PKC Group Oyj Investor Presentation Q4/2011 February 2012 Harri Suutari President & CEO 1
PKC Group Briefly PKC Group operates in two core business segments: Wiring Systems and Electronics PKC designs and manufactures electrical distribution systems, wire & cables, wiring components and electronics The Group s products and services are delivered mainly to the commercial vehicle, automotive and electronics industries Global footprint and headquartered in Kempele, Finland The Group s net sales amounted to EUR 550.2 million in 2011 21,895 employees globally at the end of Q4/2011, rented employees included PKC Group Oyj is listed in NASDAQ OMX Helsinki Ltd. 2
Growth Through Focused Investments PK Cables listed in the Helsinki Stock Exchange Acquisition of Estonian production Operations started in China Acquisition of MAN WH production in Poland Acquisition of SEGU in Germany, Poland and Ukraine 1997 1998 2000 2002 2003 2005 2006 2007 2008 2009 2010 2011 Brazilian factory was opened Acquisition of electronics business Acquisition of Russian production Acquisition of Electro Canada in Canada, the USA and Mexico Acquisition of AEES in North America, Brazil and Ireland Adj. EBITDA (1) EUR million Development Over Time (1) Illustrated net of non-recurring items 3
PKC locations today North America Acuna, Mexico (M) Dallas, Texas Green Valley, Arizona Farmington Hills, Michigan Jeffersontown, Kentucky Juarez, Mexico (M) Kirkland, Washington Monterey, Mexico Nogales, Mexico (M) Piedras Negras, Mexico (M) Portland, Oregon San Antonio, Texas Torreon, Mexico (M) Traverse City, Michigan (M) South America Campo Alegre, Santa Catarina, Brazil (M) Curitiba, Brazil (M) Itajuba, Brazil (M) São Bento do Sul, Brazil (M) São Paulo, Brazil Europe Barchfeld, Germany (M) Dundalk, Ireland (M) Haapsalu, Estonia (M) Keila, Estonia (M) Kempele, Finland (HQ) Kostomuksha, Russia (M) Mukachewo, Ukraine (M) Raahe, Finland (M) Sosnowiec, Poland (M) Starachowice, Poland (M) Asia Suzhou, China (M) Wiring systems business Electronics business (M) Manufacturing 4
Geographical split 5
Key Figures, 1-12/2011 EUR million 1-12/11 1-12/10 Change % Net sales 550.2 316.1 74.1 EBITDA before non-recurring items 59.5 42.2 41.0 Depreciation 17.5 10.7 63.6 EBIT before non-recurring items 42.0 31.5 33.3 % of net sales 7.6 10.0 Non-recurring items 7.5 1.8 316.7 EBIT 34.5 29.7 16.2 Financial items - 5.1-4.7 Taxes - 6.0-5.3 Net profit 23.4 19.7 18.8 EPS, (EUR) 1.16 1.09 6.4 Cash flows before investments 40.0 22.9 74.7 Net investments 101.5 8.6 1080.2 Cash flows after investments - 50.2 14.9-436.9 6
Key Figures, 1-12/2011 1-12/11 1-12/10 Change % Net debt (EUR million) 110.7-2.1 ROI, % 18.9 25.8 Gearing, % 72.6-1.7 No. of employees at closing. (Rented employees not included) 21,528 5,977 260.2 7
Key Figures, 10-12/2011 EUR million 10-12/11 10-12/10 Change % 1-12/11 Net sales 242.0 91.9 163.3 550.2 EBITDA before non-recurring items 20.6 12.4 66.1 59.5 Depreciation 8.2 2.5 228.0 17.5 EBIT before non-recurring items 12.4 9.8 26.5 42.0 % of net sales 5.1 10.6 7.6 Non-recurring items 3.6 0.2 1700.0 7.5 EBIT 8.8 9.8-10.2 34.5 Financial items - 1.1-3.1-5.1 Taxes - 1.9-1.4-6.0 Net profit 5.8 5.3 9.4 23.4 EPS, (EUR) 0.29 0.29 1.16 Cash flows before investments 35.6 5.0 612.0 40.0 Net investments 80.1 3.8 2007.9 101.5 Cash flows after investments - 33.5 1.0-50.2 8
Non-recurring Items, 1-12/2011 (EUR 1,000) Wiring Systems Electronics Group total Donations to the universities 0 150 150 Advisor fees 7,100 0 7,100 Cancellation of the write-down of inventories -317 0 317 Restructuring labour expenses 218 310 528 Total non-recurring items 7,001 460 7,461 9
Key Figures, 1-12/2011 Net Sales by Geographical Areas EUR, million 600 500 20,7 73,5 Employees in total incl. rented at the end of report period 400 157,5 300 200 100 30,1 60,0 20,7 154,6 236,0 0 53,7 62,5 1-12/2010 1-12/2011 Finland Other Europe North America South America APAC Personnel excl. rented employees R&D Personnel at the end of report period 25,000 20,000 15,000 +260% 21,528 160 140 120 100 80 90 101 114 120 143 10,000 60 5,000 5,311 5,652 4,423 5,977 40 20 0 2007 2008 2009 2010 2011 0 2007 2008 2009 2010 2011 10
Key Figures, 1-12/2011 Net Sales EUR, million Segu acquisition AEES acquisition Adjusted Operating Profit Illustrated net of non-recurring items, EUR million 14 12.4 12 10.5 10.7 9.9 10.0 10 8.9 8 7.6 6 4 2 0 0.4 3.8 1.9 3.4-2 -1.1 2009 2010 2011 Q1 Q2 Q3 Q4 Earnings per Share (EPS) Adjusted EBITDA % and EBIT % EUR 0.70 0.60 0.56 0.50 0.39 0.38 0.40 0.29 0.31 0.29 0.30 0.24 0.19 0.19 0.20 0.10 0.01 0.00-0.10-0.20-0.20-0.30-0.25 2009 2010 2011 Q1 Q2 Q3 Q4 18 16 14 12 10 8 6 4 2 0 Illustrated net of non-recurring items, % 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 EBITDA % Operating profit % 11
Key Figures, 1-12/2011 Net Investments 100 EUR, million 90 80 70 60 50 40 90.2 30 20 10 0 4.8 8.1 2009 2010 2011 Other Investments Acquisition Return on Investment ROI,% Cash Flows after investments EUR, million 50 37.6 40 30 20 14.9 10 0-10 -20-30 -40-50 -50.2-60 2009 2010 2011 R&D Expenditures % EUR, million 30 25 25.8 8 7 6.9 20 18.9 6 5 5.5 5.7 15 4 10 5 6.4 3 2 1 0 2009 2010 2011 0 2009 2010 2011 12
Wiring Systems Business Segment 13
Key Financials, Wiring Systems 2011 EUR million 10-12/11 10-12/10 1-12/11 1-12/10 Net sales 224.5 70.8 477.2 242.4 EBIT before non-recurring items 13.7 8.9 42.5 26.3 % of net sales 6.0 12.5 8.9 10.8 Non-recurring items 5.0 0.2 7.0 1.8 EBIT 8.7 8.7 35.5 24.5 14
AEES, Key Financials, 10-12/2011 10-12/11 Net sales 124.0 EUR million Net profit 6.7 EUR million 15
Net Sales, Wiring Systems EUR million 250 224.5 200 150 100 50 41.7 45.7 33.1 34.2 40.3 64.1 61.8 70.8 78.2 90.2 84.3 0 2009 2010 2011 Q1 Q2 Q3 Q4 16
Adjusted Operating Profit, Wiring Systems 16 14 EUR million 13.7 12 10 8 6 7.0 7.8 8.9 10.1 9.7 6.0 4 2 2.2 1.7 2.6 0-2 -4-0.6-1.8 Illustrated net of non-recurring items 2009 2010 2011 Q1 Q2 Q3 Q4 17
PKC Group Truck Market Share Globally North America Europe South America Heavy Trucks Medium Trucks PKC Other Source: Truck Statistics: J.D. Power Automotive Forecasting, Q4 2011, ACT Forecasting January 2012, Note: Europe comprised of EU27 + Efta, 18
Key Customer Segments Trucks & Buses Light vehicles Engines Recreational Products Agricultural, Forestry and Construction Equipment 19
Vehicles Europe, 2011 The registration of heavy-duty trucks increased in Europe (the EU countries, Switzerland and Norway) by 36% in 2011 over the previous year. All in all, about 236,500 heavy-duty trucks were registered during 2011. In Europe, the order books of our customers are forecast to be on a level equivalent to 2 3 months production. Forecasts on the production volumes in Europe for 2012 would seem to indicate a fall of about 10% over 2011. Registrations of new medium and heavy commercial vehicles over 3.5 tonnes in the EU-27 rose by 29.0% in 2011. A total 315,447 new trucks were registered during the year. New car sales in the European Union (EU27) year 2011 was 13,111,209 a 1.7% decline from the 2010 total of 13,343,302 and the fourth consecutive yearly fall. The number of orders received by truck manufacturers in Europe during the fourth quarter fell about a fourth short of the level of deliveries made. 20
Truck Market Heavy Trucks Registration EU27+EFTA (incl. Bulgaria & Romania) Truck Deliveries and Order Intakes, Q4/2011 Trucks > 16t, units 35,000 30,000 40,000 35,000 25,000 30,000 20,000 25,000 15,000 20,000 10,000 15,000 5,000 10,000 0 5,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 2008 2009 2010 2011 Source: ACEA Trucks, units 34,175 Total -22.2% 25,749 21,862 21,234 18,740 14,210-24.7% -24.2% -2.9% Volvo Europe + Latin America Scania Global MAN (excluding Brazil) Deliveries Order intake Source: MAN, Volvo, Scania Heavy Trucks Production, EU27+ EFTA Heavy Trucks Production by Marque, EU27+ EFTA Trucks >16t, units Trucks 16t, units 140,000 90,000 80,000 120,000 70,000 100,000 60,000 80,000 50,000 60,000 40,000 40,000 20,000 30,000 20,000 10,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MAN Group Volvo Group VW/Scania Source: J.D. Power Automotive forecasting Q4/2011 MAN Volvo Scania Source: J.D. Power Automotive forecasting Q4/2011 21
Vehicles, North America, 2011 1/2 The freight volume in the NAFTA region has returned to pre-crisis level, and vehicle fleets are being replaced. Demand has been particularly strong for heavy-duty long-haulage trucks. Some truck models now have backorders stretching for six months. The North America heavy-duty truck market strengthened during the report period. All in all, about 249,800 heavy-duty trucks were produced in 2011 which represents an increase of 62% when compared to 2010. During the fourth quarter, a total of 69,100 new heavy-duty trucks were produced. Production volumes for 2012 are projected to increase 20 % to over 300,000 units. Forecasts for North American class 8 truck retail sales are around 232,000 units in 2012. This implies overall market growth of around 26-27% versus 2011 total of around 183,000. 22
Vehicles, North America, 2011 2/2 The North America medium-duty truck market continued to gain momentum during the report period. 2011 production of medium-duty trucks increased in North America by 42.3% over the comparison period to 160,731 units. During the fourth quarter, a total of 41,147 new medium-duty trucks were produced. Production volumes for 2012 are projected to increase 6% to 170,000 units. Forecasts for North American class 6-7 truck retail sales are around 108,000 units in 2012. North America light-duty truck assembly in 2011 rose to 6,912,666 units from 6,299,976 units in 2010. North America Light Vehicle 2011 sales were up 9.4% to 15.28 million units over the comparison period. The momentum gained in 2011 in the automotive industry is expected to continue throughout 2012 and sales growth is projected at 6.4% for 2012. In North America, the orders received by truck manufacturers during the fourth quarter were almost on level with the volume of deliveries made in the corresponding period. 23
N.A. Class 8 Production Units, Thousands 400 376 350 323 300 250 200 212 206 252 296 269 221 259 150 100 118 154 50 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Source: ACT N.A. Commercial Vehicle Outlook January 2012 24
N.A. Class 8 Retail Sales Units, Thousands Source: ACT N.A. Commercial Vehicle Outlook January 2012 25
N.A. Class 5-7 Production Units, Thousands Source: ACT N.A. Commercial Vehicle Outlook January 2012 26
North America Truck Market Source: Automotive World 27
The US LV market, 1970-2015 Source: Automotive World 28
PKC Customers N.A. Recreational Source: Power Sports Business Market Data Book 2010 29
Vehicles, South America, 2011 1/2 The South America heavy-duty 2011 production was at 140,114 which represents an increase of 8.2% when compared to 2010. Fourth quarter production levels decreased 18% from the previous quarter to 33,764 units. The fourth quarter production decline was anticipated as production levels are historically lower in the fourth quarter. Production volumes for 2012 are projected to decrease 12% to 123,000 units. The South America medium-duty 2011 production was at 63,696 units which represents an increase of 5.8% when compared to 2010. Fourth quarter production levels decreased 14% from the previous quarter to 15,805 units. The fourth quarter production decline was anticipated as production levels are historically lower in the fourth quarter. Production volumes for 2012 are projected to decrease 7% to 59,000 units. The number of orders received by truck manufacturers in Brazil during the fourth quarter fell about a fifth short of the level of deliveries made. 30
Vehicles, South America, 2011 2/2 The 2011 South America light vehicle market sales reached 5.53 million units which is an all-new high. Overall sales were up 8.1% compared with 2010 which reflects the promising outlook of the South American automobile industry. A major development in the region in 2011 was the closing of boarders to imported vehicles which was expanded from Venezuela to include Argentina, Brazil and Ecuador as the country continues to drive localized production. The explosive growth that the region experienced in recent history is expected to slow down and 2012 projected sales in the region is expected to reach 5.7 million units which represents little growth over the record 2011 sales rate. New vehicle sales in Brazil set a fifth consecutive annual record in 2011. Sales of new vehicles increased 3.4% to 3.63 million units last year. Production levels also reached a new record last year at 3.41 million units, up 0.7% from the 3.38 million vehicles build in 2010. This year production is expected to reach 3.49 million units. 31
Forecast Heavy-duty Trucks, Brazil Source: Anfavea & Automotive Reports 32
Forecast Light Vehicle, Brazil Source: Anfavea & Automotive Reports 33
Agricultural Equipment Industry, 2011 Agricultural Equipment Industry and Market Worldwide agricultural industry unit sales increased 12% compared to 2010. Global tractor sales grew 12% while global combine sales grew 16%. North American tractor sales, both over and under 40 horsepower segments, were up 2%, and combine sales were down 5%. Latin America sales of tractors decreased 2% and combine sales increased 21%. EAME & CIS markets continued to improve in 2011, with tractor sales up 25% and combine sales up 39%. Production volumes for 2012 are projected to equal 2011 volumes in North America and to decrease 5-10% in South America. 34
Construction Equipment Industry, 2011 Construction Equipment Industry and Market Global construction equipment industry unit sales rose 27% in 2011 compared to the prior year, with positive trends in every region. Light equipment was up 30% and heavy equipment up 23%. North American demand was up 38% and EAME & CIS markets rose 35% as the industry continued to rebuild from the prior year's low levels. In Latin America, the market was up 25%, driven by strong demand from projects in both the public and private sectors. In APAC markets, industry sales were up 19% for the year, although significantly weaker in the second half of the year. Production volumes for 2012 are projected to increase 10-20% from 2011 volumes in North America and to increase 5-10 % in South America. Production volumes in AEME & CIS markets are projected to stay flat or grow up to 5 %. 35
Electrical Distribution Systems, EDS Leading, global electrical distribution systems supplier for heavy trucks Manufactures electrical distribution systems also for light vehicles, buses, recreational vehicles as well as construction, forestry and agricultural equipment Full service capabilities from design to final functional testing Strong experience on high volumes JIT deliveries with customized product variations Manufacturing of water tight and heat resistant engine and other wiring systems and injection moulding of connectors and grommets Factories in Brazil, China, Estonia, Germany, Mexico, Poland, Russia and Ukraine Batch harnesses Engine harnesses ABS cable Chassis harnesses Instrument harnesses 36
Components Manufacturing of plastic components & connectors, junction boxes and various power distribution centres Primary Products Connection Systems Components Power Distribution Center Components Modular Blocks High speed precision stamping of automotive electrical terminals Large lead frame / fret stampings for power distribution boxes High current heavy gage power terminals Battery terminals Steel brackets for wire harness routing and retention Factories in USA, Mexico and Ireland 37
Wire & Cable Manufactures and distributes selected wire products, PVC and cross link coated wire in both metric and English wire sizes Primary Products PVC coated wire Cross linked polyethylene coated wire Metric and English wire sizes Battery cable Factory in Mexico 38
Electronics Business Segment 39
Key Financials, Electronics 2011 EUR million 10-12/11 10-12/10 1-12/11 1-12/10 Net sales 17.5 21.1 73.0 73.7 EBIT before non-recurring items 0.1 2.0 2.8 7.7 % of net sales 0.6 9.6 3.9 10.4 Non-recurring items 0.3 0 0.5 0 EBIT - 0.2 2.0 2.4 7.7 40
Net Sales, Electronics 25 EUR million 20 15 12.1 12.7 12.7 15.1 15.1 16.9 20.5 21.1 18.7 19.1 17.7 17.5 10 5 0 2009 2010 2011 Q1 Q2 Q3 Q4 41
Adjusted Operating Profit, Electronics EUR million 3.5 Illustrated net of non-recurring items 3.3 3 2.5 2 1.5 1 0.5 0 0.7 0.7 1.5 1.7 1.3 1.1 2.0 0.4 0.6 2009 2010 2011 Q1 Q2 Q3 Q4 1.7 0.1 42
Electronics Segment, 2011 Demand for the products of PKC Group s key industrial electronics customers increased during the first half of 2011 but turned down during the second half of the year. The weakening was a result of growing economic uncertainty in Europe and a reduction in wind power investments globally. Due to a change in the product strategy of a telecommunications customer, the demand for PKC Group s Electronics business design and manufacturing services was significantly smaller than the previous year. 43
Electronics Business ODM services - Total solution including design, sourcing, prototyping, manufacturing, testing, logistics and after sales services R&D partner and contract manufacturer in industrial, commercial vehicle and Green Business electronics High-quality, experienced and flexible partner with excellent customer service and short lead times Innovative and proactive design and product development services in Finland and China Factories in Finland, China and Russia Factories are certified in accordance with requirements of the ISO 9001 and ISO/TS16949 quality and ISO 14001 environmental standards 44
Products and Industrial Segments Products Power supply units Electronics control units Vehicle electronics Testing equipment Electronics service devices Industrial Segments Industrial electronics Telecommunication Commercial vehicles Energy Security Vehicle computers Security products 45
Outlook 2012 46
Outlook for the Future PKC expects that its net sales and comparable operating profit will increase in 2012 from the previous year s level. Net sales in 2011 amounted to EUR 550.2 million and operating profit without non-recurring items was EUR 42.6 million. Major part of net sales and profit is generated by the Wiring Systems business. 47
Thank You! www.pkcgroup.com 48