TECHNOLOGY PRESENTATION Milano November 28th, 2017
Laurent HEBENSTREIT Chief Executive Officer
Agenda 1 2 3 Introduction Technology Profitable Growth Strategy 3 I
Introduction
Who is Sogefi? o Young automotive company created in 1980 by Carlo De Benedetti o Listed in Milano Stock Exchange since 1986 o Strong Entrepreneurship DNA o Developed through: a series of strategic moves tight cost control o Joined the best automotive suppliers in 2005 o Generated 31M of Cash in 2016 5 I
3 Business Units Suspensions Filtration Air & Cooling MAIN PRODUCTS o Stabilizer Bars o Coil Springs o Oil Filters o Engine Air Filters o Fuel Filters o Cabin Air Filters o Manifolds o Coolant Pumps o Coolant Outlet Housings 1,574M 563M 535M 480M 2016 Sales 36% 34% 30% Main Competitors 6 I
Sogefi Customers CARS AFTERMARKET TRUCKS 2 WHEELERS 3 WHEELERS MAIN BRANDS 7 I
Well balanced clients mix Sogefi Top 10 Clients In % of Total Sales Ford Renault/Nissan 2015 2016 FCA/CNH Industrial PSA GM Daimler Volkswagen/Audi BMW Toyota Geely/Volvo 5% 10% 8 I
Supplying premium customers & models FERRARI 599 PORSCHE CAYENNE AUDI A6 MASERATI QUATTROPORTE BMW 5-serie MERCEDES GLK VOLVO XC90 JAGUAR F-PACE CORVETTE 9 I
Technology
Current Trends Air Quality Fine Particles Reduction CO 2 Emissions Reduction Fuel Consumption Reduction Higher technology requirements Weight Reduction Filtration Filtration Air & Cooling Filtration Air & Cooling Suspensions 11 I
Stabilizer Bar content Suspensions Weight reduction Content by vehicle High Variable wall thickness Tube 45% 24 TECHNOLOGY LEVEL Middle Tube 35% 20 Indicative weight by vehicle: Entry Solid Bar ~6kg 16 12 I
Coil Spring content Suspensions Weight reduction Content by vehicle High Composite 50% 50 TECHNOLOGY LEVEL Middle Steel + high performance process 25% 23 Indicative weight by vehicle: Entry Steel ~10kg 20 13 I
4 Disruptive Future Trends 1 CONNECTIVITY 2 AUTONOMOUS DRIVING o Connected, Autonomous and Shared trends have limited direct impact for Sogefi 3 SHARED MOBILITY ELECTRIFICATION o o Powertrain electrification is a key trend for Filtration and Air & Cooling Sogefi developed with Mc Kinsey support a detailed world data base and model to create alternative powertrain scenarios Higher technology requirements 14 I
Different types of powertrains New Energy Vehicle (NEV) Internal Combustion Engine (ICE) Electric Vehicle (EV) Hybrid Battery Fuel Cell Pure ICE Electrification 15 I
Different types of powertrains Pure ICE Hybrid BEV FCEV MHEV FHEV PHEV Electrification o ICE: Internal Combustion Engine vehicle, operating on fuel. o MHEV: Mild-Hybrid Electric Vehicle, 48V system. (e.g. New Renault Scenic dci 110). o FHEV: o PHEV: o BEV: o FCEV: Full Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Non rechargeable (e.g. Toyota Prius). Plug-in Hybrid Electric Vehicle, operating on fuel, assisted by a battery. Rechargeable (plugged in to grid) (e.g. New Golf GTE). Battery Electric Vehicle, i.e., pure EV, with no ICE content (e.g. Renault ZOE, Nissan LEAF, Tesla). Fuel Cell Electric Vehicle (e.g. Toyota Mirai). 16 I
2017 Powertrain by region EUROPE 41% 87% 54% 90% 1% 3% CHINA NAFTA 19.9 2% 3% 6% WORLD 78% 1% 6% 7% 20.8 Rest of the World 1% 6% 12% 81% Rest of Asia 1% 6% 22% 14.9 72% 28.0 2% 4% 17% 8.7 Type of engine EV Hybrid Diesel Gasoline 92.3 LV sales (M units) Source: Sogefi and Mc Kinsey Estimated volume, including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T (LCV > 3.5T excluded) 17 I
Diesel/Electric disruption trends 1 2 Diesel disruption mainly affecting Europe due to o More stringent regulations o Consumers turning away from Diesel o Politics Diesel circulation restrictions in large cities Diesel share in Europe: from 41% in 2017 to 25% in 2027 in Base case scenario (20% in Strong case) Electrified powertrain evolution o Technology improvements o Politics France & UK to ban Diesel/Petrol cars from 2040 China to significantly increase EV WW EV + Hybrid share: from 6% in 2017 to 30% in 2027 in Base case scenario (33% in Strong case) 18 I
2022 Sogefi Forecast All scenarios predict a reduction of ICE from 98% in 2017 to 93% in Base Case and 89% in Strong Case in 2022 EV High 11% 13% 9% 68% 75% Share of 2022 sales per type of engine, LV 1 global 64% 11% 13% 13% 11% 13% 17% 71% 60% 66% Scenario Base case Strong case EV scenarios 7% 9% 10% 7% 9% 14% 7% 9% 18% Type of engine 75% 71% 67% EV Hybrid Diesel Gasoline EV Low 6% 10% 10% 6% 10% 14% 6% 10% 18% Source: Sogefi and Mc Kinsey Diesel Low Diesel scenarios Diesel High 1 including PC and LCV (<3.5 tons) 19 I
2027 Sogefi Forecast All scenarios predict a reduction of ICE to reach 86% in Base Case and 81% in Strong Case in 2027 EV High Share of 2027 sales per type of engine, LV1 global 59% 56% 53% Scenario Base case 19% 15% 7% 18% 15% 11% 18% 15% 14% Strong case EV scenarios 14% 16% 8% 63% 14% 16% 11% 60% 14% 16% 15% 56% Type of engine EV Hybrid Diesel Gasoline EV Low 10% 16% 8% 66% 10% 16% 12% 62% 10% 16% 15% 59% Source: Sogefi and Mc Kinsey Diesel Low Diesel scenarios Diesel High 1 including PC and LCV (<3.5 tons) 20 I
Powertrain Forecast by region (Sogefi Base Case) NAFTA 2017 2022 2027 EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 7% 6% 5% ICE Gasoline 87% 80% 69% EUROPE 2017 2022 2027 EV 1% 6% 13% Hybrid 3% 7% 14% ICE Diesel 41% 32% 25% ICE Gasoline 54% 55% 49% CHINA 2017 2022 2027 EV 2% 8% 17% Hybrid 3% 11% 18% ICE Diesel 6% 5% 4% ICE Gasoline 90% 76% 61% WORLD 2017 2022 2027 EV 2% 6% 14% Hybrid 4% 9% 16% ICE Diesel 17% 14% 11% ICE Gasoline 78% 71% 60% Rest of the World 2017 2022 2027 EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 12% 10% 8% ICE Gasoline 81% 76% 66% Rest of Asia 2017 2022 2027 EV 1% 5% 11% Hybrid 6% 9% 15% ICE Diesel 22% 21% 18% ICE Gasoline 72% 65% 56% Source: Sogefi and Mc Kinsey 21 I
Light Vehicles Sales Forecast (Sogefi Base Case) o Strong growth of Hybrid powertrains and Electric Vehicles (EV) o But total Internal Combustion Engine (ICE) remains flat Total Vehicles (M units) 2017 2022 2027 CAGR 17/22 CAGR 22/27 92 99 110 1.4% 2.1% EV 1 6 15 35% 19% Hybrid 4 9 17 19% 14% ICE Diesel 15 14 12-2% -2% ICE Gasoline 72 70 66 0% -1% Total ICE Source: Sogefi and Mc Kinsey 91 93 95 0.4% 0.5% Volume including Passenger Car (PC) and Light Commercial Vehicle (LCV) < 3.5T 22 I
Sogefi Filtration / Air&Cooling Main Products Filtration Air & Cooling OEM AFTERMARKET Oil Filter Manifold Engine Air Coolant Pump Fuel Filter Cabin Air Filter European Car Park 10 years average age Coolant Outlet Housing 23 I
Hybrid Powertrain Volume Effect New Product Air & Cooling VOLUME X2 Manifold Coolant Pump Coolant Outlet Housing Battery Pack Battery Pack coolant Manifold Filtration Thermal Pack Coolant Valve Oil Filter Engine Air Fuel Filter High performance Cabin Air Filter 24 I
BEV Powertrain Volume Effect New Product Air & Cooling Battery Pack Battery Pack Coolant Manifold Module Battery Thermal Pack Electric Cooling Module VOLUME X2 Filtration Electric Coolant Pump Coolant Outlet Housing Coolant Valve High performance Cabin Air Filter 25 I
FCEV Powertrain New Product Air & Cooling Electric Coolant Pump Coolant Outlet Housing Coolant Valve Filtration Fuel Cell Air Filter Fuel Cell Filters Water Separator High performance Cabin Air Filter 26 I
SOGEFI on Hybrid and Electric Powertrain 3-serie A8 MALIBU TX5 S-CLASS PANAMERA PACIFICA ZOE FORTWO B-CLASS 500 27 I
Sogefi Filtration / Air&Cooling products offer opportunities o Even if all scenarios predict an increase of EV, the total ICE powertrains could remain flat or a substantial part of the market until 2027. o Hybrid powertrain is a first step towards a world of multiple powertrains. o The rise of EV is depending on key evolving factors (vehicle range, battery costs, infrastructures development, ) o The rise of Hybrid, BEV and FCEV offers opportunities for SOGEFI. More volume of Cooling products New Sogefi products Higher content for existing Sogefi products 28 I
Oil Filter content Filtration Content High Oil Filter Module + Oil Cooler + Valves 23 TECHNOLOGY LEVEL Middle Oil Filter Element + Cap 2 Entry Oil Filter Spin-on 1 29 I
Engine Air Filter content Filtration Content High Engine Air Intake System 28 TECHNOLOGY LEVEL Middle Filter Element + Box 9 Entry Filter Element 2 30 I
Air Cabin Filter content Filtration Content High Synthetic media with activated carbon + anti-allergen properties + high performance Anti-allergen 3 TECHNOLOGY LEVEL Middle Synthetic media with activated carbon Particles and odours 2 Entry Pollen 1 Synthetic media 31 I
Aftermarket Pricing Power Filtration Price Index High Premium 100 TECHNOLOGY LEVEL Middle Mid Range 85 Entry Private Label 80 32 I
Air Intake Manifold content Air & Cooling Content Hot Air flow High Cooled Air flow With Actuator and Cooler 40 Cooled Air flow TECHNOLOGY LEVEL Middle With Actuator 23 Cooled Air flow Entry Simple 10 33 I
Coolant Pump content Air & Cooling Content High Flow control with e-valve or e-motor outlet Smart Coolant Pump 25 TECHNOLOGY LEVEL Middle + + Pump module with Cooler + Thermostat 20 Impeller Entry Inlet Outlet Mechanical pump 8 34 I
Coolant Outlet Housing content Air & Cooling Coolant Outlet Housing Content High M Smart Multi Way Valves 25 TECHNOLOGY LEVEL Middle Electric Thermostat 13 Entry Thermostat 8 35 I
Sogefi Ventures Startups are becoming key players of the automotive world disrupting existing business creating new business OBJECTIVES Generate profits Add value to existing Sogefi products Generate new Sogefi products HOW 1. Monitor the fields relevant to Sogefi: Air and Cooling, Filtration, Suspensions 2. Build joint development agreements with startups 3. Buy minimum 5% to 10% equity 4. Secure active minority shareholders role 5. Cash investment of 3 ~ 5 M per year 36 I
Profitable Growth Strategy
Profitability improvement plan 5 performance drivers to increase operational efficiency 1 PURCHASING 2 SHOPFLOOR 3 PROGRAM 4 MANAGEMENT Scrap reduction o Polyvalence and o o o Cost reduction through technical modifications Pluriannual price and productivity negotiations Low Cost Country sourcing o o o Direct labor productivity Higher automatization Shorter reaction times to deviations Indirect labor productivity increase Lean organizations o o o Price increases for technical modifications Systematic price increases for volume fluctuations Development and tooling cash payment o 5 o o INDIRECT COSTS REDUCTION Polycompetence Process redesign COMPETITIVE FOOTPRINT Industrial excellence Plant competitivity plan 38 I
Sogefi Excellence System Strategic cost reduction initiative 1245 945 TOTAL Material for final product 380 Transformation costs 290 Costs analized 100 Adressable costs 100% 64% 36% 23% 8% o A deep analysis of the cost base has been done o On 100m addressable costs some productivity potential have been identified with expected saving in the next 3 years TOTAL COSTS VALUATION OF POTENTIALS Data: 2016 cost base 39 I
Growth Strategies : Harvest, Challenger, Leader Harvest Challenger Leader Filtration Air & Cooling OEM Oil Filter N 4 Worldwide AFTERMARKET N 1 France Manifold N 2 Worldwide Engine Air Coolant Pump Fuel Filter Cabin Air Filter European Car Park 10 years average age Coolant Outlet Housing 40 I
Geographical Expansion and cost competitive footprint NAFTA Mexico EMEA Morocco Romania India China ASIA Suspensions Filtration EMEA project Air & Cooling 41 I
Tangible Investments 2014-2017E 70 36 42 51 59 2013 2014 2015 2016 2017E Health & Safety, Quality, Capacity increase, Efficiency, New products, New plants 42 I
Value Creation Through ROCE Increase Benchmark* 17.5% 13.5% 12.8% 10.2% 2015 Q3 2015 Q3 2016 Q3 2017 EBIT: 12 months rolling * Lazard Roland Berger: global automotive suppliers study. ROCE of ~600 key suppliers 43 I
DEBT/EBITDA Ratio Improved 3.7 Leverage now supports Profitable Growth Strategy 2.3 1.6 Q3 2015 Q3 2016 Q3 2017 DEBT: Net debt (end of period) EBITDA: 12 months rolling 44 I
Executive Summary Sogefi Strengths 1. Entrepreneurship DNA 2. Intimacy with R&D, Purchasing and Top Management of vehicle manufacturers 3. Recognized technical credibility to develop, launch and ramp-up innovative products 4. Multi-brand Aftermarket provides resilience to OEM volumes fluctuations Higher Technology Requirements EV expected to increase but total ICE will remain a substantial part of the market NEV offer opportunities in terms of more volume of cooling products, new products and higher content Profitable Growth Strategy Cost reduction plan to sustain profitability and cash generation Differentiated product strategies between Harvest, Challenger, Leader External growth opportunities researched to complement organic growth 45 I