Kongsberg Automotive ASA Fourth quarter - February 28, 2019
Highlights Q4 Sales Revenues grew by 21 (7.3%) YoY to 288 including negative FX effects of 1. We booked new business with 77 in expected annual revenues corresponding to 338 in expected lifetime revenues. Performance Adj. EBIT increased YoY by 8 to 21 with no FX effects. In addition to the fall through from the additional revenues, we also saw improvement in our operations. Increased costs of raw materials and electronic components continued in Q4 with a YoY effect of negative 2. Cash Flow Gearing Free cash flow improved by 13 to 4 YoY. Cash on hand at the end of Q4 of 59. The LTM adjusted gearing ratio (NIBD/Adj. EBITDA) declined from 2.4 in Q4 2017 to 1.9 in Q4. 2
Capital Markets Day a confirmation CMD Actual In Mill. Euro Sales 1.128 1.123 Adj. EBIT 75 75 % of sales 6,6% 6,7% Restructuring & One Off cost -20-21 EBIT 55 54 % of sales 4,9% 4,8% Financial Items -14-15 Profits Before Taxes 42 39 Taxes -17-15 % of PBT -42,0% -38,2% Net Income 24 24 EPS (NOK) 0,51 0,53 3
Revenues and Adjusted EBIT Revenues and profitability continue to consistently improve YoY Revenues Adjusted EBIT and percent 2016 2017 2016 2017 288 288 280 268 257 251 259 241 228 267 250 288 7.0% 5.4% 4.9% 7.2% 5.2% 3.6% 5.1% 3.2% 7.2% 4.8% 3.0% 20 21-0.3% 21 13 15 14 13 13 9 8 7-1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenues including HRAR EBIT adjusted for restructuring - see details in the quarterly report. 4
Market Summary
New business wins was the strongest booking year in the company s history Bookings in were more balanced in than in previous years. Expected annualized and lifetime revenues New business wins per quarter (per annum value) 140 120 100 80 60 40 20 36 71 62 122 66 121 99 77 New business wins per quarter (lifetime value) 600 500 400 300 200 100 139 349 288 535 323 459 561 338 0 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 New business wins LTM (per annum value) 420 390 360 330 300 281 292 288 291 321 372 409 364 0 2.000 1.800 1.200 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 New business wins LTM (lifetime value) 1.600 1.400 1.485 1.435 1.429 1.311 1.495 1.605 1.878 Q4-18 1.681 0 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 0 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 6
Q4 market summary Increased levels of uncertainty affected production output in Q4 Global Passenger Car Production Global light vehicles production in Q4 was 23.9m, a Global Passenger Car Production, Units in millions YoY decrease of 5.4%, equivalent to approx. 1.4m units. 25.3 China was the main driver of the global decline in production 24.4 24.3 24.1 23.9 23.0 22.5 with a YoY fall of 15.2% or approx. 1.3m units as domestic 21.8 demand in China has weakened due to concerns about an escalation of the trade war with the United States. Production in Europe fell as well with a YoY decrease in output of 4.6% or approx. 260k units. The new WLTP certification process and the uncertainty around Brexit have slowed down production, particularly in Germany and the United Kingdom. In North America, production has stabilized and had a YoY growth rate of 2.1% or approx. 90k units. Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 In Asia outside of China the YoY growth rate came in at 5.7%. Global Truck Production, Units in thousands Global Truck Production Source: IHS Light Vehicle Production Base, January 2019 773 775 807 825 864 881 Source: LMC Global Commercial Vehicle Forecast, Q4 770 789 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 The production of medium and heavy-duty commercial vehicles fell by 4.6% YoY, equivalent to approx. 40k units. A vast majority of this decline was due to China where production YoY declined by 18.3%, equivalent to approx. 63k units, primarily due to the significant advancement of production completed in 2017. North and South America continued the strong growth seen in previous quarters with YoY growth rates of 16.8% and 11.8%, respectively as the expansion cycle on the continent continued. In Europe, the truck production decreased YoY by 2.8%. 7
Segment Highlights
Segment financials last five quarters Interior Revenues 70 72 67 66 77 105 Powertrain & Chassis 109 112 103 113 96 Specialty Products 109 103 90 98 Adjusted EBIT* and percent 5.9% 1.9% 2.3% 4.2 1.2 1.6 3.7% 2.4 5.6% 4.3 1.5% 1.6 2.3% 2.5% 1.8% 2.5 2.9 1.9 5.1% 5.8 18.2% 13.2% 19.9 12.7 16.6% 17.1 17.6% 13.8% 17.2 12.4 Q4 2017 Q1 Q2 Q3 Q4 Q4 2017 Q1 Q2 Q3 Q4 Q4 2017 Q1 Q2 Q3 Q4 *Excluding restructuring costs, see details in the quarterly report. 9
Interior Revenues Adj. EBIT +14.9% 77 67 10.0 The YoY growth was primarily driven by volume increases in Interior Comfort Systems in North America and China. 1.2 4.3 3.1 Operational improvement in combination with overall volume increase were the main YoY growth drivers. The result was partly offset by price increases of raw materials and electronic components. Q4-17 Q4-18 Operations Operational efficiency improved at the segment s main plant in Poland. We are still on track with the ramp up of the second Poland plant as we expect completion in Q1/Q2 2019. Q4-17 Q4-18 Lifetime revenues 153 New Business Wins 138-15 Annualized revenues Wins include Seat Support Systems to a major European OEM with lifetime revenues of approximately 57. 29 21-8 All figures in Q4-17 Q4-18 10
Powertrain and Chassis (P&C) Revenues Adj. EBIT 105 +8.0% 113 8.4 The Commercial Vehicle business in North America continues to be the main YoY growth driver in the segment. 5.8 4.2 The YoY adj. EBIT increase was driven by an increase in North American volumes, benefits from completed restructuring activities and some other effects. 1.6 Q4-17 Q4-18 Q4-17 Q4-18 Operations Successful production ramp up at the Mexican facility to accommodate larger output to American customers within the CV segment. Significant effort was spent on increasing the capacity for a challenging short notice demand increase for a gear shifter to one of our main OEM customers. Lifetime revenues 240 123 New Business Wins -117 Annualized revenues 44 23-21 Wins includes Clutch Actuation Systems to a major European OEM with lifetime revenues of approximately 46. SOP is expected to be in 2020. High sourcing activities among the OEMs during the first nine months affected bookings in Q4. All figures in Q4-17 Q4-18 11
Specialty Products Segment Revenues Adj. EBIT 96 +2.1% 98 2.0 Strong markets across all regions in the Couplings business unit as well as the Off Highway business unit in North America were the biggest growth drivers. Slight decrease in the OPE and North American FTS businesses. 12.7 17.2 4.5 Strong operational performance and fall-through were the main drivers. Higher raw material and freight costs negatively impacted adjusted EBIT. Q4-17 Q4-18 Q4-17 Q4-18 Operations The expansion of the Couplings facility in Raufoss, Norway, has started and is progressing according to plan. The ramp up at the new FTS facility in Mexico was completed. Certain supply chain transition activities are still work-in progress. Lifetime revenues 146 New Business Wins 77-69.0 Q4-17 Q4-18 Annualized revenues 50 33-17 Significant wins include Air Coupling system to a European OEM with lifetime revenues of approximately 13. High sourcing activities among the OEMs during the first nine months negatively affected bookings in Q4. All figures in Q4-17 Q4-18 12
Norbert Loers Financial Update
Q4 - Revenue development Revenue growth in all segments 295 290 285 280 275 270 10.8 9.4 1.6-0.9 288.3 Group Revenues of 288.3, which is a YoY growth +7.8%. Business segments All segments contributed to the positive YoY development. General drivers were: Volume growth Strong markets in North America FX translation & Other effects Interior: -0.2 P&C: -0.7 SPP: 0.1 Others: -0.1 265 267.4 0 Q4 2017 Interior* P&C* SPP* FX & Others * Variances excluding FX translation effects Q4 14
Q4 - Adjusted EBIT development All segments contributing to an increased profitability 27 24 4.4-4.1 Group Adjusted EBIT 20.7, 7.7 above Q4 2017. 21 4.3-0.1 Business Segments Benefits from improved footprint across the BUs 18 15 12 9 3.2 20.7 Higher operational efficiency Increased volumes across all segments Costs for new products launches, ongoing operational optimization projects, unfavorable raw material costs and electronic components costs. Partially offset by higher administrative costs and other effects 6 13.0 3 0 Q4 2017 Interior* P&C* SPP* Other* FX Q4 *Variance excluding FX translation effects 15
Q4 - Net Profit development 10 8 6 6.1-0.2 Group Net Profit is 19.1 above Q4 2017 mainly driven by a significantly reduced effective tax rate. 4 6.9-1.3 7.7 Restructuring costs 2 0-2 -4-6 -11.3 7.7 Q4 restructuring includes mainly transition costs with continuing integration efforts in the receiving plants 2.8 Q4 2017 higher restructuring cost 9.7 with the announcements of the Easley and Burton closures. Interest In line with increased level of borrowing and bond interest rate fixed at 5.00%. -8-10 -12 Q4 2017 Adj. EBIT Restruct. Costs Interest Other Fin. Items Tax Q4 Other financial items Consist of unrealized and realized currency losses amounting to 2.0 in Q4 vs. 7.4 in Q4 2017. Other financial items include interest component on pension liability and other fees and charges Tax Absolute number mainly the same, however significantly lower effective tax rates 16
Free Cash Flow* 30 20 10 0-10 14-4 8-9 23-5 4 Operational cash flow 34.3 Stronger decrease of NWC of 8.7 in Q4 compared to Q4 2017. Cash out related to restructuring activities amounted to 3.3 for Q4. Investing cash flow -30.2 Investments amounted to 25.0 mainly to support current and future business growth. The remaining 5.2 related to development and tooling contract assets (non-current) -20-30 -23 2016 FY 2017 FY Q1 2017 Q2 2017-18 Q3 2017 Q4 2017-15 Q1 Q2 Q3 Q4 Financing cash flow -0.1 No drawing or repayment of additional debt in the fourth quarter Interest for the bond was accrued for in and will be paid in January 2019 *Cash Flow from operating activities +/- cash flow from investments interest 17
Q4 - Cash development Cash (unrestricted) Unutilized RCF 19.9-25.0 29.6-0.9-3.3-13.0 101.7 109.1 51.7 59.1 50.0 50.0 Q3 Adj. EBITDA Change in total NWC Net Investments Interest paid and other fin. charges Cash restructuring payments Other receivables/liabilities, tax and FX Q4 18
Net financial items - Breakdown Net financial Items Other items Currency effects Net interest -2.6-5.4 1.2 1.0-10.5-7.6-2.8-5.8 Currency effects Decrease in foreign exchange losses for Q4 Interest Higher overall interest expenditure compared to Q4 2017 following the placement of the bond. 3.9 3.7 0.2-2.3-0.4-0.3-2.7-0.4-2.3-0.3-0.1-0.1 0.4 0.3-0.1-2.6-2.0-3.1-5.0-2.4-7.4-4.1-2.5-2.8 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 Q2 Q3 Q4 19
Financial ratios Adjusted gearing ratio (NIBD/EBITDA*) Adjusted ROCE** (LTM) 2.4 2.4 2.2 2.1 1.9 11.1% 11.9% 13.1% 13.9% 15.4% Q4 2017 Q1 Q2 Q3 Q4 Q4 2017 Q1 Q2 Q3 Q4 Equity Ratio*** LTM Capital Employed () 26.4% 25.9% 30.2% 31.3% 30.9% 444 449 469 486 505 ** Q4 2017 Q1 Q2 Q3 Q4 Q4 2017 Q1 Q2 Q3 Q4 *Excluding restructuring costs; ** Including IFRS 15 and IFRS 9 adjustments on equities amounting to +0.7, *** Q2 has accounted for the ~ 40 equity increase 20
Summary & Outlook
Summary We finished with a record level of new business wins reducing our sensitivity somewhat to potential market challenges. Q4 marks the eighth consecutive quarter with top line, bottom line and margin improvements Continuing increases in raw material pricing and high tariffs was a setback in Q4 and continues into Q1 of 2019. From a market standpoint, we continue to see high levels of uncertainty. For some of our OEM customers, forecasted volumes have been somewhat reduced for the first quarter of 2019. This is particularly true for the UK based OEMs as well as one big global OEM. Although less of a Q1 growth rate than assumed in our plans, this would still lead to a Q1 2019 topline growth rate of 6% YoY. This leads us to estimate Q1 revenues at a level of around 306. At this stage, it is difficult to understand the drivers for the slight reduction in anticipated revenues for Q1. We can speculate that at least part of the declines are due to Brexit and WLTP issues. It is too early to say whether these effects will continue into the later quarters of 2019. 22