Investor Presentation March 2017
Disclaimer During this presentation management may discuss certain forwardlooking statements concerning Nemak s future performance that should be considered as good faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact Nemak s actual performance. 2
Nemak overview Company highlights Leading global supplier of complex, high-tech aluminum automotive components Began operations in 1981 Global footprint across 16 countries with 38 facilities Diversified product portfolio and customer base More than 60 customers worldwide Supplying ~650 / 1,300 vehicle platforms Sole source supplier in ~85% of volume Experienced management team Financial highlights (2016) (US$) Revenue US$4.3 bn EBITDA* / Margin US$798 M / 19% RoW 9% Volume by customer Europe 33% North America 58% Cylinder heads Engine blocks Product portfolio Transmissions Structural components Electric vehicle components Europe Others (including ) 3% 3% 3% 3% 3% 5% 5% Europe 17% 6% 11% 23% North America 18% North America 1 out of 4 new light vehicles sold worldwide has a Nemak component *EBITDA = Operating Income+ Depreciation, Amortization & other Non-Cash Charges 3
Focus on providing lightweighting solutions for the automotive industry Powertrain Heads Blocks Transmission Structural Comp. Longitudinal Members Shock Towers Cross members EV Components E-Drive Housings Battery Housings 4
Competitive advantages 1 Leading position in automotive lightweighting solutions 2 Broad portfolio of casting technologies focused on complex and high value-added products 3 Leading product development capabilities supported by skilled workforce 4 Solid customer relationships with diversified revenue streams 5 Global footprint with modern facilities near customer sites 6 Proven track record of profitable growth and financial resilience 7 Experienced management team 8 Well positioned to capture future growth 5
Product complexity Broad portfolio of casting technologies focused on complex and high value-added products Nemak Casting Technologies 1 Product portfolio focused on complex components Regions NA, SA, EU, Asia GSPM Sand Package HPDC Rotacast LPDC Nemak volume by process Nemak global production based on weight Others 3% HPDC 26% Sand Package 20% GSPM 51% + - - Wheels (Al & Mg) Oil Pans, Housing Covers (Al) Seat Frames (Al & Mg) Pistons (Al & Mg) Instrument Panels (Al & Mg) Front Covers Brake Calipers (Al) (Al & Other) HPDC Blocks (Al) Process complexity Cylinder Heads (Al) Structural Components (Al & Mg) Sand Package Blocks (Al) EV Components (Al) Aut. Transmission Cases (Al) Manual Transmission Cases (Al) Manifolds (Fe) + Higher value added We believe most of our competitors focus on just one or two major casting technologies 1 GSPM stands for Gravity Semi-Permanent Mold, a casting technology used to produce cylinder heads; Sand Package refers to a casting technology used to produce engine blocks; HPDC refers to High Pressure Die Casting, a casting technology used to produce engine blocks, transmission parts and other components; ROTACAST refers to a casting technology used to produce cylinder heads and engine blocks; and LPDC stands for Low Pressure Die Casting, a casting technology used to produce cylinder heads and suspension components. 6
Solid customer relationships with diversified revenue streams average OEM relationship of 20+ years Diversified revenue streams OEM Years of relationship Number of vehicle platforms 30+ 72 30+ 110 30+ 80 20+ 104 20+ 13 NA & Europe 15+ 15+ 19 37 15+ 80 10+ 50 Others 80 Total 645 Nemak supplies engine & transmission components for ~650 out of 1,300 1,200 vehicle platforms worldwide Source: IHS Automotive and Nemak research 7
Global footprint with modern manufacturing facilities 8
Proven track record of profitable growth Organic growth strategy Focused commercial strategy Increase customer share Product portfolio and regional expansion Revenues (US$bn) 3.6 3.9 4.4 4.6 4.5 4.3 M&A strategy Additional customers, products and technology High-growth markets and geographic diversification 3.0 3.0 2.9 Disciplined selection criteria & PMI 2.0 1.3 1.4 Canada Foundries 0.8 0.9 0.9 1.0 0.1 0.1 0.2 0.2 0.2 0.3 0.4 0.4 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15 16 EBITDA (US$M) 16 798 Since 1993, both revenues and EBITDA have grown at a CAGR of ~19% Source: Nemak Audited Financial Statements 9
Experienced management team A. Tamez CEO 32y A. Sada CFO 21y M. Nolte VP of Commercial 21y M. Landeros VP of HR 20y D. Kahn VP Manufacturing and Product Development 16y M. Winterhalter VP Purchasing 16y J. Pons VP of Business Development 20y K. Lellig BU Director Europe 19y N. Cantu BU Co-Director Mexico 23y L. Peña BU Director USA/CAN & SA 18y K. Bentin BU Co-Director Mexico 18y E. Saenz BU Director Asia 19y 10
Future growth opportunities 11
Lightweighting trend driven by CO2 / MPG regulations Strict emission & fuel economy standards have driven up aluminum content per vehicle and growth in Nemak s product categories is poised to capture 75% of all market growth (1) Fuel Economy Normalized to US Standards (MPG) (pounds of aluminum per vehicle) 65 60 55 50 Targets in MPG / grams of CO 2 : US 2025: 55 / 110 EU 2021: 61 / 95 Japan 2020: 55 / 105 China 2020: 50 / 116 314 355 +119 434 161 474 174 45 230 252 131 145 +89 40 35 30 107 119 123 133 183 211 273 300 25 2000 2005 2010 2015 2020E 2025E 2000 2005 2010 2015 2020E Heads, Blocks, Transmissions, Structural Components Wheels, Radiators, Others Source: Ducker Worldwide 2025E Source: International Council of Clean Transportation Note: MPG stands for miles per gallon (1) Based on expected growth in pounds of aluminum per vehicle from 2015-2025 12
Position & strategy Growth in powertrain business driven by aluminum substitution and light vehicle growth Cylinder heads Engine blocks Automatic transmissions (US$bn) (US$bn) (US$bn) 16.1 13.0 2.7 2.5 +2.9 0.2 8.4 0.1 9.4 +1.0 13.4 8.2 9.3 10.4 4.0 3.6 +1.2 4.7 3.1 0.4 1.6 2015 Aluminum 2020E Iron 2015 Aluminum 2020E Iron 2015 High Complexity 2020E Low + Mid Complexity Extend leadership position Continue to capitalize on aluminum penetration Capitalize on leading position in complex transmissions Denotes increase in US$bn Source: IHS Automotive and Nemak research 13
Vertical integration through machining Strategic rationale Nemak heads and blocks machining volume Improves competitive position Increases entry barriers 100% Improves quality, logistics and working capital costs 60% 30% Protect Tier-1 position +30 p.p. Machining business drives value creation 70% 40% 2015 2020 Target Nemak 3rd Party (1) As cast Machined In-house machining target of 70% (1) Volume outsourced by Nemak to Tier II suppliers 14
Lightweighting drives market of aluminum cast structural components Market size (US$bn) 15 Structural components 12 4 2015 2020 2025 Source: Nemak estimates 15
Electric vehicle penetration Global vehicle demand (M vehicles) Electric vehicles expected to reach 10% by 2025 74 74 2010 88 2 86 2015 Internal Combustion Engine 101 2 4 96 2020 Hybrids ~110 4 6 ~100 2025 Pure Electric +10 (+12%) Promising growth opportunity for Nemak Market for aluminum cast EV components expected to reach US$6 billion Signed contracts with 3 OEMs to produce EV components Focus on complex e-drive applications and battery housings Source: Nemak estimates 16
Financial overview 17
Strong financial performance Volume (M Eq. Units) +5% Sales (US$bn) 47.6 49.4 50.7 50.1 4.4 4.6 4.5 4.3 13 14 15 16 13 14 15 16 EBITDA (US$M) Net leverage ratio +28% 623 702 759 798 13 14 15 16 1.9x 1.8x 1.6x 1.6x 13 14 15 16 18
Improved debt profile* Total debt of US$1.452 bn Average life: 6 years Currency mix Other 1 4% Debt Maturity (US$M) Euro 41% USD 55% 500 530 Interest Rate Mix 22% Fixed 17 18 19 20 21 22 23 24 25 78% Floating Working Capital Bank Debt US dollar bond Others New Eurobond *Pro-forma as of December 31, 2016 with Eurobond issuance on March 9, 2017 1 Other currencies include Brazilian Reais, Chinese Renminbi and Indian Rupee 19