CITI SMALL & MID CAP CONFERENCE 2010

Transcription

1 CITI SMALL & MID CAP CONFERENCE 2010 JACQUES ESCULIER Chairman & Chief Executive Officer November 16, 2010

2 FORWARD LOOKING STATEMENTS Comments in this document contain certain forward-looking statements, which are based on management s good faith expectations and beliefs concerning future developments. Actual results may differ materially from these expectations as a result of many factors. These factors include, but are not limited to, the risks and uncertainties described in the Risk Factors section and the Forward Looking Statements section of WABCO s Form 10-K, as well as in the Management s Discussion and Analysis of Financial Condition and Results of Operations - Information Concerning Forward Looking Statements section of WABCO s Form 10-Q Quarterly Reports. WABCO does not undertake any obligation to update such forward-looking statements. All market and industry data are based on Company estimates. This presentation contains certain non-gaap financial measures as that term is defined by the SEC. EBIT and sales excluding the effects of foreign exchange are non-gaap financial measures. Additionally, gross profit, gross profit margin, operating income, operating income margin, EBIT, EBIT margin, net income and net income per diluted share on a "performance basis" are non-gaap financial measures that exclude separation and streamlining items, the European Commission fine indemnification, one-time impact from the Indian joint venture transactions, and one-time and discrete tax items, as applicable. Free cash flow presents our net cash provided by operating activities less net purchases of property, plant, equipment and computer software. Free cash flow on a performance basis excludes net cash used for the European Commission fine indemnification, the impact from the company s asset securitization program and net payments for streamlining activities. These measures should be considered in addition to, not as a substitute for, GAAP measures. Management believes that presenting these non-gaap measures is useful to shareholders because it enhances their understanding of how management assesses the operating performance of the Company's business. Certain non-gaap measures may be used, in part, to determine incentive compensation for current employees. Reconciliations of the non-gaap financial measures to the most comparable GAAP measures are available in WABCO s quarterly results presentations posted on the company s website. 2

3 TECHNOLOGY LEADERSHIP WABCO is THE TECHNOLOGY LEADER in our industry. WABCO has brought to market the OVERWHELMING MAJORITY of the key innovations and technology breakthroughs in braking and control systems for the global commercial vehicle industry. For more than 30 years, WABCO has achieved the most number of INDUSTRY FIRSTS for trucks, buses and trailer systems. 3

4 INNOVATION TRACK RECORD WABCO COMPETITION Industry First (1) Innovation (2) Industry First (1) Innovation (2) 2009 ESCsmart Trailer OptiTurn, Trailer OptiLoad, EcoSmart 2008 OnGuardMax AEB High-output compressor, OptiDrive Modular AMT, New Generation IVTM Blind-spot detection? 2007 OnGuard CMS RSSPlus (US) Roll Mitigation, WW Modular Compressor 2006 Two-stage compressor 2004 Hydraulic Transmission Automation New Generation ADB, Air System Protector, Trailer SmartBoard 2003 Electronic Air Processing Unit IVTM 2001 ESC Adaptive Cruise Control 2000 RSS for trailers Mechatronic Gearbox controllers 1998 Trailer EBS 1996 EBS CAN data bus for inter-system communication All-wheel disc brake for heavy duty trucks 1995 All-wheel disc brake for medium duty trucks First mechatronic device, TCS trailer ABS for US 1993 Trailer Compact Lift axle valve 1990 ECAS for Cars, SUVs, Light CVs 1985 Pneumatic AMT, ECAS, ASR 1982 Electronic Climate Control, Electronic Door Control for buses 1981 ABS 1973 Dual-line air braking system (1) Industry First: technology which is introduced in the industry for the first time and is set up for mass production and broad market adoption (2) Innovation: significant technology advancement which is not new to the industry 4

5 PRODUCT PORTFOLIO Air Compressors 13% Anti-Lock Braking Systems 11% Air Processing 11% Car Products 4% Conventional Brake Controls 13% Transmission Automation, Clutch Control 11% Actuators 10% Electronic Braking and Stability Control Systems 9% Foundation Brakes 6% Others 6% Suspension Control 6% % 2009 Sales 5

6 TRUCK & BUS REGIONAL ATTRIBUTES Estimated content per vehicle $ based on total applicable market $K Typical heavy truck price in market NORTH AMERICA <$1,000 $80K Less advanced technology vs.western Europe Large OEMs: Daimler, Volvo, PACCAR, ITE Large fleets, able to influence OEM design SOUTH AMERICA <$1,500 $65K Less advanced technology mostly from Brazil Main OEMs: Daimler, VW, Volvo, Scania WESTERN EUROPE >$3,000 $130K Advanced technology, high electronics penetration 6 OEMs: Daimler, Volvo, MAN, Iveco, PACCAR, Scania Few large, pan European fleets JAPAN & KOREA <$1,000 $80K Technology moving towards Western Europe Main OEMs: Hyundai, Hino, Isuzu, ND Targeting global market EASTERN EUROPE <$500 $70K Expected to Return to Fast growing production in the Future Improving quality and safety Global and local OEMs: KamAZ, MAZ, CHINA & INDIA <$300 $30K Basic technology; advanced technology penetration under 10% of total market 3 large OEMs: FAW, DFM, CNHTC; TATA Motors, many small 6

7 COMPETITIVE OVERVIEW KNORR HALDEX LCC COMPETITORS Technical capabilities similar Challenger position to WABCO Lower electronics capabilities Strong low cost / low tech solutions No position in transmission compared to WABCO and KNORR Mainly mechanical capabilities automation or cars Strong automatic slack Targeting specific markets Strong position in North America adjuster business with specific product ranges following BENDIX acquisition Entering into special products for Low price strategy in Aftermarket Trailing in emerging markets diesel engines WABCO KNORR HALDEX LCC competitors (2009 Estimated Commercial Vehicle Sales) ($1.5B ) (~$1.7B ) (~$0.4B) (All Under ~$0.1B) Anti-lock Braking Systems Electronic Braking Systems Conventional Products Transmission Automation Air Compressors Air Processing Actuators Suspension Control Foundation Brakes Complete Offering Partial Offering Niche Offering sources: KNORR-BREMSE website, HALDEX website 7

8 WABCO VISION & CORE STRATEGY Innovation/technology leadership Bring value as technology development/systems integration partner Global capability Connect with customers in every region Excellence in execution Differentiate WABCO through service and quality excellence additional value as a solutions partner maximum operational efficiency (backbone is Six Sigma Lean) 8

9 CUSTOMER VALUES WABCO is working on global TECHNOLOGY trends relevant to our customers We have a clear path to enhance VEHICLE EFFICIENCY and ENVIRONMENTAL SUSTAINABILITY by 20% Our vision is to improve ADVANCED SAFETY and DRIVER EFFECTIVENESS, and reduce the number of commercial vehicle accidents by 50% by 2020 We are involved in developing PRODUCTS and FUNCTIONALITIES to better meet these needs 9

10 VEHICLE EFFICIENCY ROADMAP EcoSmart Clutch Compressor Transmission automation TPMS Tire pressure monitoring 2-stage Compressor Fuel Efficiency Energy Recovery Weight Reduction Smart Air Supply E-APU E-comp - electrical driven compressor Emission & retarder controls New light weight heavy truck brake NG22MAX High Output Compressor Alu-Crankcase 10

11 ADVANCED SAFETY & DRIVER EFFECTIVENESS Mission Provide advanced and integrated safety solutions Crash Driving Situations Normal Driving Critical Situation Pre Crash Phase After Crash Integrated Active Safety Concept Passive Safety Advanced Driver Assistance Systems Braking Chassis Systems Suspension Telematics Innovations - Extract - EBSNG NG22MAX ECASNG CALMNG i-range Actuators Event Recording Future Path - Extract - EMH EPH EMB Data Logging 11

12 GLOBALIZATION Local Market Connectivity Local Manufacturing Local Supply Chain Product Development All regions managed by local teams No expats in key leadership positions 9 Nationalities from 4 continents in leadership team Took over JV in India #1 Position in all Asia countries, especially in China and India #1 Position at Kamaz 4 factories in China - Benchmark Lean processes - 2 new factories opened in factories in India - Multiple Award Winning 1 Factory in Brazil - Lean transformation under way Local strategic sourcing teams connected to global commodities Strong supply base covering core commodities Local supplier management Leveraging BCC capabilities for global manufacturing sites 2nd Product Development pillar in India to address emerging countries specificity and conventional product design (150 engineers) Software development center in Chennai (85 engineers) Test & design center in Poland to support Hanover (100 engineers) 12

13 WABCO OPERATING SYSTEM Pillars Vision Organizational Development Accountability and alignment across the value chain Six Sigma Lean Integrated supply chain supported by Lean processes from suppliers to customers Common Development Process Processes based on Design For Six Sigma driving speed and reliability Customer Partnership Establish partnerships as competitive differentiator Total Employee Involvement Hoshin-like management system in place 13

14 PERFORMANCE FROM GROWTH ABOVE MARKET SALES GROWTH THROUGH 2014* CAGR 4-6% Cars Aftermarket Expansion OE TRUCK, BUS AND TRAILER INCREASING VALUE PER VEHICLE Air Disc Brakes Transmission Automation Controls Electronic Stability Control Driver Assistance Systems GLOBALIZATION China Eastern Europe / Russia India *Assumes commercial vehicle production flat at 2009 levels OE Truck, Bus and Trailer AFTERMARKET EXPANSION Enhanced Penetration 10% Year-of-year WABCO Reman Solutions New Product Ranges New Services (e.g. Diagnostics, Training) East Europe, North America and Asia AUTOMOTIVE PENETRATION Electronic Air Suspension Vacuum Pumps 14

15 GLOBALIZATION: CHINA SALES PROJECTIONS Indexed (2009 Sales = 100) CAGR 25% to 2008 sales grew at 70% CAGR Signed long term agreement with CNHTC through 2016 including sole supplier of transmission automation systems Joint venture with Fuwa, world s largest maker of trailer axles, to produce air disc brakes in China Growing weight in WABCO s global manufacturing network and an internal benchmark for Six Sigma Lean 15

16 GLOBALIZATION: INDIA SALES PROJECTIONS Indexed (2009 Sales = 100) CAGR 21% Strongly anchored market leader Preferred supplier for all OEMs 100 Nationwide sales and service network Extensive product & software development capabilities Lean and TPM driven manufacturing High record of industry awards 16

17 SALES PERFORMANCE & MARKET TRENDS (in $ Millions) 1,031.9 Europe 2009 Q3 YTD Sales Bridge Performance Translational FX 2010 Q3 YTD YoY Sales Growth (1) By Channel OEMs 59%* Aftermarket 26%* Sales to JVs 78% Increased Content per Vehicle Strong Growth in All Regions and Customer Segments (T&B and Trailers) Higher Fleet Utilization Rates Leading Indicator for OE Growth All Time Record in Revenues in Q3 55% Increase in Trailer Production in US Preparing for Accelerated Truck Builds in Q4 10 and 2011 Q3 YTD T&B Sales Growth (1) vs. Estimated Production Growth By Region North America South America Japan/Korea China +50% 50% 39% 86% 60% 72% 2.5 WABCO 1,548.5 Estimated Production 37% 14% 66% 48% 49% India (2) 101% 77% *50% excluding India transaction *23% excluding India transaction Comments Stronger Growth in Heavy Truck Segment Compared to Medium Trucks Increased Content per Vehicle New Business and Record Production Levels in China and South America Favorable Vehicle Mix and Continued Penetration of New Products in India (1) Adjusted for currency translation (2) Represents sales growth of WABCO-TVS (January 09 through May 09 WABCO-TVS sales not included in WABCO s consolidated sales) 17

18 FINANCIAL PERFORMANCE Q3 YTD 2010 (In $ Millions except per share data) Performance Q3 YTD Q3 YTD vs Reported (2),(3) Performance (1) In Local Curr. Performance Drivers Sales $1,548.5 $1, % Gross Profit % 28.3% 28.5% +450 bps OPEX & Other (289.5) (287.5) (24.2%) (18.7%) (18.6%) +390 bps Operating Income % 9.9% +840 bps Equity Income Noncontrolling Int. Exp. (9.1) (9.1) EBIT ($259.3) $150.2 (16.7%) 9.7% Taxes Net Income ($290.7) $122.2 EPS ($4.52) $1.85 Order Book at $1,022M, Up 65% YoY Price: ($22.1) or (1.4%) Volume & Mix: $114.6 Productivity: Materials: $28.6 (5.7% gross, 4.2% net) Conversion: $14.8 (5.2%) OH absorption & other: $51.9 OPEX & Other: ($54.3): Reinstate suspended costs: ($19.5) Labor inflation/india opex: ($10.8) Bonus accrual above target: ($12.1) New investments/one-time items: ($11.9) Meritor WABCO JV up $4.7 vs. 09 Versus 09 of ($2.5) EC Fine ($400.4) in Q2 10 Other separation ($7.2) vs. $36.9 in 09 Streamlining ($1.9) vs. ($55.6) in 09 ~18% Performance tax rate full year Versus 09 Reported of ($0.31) and Performance of $0.04 (1) Adjusted for currency translation, streamlining and separation costs and EC fine indemnification (2) Adjusted for streamlining and separation costs (3) Adjusted for streamlining and separation costs, EC fine indemnification and discrete and other one-time tax items 18

19 MARKET DYNAMICS Percent of WABCO Sales in Q3 Percent of Q3 Global T&B Production 61% 59% % 9% Europe 17% North America 8% WABCO s order book continues to increase Freight demand is still increasing (+9% in last 3 months) Strong orders from Mexico and export Increasing truck orders from export markets markets and domestic demand recovery ~15% T&B production increase expected Expect T&B production to grow ~ 55% full for 2010 year 10 Initial 2011 T&B production estimate: Initial 2011 T&B production estimate: ~+15% ~+40% 7% 6% China 44% 7% 7% India 12% T&B production from ~400K in Q2 to ~300K in Q3 as anticipated; Q4 flat to Q3 Government stimulus declines, slowing demand for construction vehicles 2010 T&B production estimate: +35% Initial 2011 T&B production estimate: Flat to negative ~(5%) Q3 T&B production up 9% from Q2 Several global OE s establishing local production 2010 T&B growth of ~50% vs. 09, with Q4 down ~15% from Q3 (pre-buy) Initial 2011 T&B production estimate: Up 10% to 15% European Recovery in Line with Expectations 19

20 MARKET DYNAMICS Percent of WABCO Sales in Q3 Percent of Q3 Global T&B Production % 7% Japan/Korea 9% Brazil Q3 T&B production stable over Q2 In Q4, slight erosion in Japan after prebuy; slight increase in Korea 2010 T&B production growth expected to be ~35% vs. 09 Initial 2011 T&B production estimate: ~+5% 32% 26% Aftermarket Leading indicator for continuous growth in Europe and N. America European utilization rates continue at normal levels ~20% sales growth anticipated for : Back to normal ~10% sales growth 7% 8% 9% Government stimulus continues to help the CV industry in Q3 10 Q4 T&B production estimated lower, mainly from seasonal manufacturers vacation in December 2010 growth expected to be ~50% vs. 09 Initial 2011 T&B production estimate: Flat to up 5% 7% 9% Trailer Q3 10 production on Q2 10 level but 65% above 09 Markets currently stable 2010 growth expected to be ~60% vs. 09 Initial 2011 global production estimate: ~+20% Market Demand Continues Growing 20

21 FY 2010 GUIDANCE ($ Millions, except per share data) Sales Performance Op Margin Performance (3) EPS Updated 2010 Guidance (as of Oct. 29, 2010) (2) Prior (1 EURO = 1.28 USD) Low End High End $1,930 - $2,000 35% - 40% (1) 8.5% 9.5% $ $2.20 FCF Conversion (4) 80% - 90% (Excl. Stream. & Separation) Q Guidance (as of Oct. 29, 2010) ($ Millions, except per share data) Sales Performance Op Margin Performance (3) EPS (2) YTD Q3 Actuals (1 EURO = 1.32 USD) $1,549 50% (1) 9.9% $1.85 Revised (1 EURO = USD) Low End High End $2,144 - $2,164 (1) 46% - 47% 9.7% % $ $ % - 90% (Excl. Stream. & Separation) Q4 Projections (1 EURO = 1.35 USD) Low End High End $595 - $615 35% - 40% 9% 10% (1) $ $0.72 Note: Guidance as announced on October 29, Inclusion of this information in this presentation is not an update or reaffirmation of those financial assumptions (1) Adjusted for currency translation (2) Adjusted for streamlining and separation costs (3) Adjusted for streamlining and separation costs, discrete and other one-time tax items and the EC fine indemnification (4) Net cash provided by operating activities less net cash used for the purchases of PP&E and computerware as a percentage of net income 21

22 WABCO SUMMARY Industry leader, we continue to be well prepared and sufficiently FLEXIBLE to take full advantage of increasing demand for new commercial vehicles in 2010, while maintaining our commitment to long term growth STRATEGY Power to remain THE TECHNOLOGY LEADER adding breakthroughs to portfolio of technologies and products for full connectivity to all markets WABCO Operating System, one of our industry s most advanced management environments, delivers continuous OPERATIONAL improvements We drive PERFORMANCE by connecting with and adapting to CUSTOMERS everywhere in the world and continuing to anticipate and satisfy their needs 22

23 PASSION