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Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO
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Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

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Page 1: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Investor Presentation Q1 2016

Interim Statement

PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO

Page 2: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

• In North America truck production declined especially in heavy-duty trucks

• Truck demand in Europe continued to recover while Brazilian market is in recession. In China truck demand began cautious growth

Q1 2016 Highlights

PKC Investor Presentation Q1 2016

Business Environment

PKC’s Operations

PKC’s Financial Performance

• European manufacturing footprint improvement and program transfers continue

• In China, the JV’s quality and productivity are increasing

• EBITDA improved

• Electronics classified as discontinued operations

Page 3: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

North America Market

PKC Investor Presentation Q1 2016

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014

Production units

-27%-3%

+14%

-3%

EPA 2014 1st stage

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Heavy Duty Trucks Medium Duty Trucks

+9%

+5%

Source: LMC Automotive forecasting Q1/2016, ACT Build History April 2016, PKC Group

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2011 2012 2013 2014 2015 2016 2017 2018

Light Vehicle (Pick-up and SUV)

+2%+7%

60%

40%32%

68%

Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2016

Production units

Production units

-11%

-7%

EPA 2014 2st stage

Page 4: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

EU27 + EFTA Market

PKC Investor Presentation Q1 2016

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014

Production units

+9%

+0%

+14%

-3%

EURO 6

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Heavy Duty Trucks Medium Duty Trucks

+13%

+14%

Source: LMC Automotive forecasting Q1/2016, PKC Group

42%

58%

23%

77%

Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2016

Production units

-5%

-9%

Page 5: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Brazil Market

PKC Investor Presentation Q1 2016

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014

Production units

+2%

-29%

+14%

-3%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Heavy Duty Trucks Medium Duty Trucks

-53%

-32%

Source: LMC Automotive forecasting Q1/2016, PKC Group

30%

70%

2%

98%

Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2016

Production units

+10%

-30%

PKC estimates production volume to continue to decrease

Page 6: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

China Market

PKC Investor Presentation Q1 2016

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2011 2012 2013 2014 2015 2016 2017 2018

Heavy Duty Trucks Medium Duty TrucksSource: LMC Automotive forecasting Q4/2014

Production units

+5%

+6%

+14%

-3%

0

50,000

100,000

150,000

200,000

250,000

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Heavy Duty Trucks Medium Duty Trucks

-28%

-18%

Source: LMC Automotive forecasting Q1/2016, PKC Group

9%

91%

0%

100%

Heavy Duty Trucks Medium Duty Trucks

Market Share 1-3/2016

Production units

+9%

-8%

EURO 4 EURO 4

Page 7: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Revenue from Continuing Operations

PKC Investor Presentation Q1 2016

12 9 9 6 7

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

South America

1 1 4 14 100

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

APACEUR million EUR million

54 5864

77 76

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

EuropeEUR million

138 142136

123 120

0

25

50

75

100

125

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

North AmericaEUR million

Page 8: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Headcount, Average in Continuing Operations

PKC Investor Presentation Q1 2016

12,306 12,713 12,304 12,18611,281

0

2,500

5,000

7,500

10,000

12,500

15,000

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

North America

5,248 5,466

7,501 7,607 7,829

0

2,500

5,000

7,500

10,000

12,500

15,000

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Europe

2,213 1,736 1,553 1,301 1,284

0

2,500

5,000

7,500

10,000

12,500

15,000

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

South America

69 64 294 786 8730

2,500

5,000

7,500

10,000

12,500

15,000

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

APAC

Page 9: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

• North American heavy-duty and medium-duty truck production is estimated to decrease by 17% compared to previous year’s level

• European heavy-duty and medium-duty truck production is estimated to increase by 7% compared to previous year’s level

• Brazilian heavy-duty and medium-duty truck production is expected to continue to decrease

• Chinese heavy-duty and medium-duty truck production is expected to grow by about 5% compared to previous year’s level

• The demand for the rolling stock is expected to continue to grow steadily

Market Outlook – Full Year 2016

PKC Investor Presentation Q1 2016

Page 10: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

• PKC Group estimates that with prevailing exchange rates 2016 revenue from continuing operations (i.e. excluding Electronics business) will be at or above previous year level and comparable EBITDA from continuing operations will be higher than previous year level.

• Outlook includes higher than average uncertainty related to the North American heavy-duty truck production volumes during rest of the year

• In 2015, PKC’s revenue from continuing operations was EUR 847.3 million and comparable EBITDA from continuing operations was EUR 59.5 million

PKC Group’s Outlook

PKC Investor Presentation Q1 2016

Page 11: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

• Revenue from continuing operations increased +3%

– Revenue in North America declined due to lower truck production volumes, especially heavy-duty trucks

– European truck revenue grew

– Increased production in China and in the rolling stock segment

• Comparable EBITDA from continuing operations continued to improve

– Better productivity and production arrangements in Europe improved EBITDA

– EBITDA in North America declined owing to lower volumes, weakened utilization rates and unfavourableproduct mix

– The recent transactions in Poland and China contributed to EBITDA

Revenue and EBITDA, Q1 2016

PKC Investor Presentation Q1 2016

205.9209.4

212.2

220.0

212.7

170

180

190

200

210

220

230

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Revenue

EUR million

13.9 15.0 15.2 15.4 15.8

6.8 7.2 7.2 7.0 7.4

-4

-2

0

2

4

6

8

10

-10

-5

0

5

10

15

20

25

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Comparable EBITDA Comparable EBITDA, % of revenue

EUR million %

Page 12: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Key Figures

PKC Investor Presentation Q1 2016

EUR million

(from continuing operations unless

otherwise noted)

1-3/16 1-3/15 Change

%

1-12/15

Revenue 212.7 205.9 +3.3 847.3

EBITDA1)15.8 13.9 +13.8 59.5

EBITDA%1)7.4 6.8 7.0

Items affecting comparability - -0.6 -8.8

Operating profit 7.9 6.2 +29.6 20.2

EPS (EUR) 0.13 0.11 +18.7 0.23

Net cash from operating activities2) -34.0 -29.7 14.8

Working capital2)3) 122.4 103.5 92.7

ROCE, % 2)4) 9.7 9.8 9.9

Gearing, % 2) 56.4 8.8 31.4

Average headcount 21,294 19,854 +7.2 20,8551) Excluding items affecting comparability2) Comparison periods include assets and liabilities of discontinued operations3) Inventories + trade receivables - trade payables4) ROCE, % = Adjusted operating profit (excl. items affecting comparability) / ((Total equity + interest-bearing liabilities)(average))

Page 13: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Cash Flow

PKC Investor Presentation Q1 2016

41.0

14.8

-20.3

-15.7

20.7

-0.9

0.0

-22.5

20.7

-23.4

-30

-20

-10

0

10

20

30

40

50

2014 2015

Cash from operations Net capex (organic)

Cash after net capex Acquisitions

Free cash flow

EUR million EUR million

-29.7

-34.0

4.5

-13.6

53.6

-40

-30

-20

-10

0

10

20

30

40

50

60

2015 2016

Q1 Q2 Q3 Q4

Cash from operations

EUR million

Q1 2016 from continuing operations

Page 14: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Balance Sheet and Return

PKC Investor Presentation Q1 2016

29.0

35.8

29.7

0

5

10

15

20

25

30

35

40

2015 Q1/15 Q1/16

Equity ratio, %*

31.4

8.8

56.4

-10

0

10

20

30

40

50

60

70

80

90

100

2015 Q1/15 Q1/16

Gearing, %*

49.4

88.7

59.5 61.4

0

10

20

30

40

50

60

70

80

90

100

2015 Q1/16

Net debt* EBITDA**

9.9 9.8 9.7

0

2

4

6

8

10

12

14

16

18

20

2015 Q1/15 Q1/16

ROCE, %*

%

EUR million %

%

* EBITDA of previous 12 months excl. items affecting comparability ROCE % = Adjusted operating profit (excl. items affecting comparability) /

((Total equity + interest-bearing liabilities)(average))

** Comparison periods include assets and liabilities of discontinued operations

Page 15: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

PKC’s Strategy Captures Growth

Opportunities

PKC Investor Presentation Q1 2016

Page 16: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

PKC Investor Presentation Q1 2016

PKC’s existing addressable market amounts to about EUR 4 billion

• Trucks in North America, Europe and South America EUR 1.5 billion

• Construction equipment globally EUR 0.7 billion

• Agriculture equipment globally EUR 1.5 billion• Buses globally EUR 0.2 billion

New market opportunities equal to addressable market growth by about EUR 5 billion by 2018

• APAC truck wiring harnesses EUR 1 billion• Rolling stock control panels, power packs and

wiring harnesses globally EUR 2 billion• Aerospace wiring harnesses globally

EUR 2 billion

PKC Strategy 2018 – Doubling

the Addressable Market

1.5

1.5

0.7

0.2

Existing marketabout EUR 4 billion

Truck

Agriculture

Construction

Bus

1.0

2.0

2.0

New market opportunitiesabout EUR 5 billion

APAC Truck

Rolling stock

Aerospace

Page 17: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

PKC Investor Presentation Q1 2016

• Doubling the addressable market

• Improved manufacturing footprint and expansion of engineering services enable to maintain strong market position in western truck markets and to capture further growth opportunities

• Expansion into rolling stock market well received by the customers, working on to globalize commercial relationships with the main industry OEM’s

• 2nd Chinese PKC joint venture signed. PKC knowhow recognized by the market and further organic and inorganic opportunities identified and in progress

Strategy Execution Proceeding

Page 18: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

• PKC Group has signed an agreement to establish 50/50 joint venture (JV) with Anhui Jianghuai Automobile Co., Ltd (JAC) subsidiary Hefei Jianghuai Automobile Co., Ltd (Hefei JAC)

• JV will comprise the current wiring harness business of JAC group with aim to gradually insource currently outsourced harnesses

• PKC market share in both medium and heavy duty truck segments in China grows by 5%-points

• JV will expand PKC’s business to very sizable light truck segment as well to other commercial and light vehicle models

• The finalisation of the JV is subject to usual conditions including e.g. negotiating the related agreements and authority approvals

• The finalisation is targeted in the second half of year 2016, and the JV will be consolidated to PKC Group as of the date of starting the operations

PKC Group makes a major breakthrough in China

and establishes JV with JAC

PKC Investor Presentation Q1 2016

Page 19: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

PKC’s market position in world’s biggest truck

market will increase significantly

World’s medium and heavy truck production, ‘000 trucks

11985

417

568

663715

169 150

477514

787

930

0

250

500

750

1,000

East Europe,Middle Eastand Africa

SouthAmerica

West Europe North America Asia-Pacific,Exc. China

China

2015 2018

Source: LMC Automotive Q4 2015

Year 2015 Year 2018

Light trucks 3,977,734 4.032,019

Buses 164,299 186,257

China is also the world’s biggest light truck and bus market

PKC’s market share

development in China:

Currently:

• Heavy-duty 10%

• Medium duty 0%

After JV:

• Heavy-duty 15%

• Medium duty 5%

JV also expands PKC’s

presence in the world’s

biggest light truck and bus

market in China.

PKC Investor Presentation Q1 2016

Page 20: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

JAC is stock listed automotive group with

ambition to grow both in China and abroad

• Headquarters, R&D center and main factories in Hefei, Anhui province

• Produces close to 600,000 vehicles p.a. and 400,000 engines p.a.

• Target to gain more market share by meeting various end market requirements

• Product portfolio covers all commercial vehicle segments as well as light vehicle

models

• Annual revenue EUR 6.7 billion and employs 33,000 people

Beijing

HefeiShanghai

PKC Investor Presentation Q1 2016

Page 21: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

JV creates strong business basis and significant

growth opportunities to PKC (1/2)

JV to become the primary harness supplier to JAC

• JV is targeted to get minimum of 70% of JAC’s wiring harnesses

purchases over the next few years

• JAC’s current wiring harnesses buy appr. EUR 140 million p.a.

JAC continues to invest in its vehicle offering

• Tighter government regulation and higher customer demands in

China raise wiring harness content

• JAC will invest in improved quality and performance of its vehicles.

More features are added to vehicles and thus electrical system

becomes more complicated and critical.

JV’s business plan shows steady growth

• JAC and PKC have agreed on JV’s business plan for years 2016 -

2021

• According to business plan JV’s annual revenue will grow steadily

PKC Investor Presentation Q1 2016

Page 22: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

JV creates strong business basis and significant

growth opportunities to PKC (2/2)

JV expands PKC’s product offering to new segments in China

• Business is expanded to buses, light trucks, vans, pick –up trucks and various other light vehicles

Increased PKC brand recognition and foothold in China brings further business

opportunities

• PKC has excellent competitive position to expand its business in China to current customers and the

leading Asian and Chinese truck manufacturers through PKC’s unique expertise in managing

complexity

PKC Investor Presentation Q1 2016

Page 23: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

Transaction Highlights Summary

Transaction in brief

• The JV is accomplished via a new company that will be established with Hefei

JAC with an equity valuation of RMB 100 million / EUR 14 million*

• PKC holds 50% and Hefei JAC 50% of the equity

• PKC will contribute RMB 50 million / EUR 7 million cash

• Transaction is financed from PKC’s cash resources

• The JV contract contains specific terms regarding PKC’s right to consolidate

Impact to PKC

group’s financials

• The deal has no significant impact yet to PKC Group 2016 results

• The JV will be consolidated to PKC Group financials

Timetable

• The agreement was signed on 29 March 2016

• The finalisation of the JV is targeted in the second half of 2016

• The finalisation is subject to usual conditions including authority approvals

• Integration starts after the finalisation of the JV

* Latest RMB/EUR exchange rate

PKC Investor Presentation Q1 2016

Page 24: Investor Presentation Q1 2016 - PKC Group · Investor Presentation Q1 2016 Interim Statement PKC Investor Presentation Q1 2016 May 4, 2016 Matti Hyytiäinen, President & CEO • In

PKC Group Plc

Bulevardi 7

FI-00120 Helsinki, Finland

www.pkcgroup.comPKC Investor Presentation Q1 2016