Building Global Leaders
Bill Seeger
Finance Director – GKN plc
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
Strategic goals
Building a portfolio of market leaders with:
leading market shares in chosen segments
above market growth in each division
margins expanding through the target ranges
technology leadership - engineering for the future
Sales by division
H1 2011
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
Sales by region
Results summary
Sales
H1 2011
£m
H1 2010
£m
Change
Change
%
2,988
2,701
287
+11%
247
202
45
+22%
8.3%
7.5%
0.8% pts
223
175
48
11.8p
9.6p
2.2p
25
107
(82)
18.1%
13.8%
4.3% pts
Jun 2011
£m
Dec 2010
£m
Change
£m
(174)
(151)
(23)
Trading profit
Trading margin (%)
Profit before tax
Earnings per share (p)
Free cashflow
ROIC (%)
Net debt
Note: Figures exclude the £23m one-off charge relating to the temporary plant closure at the Hoeganaes plant in Gallatin, US
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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GKN Driveline
Trading performance
Sales - £m
Trading profit - £m
Margin %
Return on invested capital %
H1 2011
H1 2010
1,333
1,189
94
82
7.1%
6.9%
16.1%
12.1%
Sales by region
£420m
+3%
Americas
28%
Asia/
Japan
32%
Sales up 12% (£144m)
Market outperformance in all regions
Regional sales split consistent with 2010
Margin 7.1% … progressive
improvement; Japan impact estimated
0.5% pts
H1 2011
£376m
+19%
CVJ Systems
AWD Systems
Transaxle Solutions
eDrive Systems
Europe
40%
Sales by product segment
H1 2011
£1.3bn
£537m
+15%
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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GKN Driveline
From driveshaft to driveline – repositioned globally
2010 sales by customer
Tata
2%
Geely/Volvo
1%
VW
15%
Other
17%
Suzuki
2%
Renault Nissan
12%
Hyundai Kia
2%
Honda
2%
PSA
3%
BMW
4%
Unrivalled capability – global no 1
Fiat Chrysler
10%
Mitsubishi
6%
Ford
8%
Toyota
8%
GM
8%
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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GKN Driveline
Change in light vehicle production and Driveline sales – H1 2011
40%
40%
40%
40%
30%
30%
30%
20%
30%
10%
21%
20%
20%
20%
10%
6%
0%
10%
15%
7%
Market (units)
10%
-30%
-40%
China
Driveline sales
CAGR
2010 - 2014
100.0
Vehicles (millions)
80.0
70.0
60.0
-31%
Japan
Global light vehicle growth
90.0
-4%
-20%
0%
Europe
0%
-10%
4%
0%
Americas
20%
RoW
Developing
5.4%
9.0%
50.0
40.0
Developed
4.0%
30.0
20.0
10.0
Global
5.9%
0.0
2007 2008 2009 2010 2011 2012 2013 2014
Source: IHS Automotive Forecast, January 2011
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Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
GKN Driveline
Getrag acquisition strategically compelling and financially sound
Strong operating base and balanced global footprint
2010 sales by region (£m) – geared products
Complementary customer portfolio
2010 sales by customer (£m) – geared products
400
250
Other
200
Ford
£m 150
300
Land Rover
100
Volvo
50
200
0
North America
Europe
GKN
Asia
Getrag
100
Other
BMW
Fiat
Nissan
GM
Mitsubishi
0
Getrag
GKN
Secures global leadership in all-wheel drive systems and components
eDrive technology licence principally for Europe and North America
Transaction:
Consideration £280m
2010 revenues £380m EBITDA £50m
Completion expected September
7
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
GKN Driveline – summary
Key growth drivers
Outperformance of the global CVJ business
Market growth in North America, China, India and Brazil
Broadening customer and product base in AWD and Trans Axle products
New product opportunities for drivetrain electrification
China as a special market in which to grow our presence
Strong relationships with customers underpin sustainability
Bolt-on acquisitions - focus on AWD and eDrive Systems
Exceptionally well positioned to outperform global markets
Targeting 2% to 3% outperformance relative to market
Move rapidly into target margin range of 8% to 10%
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Building Global Leaders – Powder Metallurgy
Hoeganaes
Powder
production
Sinter Metals
Component
manufacture
220,000 tons of powder
per year
6 billion parts
per year
plenty of applications
US no 1 and
22% global share
World no 1
16% global share
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
Customers
Over 3,000 customers
globally
75% automotive
9
Accelerated trend towards design for PM
Efficient transmission
Reduced emissions
Energy efficiency
Driving dynamics
Industrial
Electrification
New products and
design for PM
increase to c.40%
of sales in 2015
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Powder Metallurgy
Trading performance
H1 2011
H1 2010
435
378
39
26
9.0%
6.9%
15.7%
8.0%
Sales up 15% (£57m)
Strong sales growth across all regions
Sales - £m
Trading profit - £m
Margin %
Return on invested capital %
Sales by region
Europe
41%
North America sales growth reflects
increased domestic OEM volumes;
minimal exposure to Japanese OEMs
Margin 9% - momentum from 2010,
movement into target range
Market Outperformance
H1 2011
£180m
+18%
Sinter Metals market outperformance and
strong revenue growth in major markets
30%
Sales in India, China and Brazil increased by
25%
30%
17%
20%
£205m
+11%
North
America
47%
Asia/SA
12%
10%
£50m
+22%
6%
16%
10%
4%
0%
0%
North America
Market (units)
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
20%
Western Europe
Powder Metallurgy sales
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Powder Metallurgy – summary
Key growth drivers
Value of PM content per vehicle outgrowing market
Continued market growth in Europe and North America with
accelarated growth in India, Brazil and China
Increasing penetration in industrial markets
Unique parts and powder position supports rapid exploitation of
design for PM
Bolt on acquisition potential to strengthen global positioning
and new technology
Powder Metallurgy division set to grow 2%-3% faster than
market with continued margin expansion
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Land Systems
Exploiting GKN capabilities
2010 revenue:
£699m
2015 target
revenue: £1.5bn
Power
Management
(sales £190m)
High
Performance
Structures
(sales £253m)
Aftermarket
and Services
(sales £256m)
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Products for agriculture machinery
Clutches
PTO shafts
Wheels
Gearbox applications
Hydromech Transmission
Clutch applications
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
Gearboxes
PTO shaft applications
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Land Systems
Trading performance
H1 2011
Sales up 24% (£85m)
H1 2010
Regional sales growth reflects:
Sales - £m
Trading profit - £m
Margin %
Return on invested capital %
444
359
39
19
8.8%
5.3%
24.2%
Sales by region
Improving activity in construction, mining
and industrial (31% of sales)
Margin of 8.8% - market positions and
restructuring benefit support acceleration
into target range
6.2%
H1 2011
£95m
+19%
Commercial
vehicle and
passenger car
(+9%)
Americas
21%
£15m
+28%
Strong agricultural recovery (41% of
sales)
Asia 4%
Sales by market
Industrial
(+41%)
£124m
£89m
£334m
+25%
Europe
75%
£49m
Construction
and mining
(+32%)
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
£182m
Agriculture
(+26%)
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Land Systems
Stromag – a high quality addition to
Power Management business unit
Brings capabilities in brakes, flexible couplings
and sensors and strengthens position in clutches
Applications in existing markets (agricultural and
construction) and new markets (renewable energy
and metal processing
Stromag sales by
market (2011E)
Gears
11%
Stromag products
– Wind Turbine application
Wind
20%
Other
industrial
32%
Metal
processing 10%
Cranes
15%
Offhighway
12%
Stromag sales by
region (2011E)
Transaction:
Consideration £174m
2011 projected sales £125m EBITDA £22m
Completion expected September
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
Brazil,
India and
China
5%
USA
8%
Rest of
Europe
15%
Germany
46%
France
26%
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Land Systems - summary
A strong market focused growth platform in place
Key growth drivers
Leverage customer relationships to expand in existing markets
Rapid geographic expansion
Moving into new markets – industrial and renewables
Development of aftermarket capability across markets
Exploit Group technology and develop market leadership in electro mechanical
power management
Targeting organic growth 3% to 4% above global market and expanding
margin into target range
Acquisition to build capability and secure £1.5bn revenue goal in 2015
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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GKN Aerospace
Market
Business
mix
Sector
Customer base
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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GKN Aerospace – world class product portfolio
Composites
Metallic
structures
Engine
products
Nacelles
Canopies and
transparencies
F/A-22 Titanium
Aft Boom
Exhaust systems
Gulfstream G100/G150/
Dassault Falcon 50EX
A400M Composite
Wing Spar
A330 Trent
700 Fan
Cowl Door
Main Landing Gear
Beam Assembly
Canopies and
windshields for military
applications
Fan modules
GEnx Composite Fan Case
Fan
blades
F-135 Fan Inlet Case
F-35 JSF Titanium
Bulkhead
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
B787 passenger
windows
Bombardier Dash 8 - 400
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GKN Aerospace – well positioned for the future
Blackhawk
*
A400M
B747-8
*
F18
F-35
V22
*
C130J
C17
HTF7000
A380
*
*
*
A350
B787
*
A330
A320
*
*
CH53-K
*
1
* Life of programme
2
3
4
5
6
7
8
Significant proportion of life of programme
(Ship set values $m)
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
20
Aerospace markets
Joint venture with COMAC will position GKN for participation in
development of Chinese aerospace industry
Growing list of new aircraft programmes provides revenues and profits for
decades to come
A350
JSF
CH53K
A400M
C919
N/UCAS
B747-8
C Series
B787
A320 NEO
Business jets
With increasing civil build rates, solid platform in defence and new
programme positioning, GKN Aerospace is set for sustained growth
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Aerospace
Trading performance
H1 2011
H1 2010
723
734
80
80
Margin %
11.1%
10.9%
Return on invested capital %
22.5%
24.4%
Sales - £m
Trading profit - £m
Sales £723m … margin 11.1%
Civil 58% up from 53% - Military 42%
down from 47%
Civil sales growth expands Structures
Europe
North America programme run downs
decrease military sales
ROIC reflects A350 investment
Sales by market - H1 2011
Customer split – FY 2010
Rolls
Spirit Royce
Bombardier
(8)%
Engine
Products
£100m
+8%
Structures
Europe
£334m
BAE
Northrop
Special
Products
£51m
+2%
Boeing Military
GE
Lockheed
Boeing Civil
Structures
US
£238m
UTC
(11)%
EADS
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Summary - Aerospace
Proven track of growth and margin progression
Strong platform on existing programmes with increasing
build rates
New programmes now set to ramp up production
Technology development focused on positioning for
future programmes
Aero engines focus for capability development
Targeting compound sales growth of 8% to 10% for a number
of years and further margin expansion
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Summary
Group continues to deliver strong growth and improving
margins
Global positioning, order book strength and sector-leading
technologies support continuing market outperformance
Acquisition of Getrag Driveline Products and Stromag
strategically compelling and earnings enhancing
New partnerships with EVO Electric and COMAC provide
important building blocks for the future
Performing strongly and developing rapidly – GKN entering a
new phase
Driving Sustainable Growth
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011
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Building Global Leaders
Jefferies Industrial and A&D Conference, New York – 9-11 August 2011