Capital Market Day on October 20, Introduction Detlef Borghardt

Transcription

1 Capital Market Day on October 20, 2011 Introduction Detlef Borghardt

2 Products Components and Systems for Trucks and Trailer Fifth Wheel Wheel End Kingpin Syspension Landing Legs Axle System 16 production sites, 34 subsidiaries, employees, service points 2 SAF-HOLLAND

3 Customers and Business Units Well known Truck and Trailer OEMs, fleets, spare part dealers, workshops 3 business units: Trailer Systems, Powered Vehicle Systems, Aftermarket 3 SAF-HOLLAND

4 SAF-HOLLAND worldwide Canada Woodstock Norwich Germany Keilberg Wörth am Main Frauengrund Singen USA Holland OAC Muskegon Warrenton South Warrenton North Wylie Dumas China Xiamen Brazil Jaguariuna India Madras HOLLAND (India) Pvt. Ltd. Australia Melton 4 SAF-HOLLAND

5 Economic growth is forecasted at c. 2% p.a. in Europe and North America, c. 5% p.a. in Brazil and Russia and c. 9% in India and China Real annual GDP growth by country/ region ( ) Underlying market analysis Macro drivers Country/ region CAGR% ( ) Europe* (4.2) % North** America (2.6) % Brazil (0.7) % Russia (7.9) % 1.7% 1.1% 1.5% 1.7% 1.9% 1.9% 1.6% 0.8% 2.8% 2.6% 2.2% 2.4% 2.5% 2.4% 2.4% 2.5% 7.6% 4.6% 5.1% 4.6% 4.0% 4.1% 4.5% 3.8% 3.6% 4.7% 5.1% 5.0% 4.2% 3.8% 4.6% 4.5% India 6.8% 8.8% 8.2% 9.0% 8.8% 8.4% 8.0% 8.5% 7.8% China 9.1% 10.1% 9.2% 9.1% 8.8% 8.7% 8.6% 8.9% 9.2% Historical Forecast Note: * EU27; ** US and Canada Source: Economist Intelligence Unit (EIU); Oxford Economic Forecast (OEF); L.E.K. analysis, economy watch 5 SAF-HOLLAND

6 The highest modal share of national road freight transportation is found in the US and Europe Inland freight transport by transportation mode (2009) Percent (based on tonne kilometres) 100 Underlying market analysis Macro drivers 80 Other Road 20 0 US* Europe Brazil Russia India China** Note: * Percentage split based on value terms; ** Percentage split based on transport-tonnes Source: US Department of Transportation; Eurostat; Ministério dos Transportes; Chinese Statistical Summary; OECD; L.E.K. research 6 SAF-HOLLAND

7 Road transport volumes in the NAFTA region and Europe are forecasted to show moderate growth going forward after a slight decline in 2009 Development of road transport volumes in Europe and North America ( ) Underlying market analysis Macro drivers Trillions of tonne km 3.0 Historical Forecast CAGR% (07-10) (10-14) 2.5 NAFTA* Europe Note: * Includes US and MX Source: BMI; L.E.K. research and interviews 7 SAF-HOLLAND

8 After a slight decrease in road based transport volumes in 2009, China is expected to show the strongest growth in road freight by 2014 Development of road-based transport volumes in BRIC countries ( ) Underlying market analysis Macro drivers Trillions of tonne km 3 Historical Forecast CAGR% ( ) (10-14) 2 China India Brazil Russia Source: BMI; L.E.K. research and interviews 8 SAF-HOLLAND

9 Axles with disk brakes are expected to grow stronger than axles with drum brakes albeit remaining primarily a European market Market for trailer axles with disc brakes by country/ region ( ) Market for trailer axles with drum brakes by country/ region ( ) Millions of units 2.5 Historical Market-based forecast CAGR% (10-15) Millions of units 2.5 Historical Market-based forecast CAGR% (10-15) Total 15 Total China China India Russia Brazil North America India Russia Brazil North America Europe 12 0 Europe Source: L.E.K. research, interviews and analysis 9 SAF-HOLLAND

10 SAF-HOLLAND product markets development Trailer systems With an expected growth rate of 13% p.a. between , the air suspensions market is forecasted to grow at a higher rate than the market for mechanical suspensions Market for trailer air suspensions by country/ region ( ) Market for trailer mechanical suspensions by country/ region ( ) Millions of units 2.0 Historical Market-based forecast CAGR% (10-15) Millions of units 2.0 Historical Market-based forecast CAGR% (10-15) Total 13 Total China India Russia Brazil North America Europe China India Russia Brazil North America Europe 9 Source: L.E.K. research, interviews and analysis 10 SAF-HOLLAND

11 Strong brands, a reputation for quality and technology expertise Brands representing superior product performance and aftermarket service Customer feedback on needs Push Sales OEM Pull Sales End Users Marketing of brand and products Majority of purchase decisions are specified by end users (e.g. Axle Systems approx. 80% of the purchasing decisions are specified by end user) End users choose SAF-HOLLAND because of Excellence in quality, design and manufacturing Superior quality and performance Leadership in technological innovation High standard of safety Lower total costs of ownership and higher efficiency to end user driven by leading technologies lightweight and highly durable components full product warranties outstanding service and supply of spare parts Source: based on L.E.K Consulting, February SAF-HOLLAND

12 Strategic focus Continue profitable growth Increase profitability GDP growth accompanied by significantly higher growth in the transport & logistics industry as main driver Pent-up demand will further positively impact growth for the next 2-3 years Maintain and increase market shares in North America (esp. axles and suspensions) Increasing installed base and A2 brands will support growth of stable aftermarket business Further regional diversification (entering incumbent-driven markets with regionspecific products) Benefit from regulatory environment, e.g. cutting of braking distances in the US Cost structure will benefit from economies of scale Market position and pricing power allow to pass on price increases especially in the trailer and aftermarket business (with a certain time delay) Keep overhead costs at optimised level Profitability supported by technological leadership and strong brand 12 SAF-HOLLAND

13 Targets and outlook Results 2010 vs. Targets 2010 Sales: EUR 631 mn vs. EUR mn Adjusted EBIT margin: 5.9% vs. 5.5%-5.8% Targets 2011 Sales: sales growth of up to 25% as compared to the prior year Earnings: expected to improve Mid-term targets Sales: EUR 1 bn Earnings: 10% adj. EBIT margin Net working capital: <10% of sales Capex: approx. 2% of sales 13 SAF-HOLLAND

14 Management Board Detlef Borghardt Wilfried Trepels Jack Gisinger Steffen Schewerda Alexander Geis CEO since 2011 Previously Mr. Borghardt was Head of the Trailer Systems Business Unit He joined in 2000, as Head of Sales, Services, and Marketing Before, Mr. Borghardt held various leader-ship positions with Alusuisse-Lonza CFO since 2005 Previously, he was a member of the management board of Dürr Systems and of Schenck Process In addition, he has worked for Dürkopp Adler as Director of Finance and Accounting Head of the Powered Vehicle Systems Business Unit and Head of Group Engineering since 2007 Mr. Gisinger joined the Group in 1980 and has held various engineering and management positions Head of the Trailer Systems Business Unit since 2011 and member of the management board since 2007 He joined the Group in 1997 Previously, Mr. Schewerda served as head of materials management, logistics, and production at the Group's facility in Keilberg Head of the Aftermarket Business Unit since 2009 and member of the management board since 2011 His career at SAF- HOLLAND started in At last he was Vice President Aftermarket and deputy member of the management board 14 SAF-HOLLAND

15 Turnarounder des Jahres SAF-HOLLAND

16 One thing is for certain: After a turnaround is before a turnaround! 16 SAF-HOLLAND

17 Capital Market Day on October 20, 2011 Trailer Systems Steffen Schewerda

18 Market Development 18 SAF-HOLLAND

19 GLOBAL Trailer Products The performance of the Trailer business highly depends on the axle and suspension sales. Regarding products for different regions, there is one common thing: We have wheels on both sides and a brake included that s basically it. These are the core products for the different core markets From a macro perspective the global Trailer market it is one market. From a product perspective it is a highly diversified market which requires different products for different applications all over the world. We as SAF-HOLLAND cannot leverage our products! We can only leverage our technology! (which is a major advantage compared to our competition) 19 SAF-HOLLAND

20 EUROPE SAF-HOLLAND s position in the European Trailer market is stable at around 37% market share The INTRADISC is a very successful premium product MERITOR pulled out of the market and leaves additional volume for the established manufacturers To grow further, SAF-HOLLAND needs to defend the existing market share and performan on highest levels to gain additional growth We see the following challenges in the near future The competition (esp. BPW) is making progress with their products in terms of weight New market players are appearing especially VALX (FUWA) is coming into the European market as a low cost challenger Competitor s image better than our s 20 SAF-HOLLAND

21 NORTH AMERICA In North America, the market share of Mechanical Suspensions is still pretty strong and much higher compared to Europe The Disc Brake market in North America, is still very small and developing only slowly DISC Air Mech. DRUM Europe Europe 21 SAF-HOLLAND

22 NORTH AMERICA Strategic approach: Concentrate on the systems approach. We need to offer the market fully integrated systems. A system means: Suspension, Axle, Brake and Wheel End. Some OEM s strictly refuse to take the Wheel Ends included. Our own axle production in North America is part of this strategy. In the meantime 80% of our suspensions are equipped with our axles (will be 100% in 2012) The Disc Brake (all segments) might change the structure, as we only sell intergrated systems (wheel ends included). Some competitors have another approach Concentrate on the Specialty segment. Sales is higher (some of the smaller and medium size OEM s ask for fully dressed systems) and the margins are higher, too Our suspension system portfolio in 2009 Very limited suspension system offering. We cannot even offer products to all market segments 22 SAF-HOLLAND

23 NORTH AMERICA Our suspension system portfolio in 2012 New suspension systems were introduced during the MATS in All tests positive Seed units are in the field. First prototypes are sold to customers Ramp up in Q Production ready in Q Broad suspension system offering. We can cover a big portion of the market now 23 SAF-HOLLAND

24 BRASIL Market size approximately 40,000 50,000 Trailers per year, 90% on Mechanical Suspensions SAF-HOLLAND market share very small - big opportunity to grow. Strategy in Brasil: Systems approach with premiuim products What we could offer to the market until now: What we will offer to the market from now on: Single axle only, no suspension Fully integrated Mechanical suspension system. 24 SAF-HOLLAND

25 CHINA Market size approximately 200,000 Trailers per year, 90% on Mechanical Suspensions. These suspensions are usually produced by the trailer OEM itself. SAF-HOLLAND market share very small - big opportunity to grow. Strategy: Give the market what the market requires first. In this case this means a robust 13to square axle. This axle is developed and selling activities are going on Systems approach with premiuim products to follow. However, we are already selling Air Suspension systems into the high end market segment 25 SAF-HOLLAND

26 Capital Market Day on October 20, 2011 Powered Vehicle Systems Jack Gisinger

27 Significant Events since 2006 Merger between SAF and Holland Housing crisis in the US Acquisition of GF VKT 20% ms in Europe Start of volume shipments for an extraordinary government Order in the US with $ 40 million sales per year 40% gross margin Financial crisis Government order Reduced per contract Expansion in new markets Brazil and China Launch of new suspension systems Dec 2006 Mid 2007 Aug Sep 2008 Jun /12 End SAF-HOLLAND

28 PVSBU Competitors and Customers Relevant fifth wheel suppliers Relevant Customers 1. > 50% ms in the US > 20% ms in Europe SAF-HOLLAND

29 PVSBU Competitors and Customers Relevant suspension suppliers Relevant Customers Captive Suppliers 29 SAF-HOLLAND

30 Heavy Truck Production Forecast Heavy* truck production by region ( ) Millions of units 3.0 Historical Market-based forecast Total heavy trucks CAGR% (10-15) Articulated trucks CAGR% (10-15) China is estimated to constitute 58% of heavy truck production of the regions under review in Share of articulated trucks (%)** Note: * >15 GWT; ** Articulated heavy trucks as share of heavy trucks Source: JD Power; L.E.K. research and analysis Total 5 8 China India Russia Brazil North America Europe Due to an expected stabilisation of Chinese production, the recovery of Western production and the expected rise of Indian heavy truck production, this share is expected to decline to 47% in 2015 The North American market is expected to continue to be the most volatile heavy truck market The share of articulated trucks has dropped in the crisis due to this market's general stronger cyclicality and its high share in the strongest declining North American market 30 SAF-HOLLAND

31 Heavy Truck Suspension Forecast Market for air suspensions by country/ region ( ) Market for mechanical suspensions by country/ region ( ) Millions of units 4.0 Historical Market-based forecast CAGR% (10-15) Millions of units 4.0 Historical Market-based forecast CAGR% (10-15) 3.5 Total Total China India China (2) Russia Brazil North America India Russia Brazil Europe North America Europe 8 Source: L.E.K. research and analysis 31 SAF-HOLLAND

32 Global Technology Trends and Priorities Weight Reduction Weight Reduction Industry Action SAF-HOLLAND Response Industry Action SAF-HOLLAND Response North American shift from slider to stationary Integrated stationary designs; direct mount slider; Demand for lightweight components ADZ next generation; FW16 Low Lube; FW32-14; Aerodynamics and Fuel Efficiency Industry Action SAF-HOLLAND Response Industry Action SAF-HOLLAND Response Industry Action SAF-HOLLAND Response Closing gap between tractor and trailer ACTIVE Fifth Wheel design, working with Navistar; Demand for lightweight components ADZ next generation; FW16 Low Lube; OEM SuperTrucks Peterbilt, DTNA, and Navistar cooperative projects; 32 SAF-HOLLAND

33 PVSBU Significant Events in 2011 Significant growth in North American and European Truck industry in 2011, more than 61.4% year over year growth in N.A. and over 29% in Europe Increase in fifth wheel market share both in North America and Europe to 52.4% and 23.8% respectively Recapture of Defense pintle hook business, due to adoption of an innovative and proprietary design feature. Release of the ADZ vocational suspension with additional revenue and added margin. Localized production of fifth wheels in Brazil through our Brazilian subsidiary Capture of a future fifth wheel specification for a major truck OEM s entry into the China and S.E. Asian markets Planned reductions in the Defense suspension area, due to military contract changes, were implemented earlier than expected but will be in line with forecasts by the close of the year and for the coming years. 33 SAF-HOLLAND

34 Increase Suspension Product Sales/Margin Actions Design and launch in 4 th quarter 2012 the initial Auxiliary Vocational Suspension Follow with subsequent models in 2013 and 2014 Re-design and launch in 4th quarter 2011 the mechanical lift Auxiliary Vocational Suspension 34 SAF-HOLLAND

35 Fabricated Fifth Wheel Develop low-cost fabricated fifth wheel Develop domestic Chinese 20t fifth wheel production with SOP 3rd quarter 2012 Develop ROW 20t fifth wheel Where to offer, how to position, price, etc. Develop 28t fifth wheel for domestic China market with SOP 3rd quarter 2012 Develop manual release slide bracket for UK and Scandinavia Develop sources for all components in China 35 SAF-HOLLAND

36 Ensure Adequate Raw Material Supply Evaluate and Qualify Alternative Casting Sources Secure a more diverse/balanced supply of FW castings PPAP Approved Colombian foundry on-line 3Q 2011 PPAP Approved China foundry with deliveries in June Investigate and qualify an alternate ductile iron casting source by 3rd Quarter 2012 Second suppliers for key components Dual source program key components Design parameters driving operations and procurement complexity 36 SAF-HOLLAND

37 Increase FW Market Share Actions North American and European OEM strategy to increase market share through aggressive marketing and dealer calling activities Increase fleet calling activities both in North America and Europe to improve specifications from the fleets In Brazil, implement a truck OEM initiative to promote our local production of fifth wheel and tag axle assemblies in combination with a new initiative at the fleet and dealer level. Establish local assembly operations for fifth wheels in South Africa and Middle East and implement increased fleet and dealer activities to promote In Australia increase dealer direct sales business through the newly established branch warehouses in all states. 37 SAF-HOLLAND

38 Lean Enterprise Project Actions Emphasize a fleet pull-through strategy, concentrating on up selling customers on added options for fifth wheel assemblies, such as air release, ELI, no/lo lube, etc. Initiative to continue to differentiate product pricing at the OEMs in LTA Agreements that protect specialty fifth wheel pricing and option pricing from price down formulas Outsource steel cast products at VKT Reinforce Lean concepts and activities at all PVSBU operations, including a renewed emphasis on back office activities 38 SAF-HOLLAND

39 ROW Strategy Mexico Develop a Business Plan for the establishment of a local FW assembly operation and Aftermarket warehouse in Mexico India Expand Powered Vehicle base in India with additional vocational suspension products for the Indian Truck OEM s, further entry into the Bus market with new products for low floor and ultra low floor applications and expand into the fifth wheel market with fabricated product from China Japan Localized assembly and production of fifth wheels in Japan by a partner Thailand Localized fifth wheel production to support initiative by a major truck OEM for the S.E. Asia region 39 SAF-HOLLAND

40 PVSBU Risks and Opportunities Risks Global economic crisis adversely effects the North American heavy duty truck market and limits the growth in 2012, that is forecasted to be between 11-18% higher than 2011 Raw material prices do not stabilize or go lower but increase at a rapid rate New vocational suspensions are resisted by the market resulting in a slower than predicted sales ramp-up Supply of critical raw materials, especially fifth wheel castings, is restricted by unknown market pressures on our suppliers ( similar to events in 2011) Opportunities Market acceptance of our new vocational suspension line is rapid and ahead of expectations Major OEM with a single source fifth wheel contract moves to an open databook where we have the opportunity to increase our market share significantly Vocational suspension and bus suspension opportunities materialize in Europe due to increased OEM, fleet and dealer activity Market for Specialty vehicles in North America rebounds in 2012 due to increased freight activity 40 SAF-HOLLAND

41 October 20 th, 2011 Aftermarket Alexander Geis

42 Capital Markets Day Aftermarket Business Unit Business Performance Aftermarket 42 SAF-HOLLAND

43 Capital Markets Day Aftermarket Business Unit SH Aftermarket Characteristics Large distribution network to achieve success Need to secure parts availability for a long period after series production has stopped to satisfy customer needs Partly dependent on OEM created field population Sub-suppliers of OEM have own Aftermarket sales and are positioned to be a competitor Independent Aftermarket offers private labels and grey parts Heterogeneous customer structure: dealers, workshops, fleets, exporters, 43 SAF-HOLLAND

44 Capital Markets Day Aftermarket Business Unit SH Aftermarket Strengths Business Unit with own sales force, warehousing, purchasing, logistics, etc. High flexibility, direct reporting lines and customer oriented set up Expansive service network more than service points world wide resulting in a good parts availability and high service quality Aftermarket co-operations with major European truck OEMs (Scania, Volvo, DAF, MAN, Mercedes, Iveco) Aftermarket co-operations with major North American truck OEMs (Daimler NA, Peterbilt, Kenworth, PACCAR, etc.) Multi-brand strategy for price sensitive markets: good better best product strategy Especially developed and adapted repair and maintenance solutions repair kits Strong local partners leading position in industry mandatory to become SH partner Sustainable margins due to own sales & service network, slim structure and proprietary products Global AM purchasing set up resulting in cost savings & margin increases/defends 44 SAF-HOLLAND

45 Capital Markets Day Aftermarket Business Unit Global SH Aftermarket Potentials Steadily increasing truck and trailer population with SH OE-products / good first fit market shares Local footprints in all major regions + expansion into unexplored regions Expanding product range, A2-set up, 3 rd party products Gain of market share from competitors, e.g. BPW AM / Knorr parts SH Aftermarket is very well positioned for the future in the global transportation industry 45 SAF-HOLLAND

46 Capital Markets Day Aftermarket Business Unit SH Aftermarket Targets Maintain steady growth Stabilize / defend or even increase margins Continue expansion strategy in collaboration with all other Business Units Continuous improvement of spare parts availability in emerging markets Defend market shares against grey parts and strengthen position as original parts supplier Optimization of global set up incl. logistics, purchasing and warehousing to further reduce costs SH Aftermarket targeting to achieve 30% share of group sales and defend 15 to 16% adj. EBIT margin 46 SAF-HOLLAND

47 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers ** ** SH Central PDC* **Planned 2012 * PDC = Parts Distribution Center 47 SAF-HOLLAND

48 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers Europe SH Central PDC* Subsidiaries / regional PDC* Representatives / regional PDC* * PDC = Parts Distribution Center 48 SAF-HOLLAND

49 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers North America SH Central PDC* Subsidiaries / regional PDC* Mexico planned 2012 * PDC = Parts Distribution Center 49 SAF-HOLLAND

50 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers Central / South America Mexico planned 2012 SH Central PDC* Subsidiaries / regional PDC* * PDC = Parts Distribution Center 50 SAF-HOLLAND

51 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers Warehouse Middle East SH Central PDC* * PDC = Parts Distribution Center 51 SAF-HOLLAND

52 Capital Markets Day Aftermarket Business Unit Global SH AM Parts Distribution Centers Warehouse Asia - Pacific Malaysia planned 2012 * PDC = Parts Distribution Center 52 SAF-HOLLAND SH Central PDC* Subsidiaries / regional PDC* Representatives / regional PDC*

53 Capital Market Day on October 20, 2011 Financing Wilfried Trepels, CFO

54 Actual Financing Creditline c. 230m (A1 + A2: 40.1m ; Revolving Credit facility B: 188.8m ; Sundry 0.6m ) Total liquidity (06/30/2011): 66.4m Factoring basket: 10.0m Repayments: c. 5.8m each in May and November (starting 2012) Excess cash flow: 50% of Free Cash Flow (on a quarterly basis) Interest base (EURIBOR/LIBOR): 2.6% Interest Margin: 4.0% (>3.50); 3.50% (> 2.75); 3.00% (>2.00); 2.50% (< 2.00) Commitment fee: 40% of the relevant margin for the available commitment under Faciity B Success fee: 2.6m p.a. Expiry date: 09/30/2014 Covenants: Net Debt/EBITDA EBITDA/Net Interest Equity Ratio 1) 12/31/ x 2.00 x 25% 03/31/ x 2.50 x 25% 06/30/ x 2.50 x 25% 09/30/ x 2.75 x 27.5% 12/31/ x 3.00 x 27.5% 03/31/ x 3.25 x 27.5% 06/30/ x 3.50 x 27.5% 09/30/2013 ff x 3.75 x 30.0% 1) Headroom 10%-points Solid and flexible financing of the group until September SAF-HOLLAND

55 Financing strategy How to manage the cyclicality of the industry Management strongly committed to low debt / leverage Stable and high margin aftermarket business grows and mitigates cyclicality Optimised cost structure and net working capital management are sustainable Solid liquidity position with sufficient headroom under the financing instruments Increase regional footprint (e.g. in BRIC countries) and diversify business (e.g. axles and suspensions in North America) Financial policy Significantly improved financial profile through capital increase Maintain solid equity ratio Further reduction of net debt Long-term safeguarding of liquidity 40-50% dividends from available net income depending on business environment (earliest 2013 for 2012) Increase diversification of funding sources Future Financing Bond transaction (c. 150m ) - Unrated & unsecured - Term (6) 7 years - Reasonable coupon - Covenants (cross default) Revolving credit facility (c. 90m ): - Unsecured - Term 5 years - Reasonable agreements on Interest margin Covenant set Acquisitions & dividends Both instruments to early (before June 30, 2012) refinance existing credit lines of c. 230m (due 09/2014) and reduce success fee significantly 55 SAF-HOLLAND

56 Flexibility & Sustainability 1 Increasing sales independent from market development (New) axle production in N/A and new full product range of suspensions increasing market share from 10% (resp. 16%) to 30% Increasing sales in BRIC countries from 10.0 m to 100 m (2014/2015) Increasing sales in A/M business due to optimized structure of sales channels, increasing product portfolio and regional expansion 2 A/M business stable increasing and remains in market down turns 3 4 Net working capital < 10% of sales and capex < 2% of sales Cost flexibility: c. 80% of COS are material costs (variable) Blue-collar worker 100% flexible in N/A and 25% in Europe (plus reduction of over time accounts of c hours) 5 Proven cost cutting record and (crisis-) experienced management team 6 Sufficient financial flexibility and widened covenant set 56 SAF-HOLLAND

57 Investor Relations: SAF-HOLLAND Group GmbH Barbara Zanzinger Hauptstraße Bessenbach Phone Telefax Mobile