June

9 Precision Polymers examples of our blue chip customers OEMs Distributors Fenner PLC AEP Capital Markets Day June

10 Precision Polymers global locations Fenner PLC AEP Capital Markets Day June

11 Precision Polymers key characteristics of our businesses Highly autonomous, market focused Profitable niche segments with fragmented competition Products leverage expertise in reinforced polymers Strong go-to-market capabilities and value-added selling techniques Local manufacturing and distribution Cost competitive operations An entrepreneurial spirit Fenner PLC AEP Capital Markets Day June

12 case study The original AEP business still growing Fenner PLC AEP Capital Markets Day June

13 overview Fenner Drives is a worldwide leader in the design and manufacture of value-added, problem solving products for power transmission, motion transfer and light-weight conveying applications. Eagle Orange 85 Round conveying teracotta roof tiles SuperTLink Wedge V-belt on airport baggage conveyor Fenner PLC AEP Capital Markets Day June

14 principal product lines Link belts Keyless Locking Devices Polyurethane Belts Pulleys & Idlers HVAC Conveying Material Handling Commercial Marine Agriculture Pulp and Paper Conveying Applications Forestry Steel Mills HVAC Food Industry Ceramics Packaging Conveyor Applications Wood Processing HVAC Fitness Equipment Paper Processing Packaging Agriculture Fenner PLC AEP Capital Markets Day June

15 7% p.a. CAGR over 30 years 35 Fenner Drives Revenue Acquisition B-LOC Acquisition Efson 2002 Acquisition Eagle Belting m Acquisition Manheim Mfg & Belting 1989 Acquisition BTL Financial year ended 31 August Fenner PLC AEP Capital Markets Day June

16 historically a North American business Revenue by product category Revenue by destination 3% 14% 83% Link Belts Keyless Locking Devices Polyurethane Belts Pulleys & Idlers Americas Asia Pacific EMEA 2013 figures Fenner PLC AEP Capital Markets Day June

17 competitive overview 100% Link Belts Keyless Locking Devices Polyurethane Belts Pulleys & Idlers Niche businesses: Profitable segments % Share Build-Up 90% 80% 70% 60% 50% 40% 30% 20% 10% F e n n e r D r I v e s All Other Fenner Drives All All Other Other Fenner Drives Bar width reflects relative size of market. Not to scale. F e n n e r D r I v e s Performance, service and quality matter most Nature of competition: #1 or #2 in each segment Different competitors in each product category Go-to-market strategies: Direct to OEMs Rep agencies (US) Consumer sales through fennerdrives.com Source: Fenner Analysis. Fenner PLC AEP Capital Markets Day June

18 PowerTwist Plus V-Belts Selling Value Polyester reinforced urethane alternative to commodity rubber V-belt Priced at 3-10x a rubber V-belt Fenner PLC AEP Capital Markets Day June

19 benefits of PowerTwist Plus Faster to Install Reduced Vibration Higher Temp. Tolerance Longer Belt Life Better resistance to hostile environments including: oil, grease, water, most common industrial and agricultural chemicals and solvents Higher resistance to abrasion Reduced Inventory Fenner PLC AEP Capital Markets Day June

20 PowerTwist Plus saves money Example of marketing literature Fenner PLC AEP Capital Markets Day June

21 continued incremental expansion Fenner Drives will grow organically through: Continued economic recovery, growth in industrial production Accelerated new product introductions Selected international expansion Further penetration in North America Fenner Drives will grow through acquisition: Adjacent product categories Further penetration into existing segments Fenner PLC AEP Capital Markets Day June

22 Precision Polymers other current developments Fenner PLC AEP Capital Markets Day June

23 a world leader in lay flat hose Hydraulic Fracturing Agriculture Emergency Mandals: key summary Manufacturing Based in Mandal, Norway since 1775 The world leader in premium extruded through-theweave lay-flat hoses Focused on higher-end rubber and TPU hoses Both a hose producer and loom manufacturer Acquired by Fenner in September 2012 for 7.0m (net) Fenner PLC AEP Capital Markets Day June

24 hydraulic fracturing opportunity Hydraulic Fracturing April 2014: Completed 7.4m capital expansion Expect payback on acquisition and expansion within 2 years F Lay-flat Hose For Frac Water Transfer Annual Demand Estimate By Probability (miles) 4,500 4,000 3,500 3,000 Hose 2,500 Demand 2,000 (miles) 1,500 1, F Year Note: 1. Based on known / estimated existing capacity and announced capacity additions for lay-flat hose suitable for frac water transfer at 8 major Western Hemisphere manufacturers 2. Based on known / estimated existing capacity and announced capacity additions for TPU layflat hose suitable for frac water transfer at 5 major Western Hemisphere manufacturers Source: IAMCO analysis 5% 20% 40% 60% 80% 95% 2014F Maximum Industry Capacity (TPU & Rubber): 2,815 miles F Maximum Industry Capacity (TPU Only): 1,755 miles 2 Key X% Probability that demand will exceed this level Fenner PLC AEP Capital Markets Day June

25 NinjaFlex an example of our entrepreneurial spirit The cutting-edge flexible filament for 3D printers. Launched mid-october 2013 Sales predominantly direct to consumers through fennerdrives.com Very rapid growth to date but remains relatively small Fenner PLC AEP Capital Markets Day June

26 NinjaFlex flexible filament for 3D printers Fenner PLC AEP Capital Markets Day June

27 Growth priorities Fenner PLC AEP Capital Markets Day June

28 Precision Polymers growth priorities Organic growth prospects: High Mandals Fenner Drives: New products and international expansion, 3D printing Forecast Growth Estimates J Dawson Precision Drives Mandals: Water hose for hydraulic fracturing Fenner Precision: Infrastructure and technical textiles James Dawson: Higher temperature hoses, geographic expansion Acquisition opportunities: 0% Fenner Drives: Bolt-on product lines 0% ROGCE High Mandals: High quality industrial hose companies Size of Bubble is Fiscal 2013 Sales ( m) Colour represents Divisional sentiment. Niche polymer companies Fenner PLC AEP Capital Markets Day June