Capital Markets Day

Report
Concentric AB
Ian Dugan/David Bessant
20 May 2011
Introductions
2

Ian Dugan – Chief Executive

David Bessant – Chief Financial Officer

David Woolley – Senior Vice President, Europe and India

Len Mason – Senior Vice President, Americas

David Williams – Group Technical Director (Engine Products)

Bill Pizzo – Vice President, Global Hydraulics Engineering
20 May 2011
Concentric AB - Agenda
A global leader in the design and manufacture of pumps
for diesel engines and hydraulic systems
3

Concentric – built on a solid foundation

A streamlined business

A focused strategy towards growth
20 May 2011
Concentric AB
4

Built on a solid foundation

A streamlined business

A focused strategy towards growth
20 May 2011
Concentric AB – Overview



Concentric AB is organized regionally

Two regions – Americas and Europe and ROW

Manufacturing occurs in the UK, India, China, Sweden, Germany and the US
close to customers

The company employs 1,156 people

Focus on four end markets – Truck, Agricultural machinery, Construction
equipment and Industrial applications
We make pumps for diesel engines, used for pumping lubricating oil,
coolants and diesel fuel

Concentric AB is the global market leader in engine pumps in the 0.8 - 2 litre
per cylinder niche

Largest customers are engine manufacturers and large truck manufacturers
which produce diesel engines for their own trucks and construction machinery
We make gear pumps for a broad range of hydraulic pump applications
Concentric AB is a market leader in niches such as fan drives and supplementary
power steering
 Largest customers are OEMs of a wide range of industrial vehicles, agricultural
machinery and construction equipment

5
20 May 2011
History
1921
Concentric founded in Birmingham, England
1929
JS Barnes Company founded in Rockford, USA
1948
Concentric makes first engine pump
1977
JS Barnes focuses on hydraulic pumps
Mid 1980s
Hesselman, Haldex and Garphyttan consolidates under the
name Haldex AB
1987
Haldex acquires JS Barnes
1991
Haldex acquires Reichert, a Vickers company
2002
Group of companies comprising Barnes, Vickers and Hesselman
is renamed Haldex Hydraulic Systems Division
April 2008
Haldex Hydraulic Systems Division acquires Concentric
Spring 2011 Haldex Hydraulic Systems Division is renamed Concentric AB to
prepare for demerger and listing on OMX NASDAQ
6
20 May 2011
End Markets
Source: 2010 Group sales

Diverse spread of platforms across
four end markets

Multiple growth opportunities
7
20 May 2011
Blue Chip – Customer Base
Top 10 Customers
Source: 2010 Group sales

Top 10 customers account for 64% - reflects engine products customer concentration

Other customers account for 36% - reflects diverse base in hydraulics products (700+)
8
20 May 2011
Extensive Product Portfolio
We offer best in class technologies, focused on fuel economy, emissions
reduction and noise management, with the major products including:




Oil pumps, fixed and variable displacement, mechanical or electronic control
Water pumps, fixed and variable control with future stretch for electrification
Fuel transfer pumps, mechanical with electrification options
Hydraulic pumps and motors featuring low noise, low speed and high power density
Key new products include:



Alfdex oil mist separators
Hydraulic Hybrid drive systems offering 40-50% fuel savings and engine downsizing options
Varivent EGR pumps to provide greater mass of re-circulated exhaust gas, reducing emissions
Alfdex:
Oil mist separator
9
20 May 2011
Variable Flow
Coolant Pump
Variable Flow
Oil Pump
Hydraulic Hybrid
Drive System
Global Infrastructure
Birmingham, UK
Itasca, Illinois
Landskrona, Sweden
Manufacturing
Headquarters
Manufacturing & Distribution
Skånes Fagerhult, Sweden
Manufacturing & Distribution
Manufacturing
Suzhou, China
Manufacturing
Rockford, Illinois USA
Manufacturing
Hof, Germany
Manufacturing
Pune, India
Manufacturing
10 20 May 2011
Global Manufacturing
Hof, Germany
Birmingham, UK
Itasca, USA
Skånes Fagerhult, Sweden
Pune, India
Suzhou, China
Production Sites
11 20 May 2011
Rockford, USA
Landskrona, Sweden
A Solid Financial Position
(Key Metrics)
Q1 2011
2010
SEK 554m
SEK 1,977m

Sales

Sales growth 1)
11%
53%

Material % of sales
52%
49%

EBITDA margin
15.1%
12.7%

Operating income
SEK 66m
SEK 151m

Operating margin 2)
11.9%
7.6%

Operating free cash flow
SEK 44m
SEK 272m

Working capital as % of sales
0.4%
0.3%

ROCE 2)
16.5%
12.1%

Debt/equity ratio
39.0%
41.5%
1)
Like-for-like sales growth, constant currency
2)
Before items affecting comparability (demerger costs, restructuring expenses and capital losses)
3)
Pro forma financial information
12 20 May 2011
2)
3)
3)
Q1 2011 Comments
Sales development
Constant currency
11.5% above Q4 2010
Profit development
11.9% EBIT vs
10.2% in Q4
Cash flow
development
SEK 44m Free
cash flow
13 20 May 2011
- Material price pressure
- Double corporate costs (SEK 3m)
- Listing advisor costs (SEK 5m)
- Drag-through benefit of restructuring
- Supply constraints
- Currency
- Growth pressure on accounts receivable
- CAPEX to fund growth
Concentric AB

Built on a solid foundation

A streamlined business

A focused strategy towards growth
14 20 May 2011
Strongly impacted by the
downturn...

In Q1 2009 sales fell by 31% versus Q1 2008

Reaching a low point in Q3, 2009 where sales fell 46% year-on-year

Throughout this difficult period, robust management action ensured that
the business remained consistently cash generative

In 2009, the business generated SEK 64m of operating free cash flow
despite the fall in sales
15 20 May 2011
... but decisive actions
have been taken

Blue Collar staff and variable overheads were flexed in line with sales

Reduced headcount from 2,662 employees in April 2008 to 1,156
employees by the end of 2010

Protected key staff and know-how, to secure growth post the Recession

Material escalator pass through agreements, were driven through the
customer base

Won opportunistic new contracts from competitor distress

Removed surplus and non value adding capacity

Sold majority interest in operation in Qingzhou, China and closed a
manufacturing plant in Statesville, USA
16 20 May 2011
Lean Operational Structure

Decentralized organization - all sites profit and cash accountable

Supported by best practice, in design and manufacturing
Ian Dugan
Finance, IR & IT
David Bessant
HR
Melissa Dunn
Engineering
David Williams/Bill Pizzo
Strategy
Brian Nelson
Americas
Len Mason
Europe
David Woolley
China
Kevin Johanson
Alfdex JV
Mats Ekeroth
Suzhou
Landskrona
Rockford
Itasca
USA
USA
17 20 May 2011
Birmingham
UK
Hof
Germany
Skanes
Sweden
Pune
India
China
Sweden
Concentric AB

Built on a solid foundation

A streamlined business

A focused strategy towards growth
18 20 May 2011
Vision - Leading the Way
Mission
Concentric AB is a global company specialising in fluid dynamics and fluid power
technologies that provide better fuel economy, emissions reduction, vehicle
control and productivity in trucks, buses and agricultural and other off-road
vehicles
We are a global leader specialising in engines and hydraulics, delivering custom
solutions in application niches where we add value to the customer’s products
Vision
To remain the industry global leader providing innovative energy saving technology
via a global manufacturing footprint adjacent to our customer
Technology + Innovation = Sustainability
Strong sense of ethics
Values
Respect for the individual
Elimination of waste
19 20 May 2011
Market Drivers
Positive Underlying Growth
Environment and Regulation
Emission limit, Regulation
Concentric pursues a strategy of
continuous product development to
enable our customers to meet and exceed
increasingly stringent environmental
requirements. The company is a world
leader in this area and offers a portfolio
of competitive products that contribute to
more efficient emission control, superior
fuel economy and noise reduction
Global infrastructure growth
Continued infrastructure growth,
particularly in developing economies will
continue to stimulate long-term growth
for the Company’s products used in
transportation, mining, construction,
agriculture and power generation
sectors, above GDP growth
Forecasted Real GDP growth (% change, year on year)
Country/
region
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Brazil
3.2
4
6.1
5.2
-0.6
7.5
4.5
4.1
4.1
4.2
4.2
China
11.3
12.7
14.2
9.6
9.2
10.3
9.6
9.5
9.5
9.5
9.5
Euro area
1.7
3.1
2.9
0.4
-4.1
1.7
1.6
1.8
1.8
1.9
1.8
India
9.2
9.7
9.9
6.2
6.8
10.4
8.2
7.8
8.2
8.1
8.1
Japan
1.9
2
2.4
-1.2
-6.3
3.9
1.4
2.1
1.7
1.5
1.3
Unites States
3.1
2.7
1.9
0
-2.6
2.8
2.8
2.9
2.7
2.7
2.7
Source: International Monetary Fund, World Economic Outlook Database, April 2011
20 20 May 2011
A Focused Strategy
Market leading positions in both diesel engine and hydraulic pumps,
enables Concentric to take full advantage of strong underlying market
growth and to leverage its technology to meet increasingly stringent
environmental demands
 Maintain
 a diverse spread of end-markets and geographic activity to reduce
economic and legislative cyclicality of revenues
 a competitive cost structure and maximize operational leverage to
drive profit and cash conversion
 a leading position in the premium hydraulic pumps segment in both
North America and Europe
 Use the existing infrastructure to expand the scope for specialist hydraulic
gear pumps in India, China and Brazil
 Actively explore complimentary bolt on acquisitions

21 20 May 2011
Financial Targets
Targets (over a business cycle)
Comments
7% CAGR
Calculated on a constant currency basis
and driven by new emissions legislation and
global infrastructure growth
Operating income
(EBIT)
11% EBIT
margins
Calculated on a constant currency basis
and driven by a lean manufacturing
operation supported by global sourcing
and cost effective design
Capital structure
Debt/equity
ratio < 1.0
Organic Growth
Dividend
22 20 May 2011
1/3 of net
income
2011 Outlook Comment

Applied to Concentric’s business mix, underlying market statistics
currently indicate around 11 percent growth in constant currencies
for the full year 2011 versus the full year 2010
23 20 May 2011
Summary – Well Positioned
for Growth
Built on a solid
foundation
A clear history of delivering profit and cash through
the business cycle
Streamlined
during the
financial crisis
Experienced management, decisive and quick to act
Maintaining lean structures to maximise drop-through
as volumes recover
A focused strategy
towards growth
24 20 May 2011
- Products, people, resources, markets and customers,
all developed and moving forward
- Clear and transparent drivers of growth, strong
history of successful execution
Appendix
25
20 May2011
Appendix
Financial Performance
Key figures
2011
2010
2010
2009
SEK m
Q1
Q4
Full year
Full year
Net sales
554
520
1,977
1,406
EBITDA
84
73
252
28
66
53
151
-79
Operating free cash flow
44
125
272
64
Working capital
8
6
6
50
1,077
1,132
1,132
1,363
282
312
312
510
1)
Operating income
2)
Capital employed
Net debt
1)
2)
2)
1) Before items affecting comparability (demerger costs, restructuring expenses
and capital losses)
2) Pro forma financial information
26 20 May 2011
Appendix
Financial Performance
Key metrics
Sales Growth
2)
Operating margin
ROCE
2010
2010
2009
Q1
Q4
Full year
Full year
11.5%
1)
EBITDA margin
2011
2)
2)
Working capital as % of sales
Debt/equity ratio
3)
3)
53.0%
15.1%
14.0%
12.7%
2.0%
11.9%
10.2%
7.6%
(5.6)%
16.5%
12.1%
12.1%
(4.4)%
0.4%
0.3%
0.3%
0.6%
39.0%
41.5%
41.5%
67.5%
1) Like-for-like sales growth, constant currency
2) Before items affecting comparability (demerger costs, restructuring expenses and capital
losses)
3) Pro forma financial information
27 20 May 2011
Any Questions
28
20 May2011

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