Conference Call 2014 Final
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Transcript of Conference Call 2014 Final
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Bilanzpressekonferenz
zum Geschftsjahr 2014 Ausblick und Strategie
31. Mrz 2015
Analysts and Investors Conference
Fiscal Year 2014 Outlook and Strategy
March 31, 2015
1
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Organic sales growth (ex scope changes and at constant exchange rates) at 11.2% exceeds target range of 5-7% and tops car markets
growth of 3%
Full consolidation of EK Marusan Corporation adds EUR 23.1 mn in sales, (minor earnings contribution before ppa; 0.3% margin dilution)
Clean EBIT adjusted for one-offs and EUR 3.4 mn ppa increased to EUR 162.3 (149.8 mn) mn Clean EBIT margin 12.2%
E-Mobility clearly below original expectations: Due to sluggish demand for BEVs negative earnings contribution of EUR 8.1 mn (7.3 mn)
Brazilian subsidiary EUR 4 mn below budget due to market breakdown
Sixth consecutive year of dividend increase EUR 0.55 (0.50) per share
Financial Year 2014: Highlights
2
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13.2%
5.0%
3.6%
0.8%
0.1%
-13.0%
-14.7%
-20% -10% 0% 10% 20%
China
USA
W. Europe
Japan
India
Russia
Brazil
2014: Global car production driven by China, NAFTA and
European recovery Brazil and Russia down sharply
Car production 2014 (yoy change)
3
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2014: Effects from assumption of control of ElringKlinger
Marusan Corporation
in mn
FY 2013
(as originally
reported)
FY 2013
(as restated;
at equity)
FY 2014
(at 100%)
Sales 25.1 -- 46.2
2
EBIT 0.8 -- 1.3
One-off gain 17.6 17.6 --
PPA -- -- -2.2
Control of Marusan Corporation was assumed with effect from Dec. 31,
2013; due to retrospective application of IFRS 11, Marusan was
consolidated at equity in 2013 and fully consolidated in 2014
Margin dilution effect of 0.3 percentage points at Group level
Marusan sales in 2014 stable at constant exchange rates 4
-
475 528
608 6581
579
796
1,0332
1,127 1,1503
1,326
0
200
400
600
800
1,000
1,200
1,400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales revenues driven by long-term organic growth
mn
1 Incl. acquisitions of SEVEX (~ EUR 46mn sales) and Marusan (~EUR 14 mn sales)
2 Incl. acquisitions of flat gaskets business of Freudenberg (~ EUR 53 mn sales) and Hug Group (~ EUR 29 mn sales)
3 Marusan excluded with retrospective effect (~ EUR -25 mn sales) due to IFRS 11 5
-
70.9
87.6
114.9
60.0
49.4
94.0
113.91
126.6 131.32
153.1
0
30
60
90
120
150
180
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Earnings before taxes
mn
1 Excl. one-time gain of EUR 22.7 mn from sale of industrial park
2 Excl. one-time gain of EUR 17.6 mn resulting from the assumption of control of ElringKlinger Marusan Corporation 6
-
Group Sales by segment 2014 (py)
OE share up driven by structural growth and new products
Industrial Parks
0.3% (0.4%) Services
0.6% (0.7%)
OE
82.2% (80.5%)
Engineered Plastics
7.0% (8.0%)
Aftermarket
9.9% (10.4%)
7
-
OE segment by division 2014 (py)
Strong growth in Exhaust Abatement and Specialty Gaskets
Specialty Gaskets
19% (18%)
Exhaust
Abatement
7% (6%) Cylinder-Head Gaskets
17% (18%)
Shielding Technology
31% (32%)
E-Mobility
1% (1%)
Housing Modules
25% (25%)
8
-
Group Sales by region 2014 (py)
Recovery in W. Europe, Asia driven by EKMA consolidation
South America & Others 4.4% (5.7%)
Rest of Europe 32.7% (31.2%)
Germany
29.3% (31.4%)
Asia-Pacific 17.0% (14.3%) incl. exports: ~25% of OE sales
NAFTA 16.6% (17.4%) incl. exports: ~25% of OE sales
9
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Employees worldwide 54% outside Germany as of December 31, 2014 (py)
AG
2,488 (2,301)
Domestic subsidiaries
854 (754)
International
subsidiaries
3,913 (3,661)
Germany
3,342 (3,055)
+9.4%
Group
7,255 (6,716)
+8.0%
10
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One-off expenses affecting Q4 performance:
EUR 2.0 mn of inventory corrections and adjustments at ElringKlinger Korea related to plant relocation to the newly built site at Gumi
EUR 1.5 mn in warranty-related charges to settle insurance case from 2008 (allowance for receivables);
EUR 8.5 mn cash proceeds from insurance payments; no longer any
risks associated with this matter
EUR 1.4 mn one-time allocation to provisions due to amendments to Management Board contracts of service in respect of long-term variable
incentive components of compensation (LTI II) related to prior years
Financial Year 2014: One-offs
11
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FY 2014: Sales and EBIT (=operating result)
in mn
2014 2013
(restated)1
Change
in %
Sales 1,325.8 1,150.1 +15.3
Cost of Sales 967.4 824.5 +17.3
EBITDA 233.4 221.02 +5.6
EBIT
(operating result) 154.0 146.62 +5.0
Clean EBIT pre PPA 162.33 149.82,4 +8.3
1 Previous year's figures adjusted due to retroactive application of IFRS 11,
resulting from at equity consolidation of ElringKlinger Marusan Corporation in 2013
2 Excl. EUR 17.6 mn one-time gain from assumption of control of Marusan
3 Excl. EUR 2.0 mn of adjustments at ElringKlinger Korea, EUR 1.5 mn in warranty-related charges, EUR 1.4 mn
provisions for Mgt. Board compensation relating to prior periods, EUR 3.4 mn PPA
4 Excl. EUR 1.4 mn one-time gain ElringKlinger Korea, EUR 1.8 mn restruct. charge Nantiat, EUR 1.5 mn one-offs
Aftermarket, EUR 1.3 mn PPA 12
-
FY 2014 : Financial Result and Net Income
in mn
2014 2013
(restated) 1
Change
in %
Net finance cost -0.9 -15.3 +94.1
EBT 153.1 131.32 +16.6
Taxes 42.5 32.82 +29.6
Net income 110.6 98.52 +12.3
Profit attrib. to EK
shareholders 105.7 92.72 +14.0
EPS (in ) 1.67 1.462 +14.4
1 Previous year's figures adjusted due to retroactive application of IFRS 11,
resulting from at equity consolidation of ElringKlinger Marusan Corporation in 2013
2 Excl. EUR 17.6 mn one-time gain from assumption of control of Marusan 13
-
286.8 303.3
294.0 291.1
324.0 333.5 327.4
340.9
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4
2013
2014
Sales by quarter
1 Previous year's figures adjusted due to retroactive application of IFRS 11;
at equity treatment of ElringKlinger Marusan Corporation in 2013
281.01 296.11
287.51 285.51
mn
14
-
32.81
41.01 38.21
34.61,2
42.1 41.5 41.2
29.2
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4
2013
2014
EBIT by quarter (= operating result)
1 Previous year's figure adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan Corporation
2 excl. EUR 17.6 mn one-time gain
mn
15
-
33.7
41.2 40.1
34.81
43.0 42.3 42.1
34.9
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4
2013
2014
Clean EBIT pre PPA
1 Previous year's figure adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan Corporation
mn
16
-
925.91
1,089.7
233.91 282.2
0
200
400
600
800
1,000
1,200
FY 2013 FY 2014 Q4 2013 Q4 2014
+20.6%
Q4 2014: OE sales up 20.6 % driven by core
business, higher tooling sales, EKMA scope change
1 Previous year's figures adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan
Corporation (- EUR 25.1 mn in FY 2013; - EUR 5.6 mn in Q4 2013)
2 excl. EUR 17.6 mn one-time gain
mn FY EBIT +5.3%
111.2 (105.62)
+17.7%
17
-
119.3
130.7
26.4 33.4
0
30
60
90
120
150
FY 2013 FY 2014 Q4 2013 Q4 2014
+26.5%
Q4 2014: Aftermarket sales up by 26.5%
Strong performance in Eastern Europe
mn FY EBIT +11.6%
25.1 (22.5)
+9.6%
18
-
92.6 92.9
22.2 22.1
0
20
40
60
80
100
120
FY 2013 FY 2014 Q4 2013 Q4 2014
Q4 2014: Sales Engineered Plastics down 0.5%
mn FY EBIT -4.3%
15.4 (16.1)
+0.3%
-0.5%
19
-
Project-related and product-mix related business implies higher sales/earnings volatility over the quarters also in 2015
Hugs EBIT margin (21.2%) to remain above Group average
Disproportionately high comparison basis in Q1
2014: Exhaust Gas Purification division
Good yoy growth but H2 below H1 level
in mn Hug Group
Q1 Q2 Q3 Q4 FY
14
FY
13
Sales 20.7 19.5 17.1 13.8 71.1 57.6
EBIT 7.6 4.0 2.0 1.5 15.1 13.6
PPA 0.3 0.3 0.3 0.3 1.2 1.3
20
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EBIT bridge financial year 2014
154.0 3.4 2.0 1.5 1.4 162.3
4.0 5.0
EBITreported
PPA Inv. corr.,adj. EKKO
Chargeswarr. case
ProvisionsLTI II
Clean EBITpre ppa
EBIT dev.Brazil
Earningsdiff.
E-Mob
mn
21
-
126.2
74.5
112.3 119.0
149.9
0
40
80
120
160
200
2010 2011 2012 2013 2014
Net cash from operating activities up 26.0% in 2014
mn
22
-
Cash flow bridge 2014
62.9
149.9
52.9
-163.1
-32.8
-1.1 68.7
0
50
100
150
200
250
Cash atDec 31,
2013
Net cashfrom
operatingactivities
Investments Dividendspaid
Change infinancialliabilities
Others Cash atDec 31,
2014
mn
23
-
134.3
121.6 114.3
125.6
163.1
~110
82.2
96.8
79.4 74.4
79.2
0
40
80
120
160
200
2010 2011 2012 2013 2014 2015
Capex rate going forward expected at 7-9% of sales
mn
Investments in
property, plant and
equipment and
intangible assets
Deprecation and
amortization
24
ppe
-
41.1 40.9
22.4 22.1
58.9 59.1
27.2 28.2
50.4 49.7
Dec 31,2013
Dec 31,2014
Dec 31,2013
Dec 31,2014
Balance sheet structure as at December 31, 2014
Equity ratio remains solid
Non-current assets / liabilities
Current assets / liabilities
Shareholders equity
Assets
in %
Liabilities and
shareholders equity in %
25
-
0.15 0.20
0.35 0.401
0.45 0.50
0.55
0.00
0.20
0.40
0.60
0.80
1.00
2008 2009 2010 2011 2012 2013 2014
Consistent dividend policy
6th consecutive increase of regular dividend
1 Regular dividend
26
-
Cutting CO2: Legislation a long-term driver for structural
growth
95
prop. 75-65
~178
102
~160
112
0
40
80
120
160
200
2020 2025 2015 2025 2015 2025
EU US China
2011: 135.7 g/km 2010: 255.6 g/km 2008: 185 g/km
CO2 limit in g/km
Source: A.T. Kearney, VDA, EK research
27
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Its All About Emissions: Downsizing the combustion engine versus E-Mobility
Exhaust abatement
Downsizing/ Lightweight
E-Mobility
CORE
BUSINESS
HUG: EAT Division
New business areas
long-term potential
28
-
Improving efficiency in combustion engines
will clearly remain a key driver in the
foreseeable future
EK provides key technology enabling
engine for downsizing/ turbocharging
EK features a leading market position in
turbocharger gasketing
Projected market demand growth CAGR > 10%
Structural growth: Downsizing and Turbocharging
Inlet gasket
Outlet gasket
Heat shield
Light-weight
resonator
V-ring
Flap
29
-
Hug: Sustainable exhaust abatement off-road, on rail and
on water
Manifold applications: stationary engines, material handling, oil and mining, natural gas power plants
Driver: Stricter emission legislation for non-road applications
US DPF truck retrofit market still solid: Hug market share tops 30%
Significant sales potential with nauticlean systems (DPF/DeNOx/HC) for ships (IMO Tier 3)
Following promising tests, installation of first DPF system for bunker oil powered high sea ship engine
30
-
Growth with HFHT: New lightweight technology ramping
up in 2015
Unique process of combining lightweight
metal with plastics in cooperation with
premium OE
First products in high-growth area light-
weight body/chassis components (carriers)
Largest contract in company history
ramping up in 2015 (EUR 130 mn in total)
SOP in China and North America in HY1
and HY2 2015 respectively
Significant follow-up market potential,
licensing contract terms in negotiation
31
-
E-Mobility Update: Fuel Cell Technology and Battery
Components
Cell contact systems for fully battery electric
vehicles and plug-in hybrids
2014 below expectations: sales at EUR 11.0
(8.4) mn, EBIT EUR -8.0 (-7.2 m) due to
sluggish demand for EVs
For the time being low oil and fuel prices
burden competitive position of BEVs
Fuel-cell: Bipolar plates and fuel-cell stacks
SOFC auxiliary power units for trucks, ships, RVs, homes and stationary applications in
development (new enerday takeover adds
system expertise)
First contract for PEM fuel cell stacks for material handling equipment
32
-
EK expects overall worldwide LV production to grow by 2% in 2015
NAFTA: continued slight growth
China: slowing growth at record levels, car sales expected to grow approx. 7%
Western Europe: Ongoing modest recovery in Western Europe but still way below pre-crisis level (2007); German car market will expand only slightly
Mixed signals from BRI markets: Brazil: stabilization at low levels
Russia: another weak year ahead (-20 to -25%)
India: expected to continue recovery
Truck sales in Europe recovering (+5%) from low levels; US truck sales increasing moderately following double digit gains in 2014
Outlook car markets 2015: Another year of moderate
growth - divergence continues
33
-
Outperforming market growth by 4-5%
Strong structural growth across all divisions
Due to ongoing sluggish demand in BEV/ PHEV market and low fuel prices the E-Mobility division is not likely to see a fundamental improvement in
earnings performance (originally break-even target)
Brazil and Russia to remain at depressed levels
Positive earnings contribution from M&W acquisition but temporarily slight margin dilution
Currency tailwinds
Outlook 2015: The Group
34
-
Outlook 2015: Financial performance
in mn
FY 2014 Guidance FY 2015
Sales 1,325.8 5-7% organic growth
(plus 30 mn scope change M&W) 2
Clean EBIT
pre ppa 162.3 170-180
Investments1 147.0 approx. 110
ROCE 12.4% slight increase
Order intake up 10.5% at EUR 1,418.6 mn (up 8.3% excl. scope changes)
Order backlog up 15.6% at EUR 688.2 mn
Capex also dependent on euro exchange rate 35
1 in plant, (investment) property and equipment
-
Bilanzpressekonferenz
zum Geschftsjahr 2014 Ausblick und Strategie
31. Mrz 2015
36
-
Disclaimer Forward-looking Statements and Predictions
This presentation contains statements about the future. These statements are based on current
expectations, market evaluations and predictions by the Management Board, and on information
that is currently available to them. The statements about the future should not be interpreted as
guarantees of the future developments and results that they refer to. Whilst the Management
Board are convinced that the statements that have been made, and the convictions and
expectations on which they are based, are realistic, they rely on suppositions that may
conceivably prove to be incorrect; future results and developments are dependant on a
multitude of factors, they involve various risks and imponderabilities that can affect whether the
ongoing development deviates from the expectations that have been expressed. These factors
include, for example, changes to the general economic and business situation, variations of
exchange rates and interest rates, poor acceptance of new products and services, and changes
to business strategy.
37