GKN - Moving the world
Nigel Stein, Chief Executive, GKN plc
JP Morgan Cazenove Capital Goods Conference,14 June 2012
Strategic overview
GKN’s strategy
Lead in chosen markets
Leverage global footprint
Technology driving margin
Sustain above-market growth
Creating long-term shareholder value
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Strong businesses
World leading positions
Driveshafts
All-wheel drive (AWD)
eDrive
Sinter components
Composite aero-structures
Industrial power management devices
Global reach
Europe
eTransmission
Americas
Composite fan blade
Asia
GKN Driveline
GKN Powder Metallurgy
Divisional sales
by region
GKN Aerospace
GKN Land Systems
0%
20%
40%
60%
80%
Driving for above market growth
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100%
Technology drives margins
Group margin
Continued margin improvement
9
Progress after recession
8
Reached Group target range
% 7
Increased targets for three divisions
6
5
4
3
2005
2006
2007
2008
2009
1
2011
margin
Current
target
New
target
GKN Driveline
7.1%
8-10%
No change
GKN Powder Metallurgy
8.5%
8-10%
9-11%
GKN Aerospace
11.2%
10-12%
11-13%
GKN Land Systems
8.0%
7-10%
8-11%
8-10%
Accelerated
progress
into range
2010
2011
Group
1
Excluding Gallatin impact
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8.0%(1)
Balanced approach to increase shareholder value
GKN Land Systems
Growth
TARGET: Above-market growth
TARGET: 8-10% margins
Business
Performance
Margin
Increasing EPS and
Dividends
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Return on
invested
capital
TARGET: ROIC 20%+
Different divisional priorities
GKN Aerospace
GKN Land Systems
GKN Land Systems
Growth
GKN Driveline
GKN Powder Metallurgy
Business
Performance
Margin
Increasing EPS and
Dividends
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Return on
invested
capital
GKN Driveline – global leader in driveline
Sales £2,795m; Trading margin 7.0%
including acquisitions & disposals
Market segments
Global driveshaft leadership. Continuing
expansion in faster growing emerging markets
(using proforma Getrag Driveline Products)
Transaxle & Others 7%
− Particular strength in China, India, Brazil
Getrag Driveline Products acquisition creates
AWD leader
− Added content per vehicle, growth 1-2% above market
− Opportunities in emerging markets
World leader in eDrive gearboxes
− Investing in the future – 5-10 years ahead
Priority – Margin improvement
Further develop AWD systems approach
Pricing initiatives – more selective
Driving down costs
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AWD
31%
CVJ/sideshaft
62%
Automotive markets
Global light vehicle production increased by 4% in Q1 2012 - strongest markets
include Japan, North America and India while Brazil, Europe and China fell
50
49%
40
Japan
30
% change
North America
20
10
15%
India
China
5%
Europe
0
-10
Brazil
-4%
-8%
-10%
-20
Strong recovery in Japan following disruption caused by earthquake/tsunami in
March 2011
Production in China more positive for non-domestic OEMs
European premium vehicles remain strong
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GKN Powder Metallurgy - Global leader in Powder Metal parts6
Sales £845m; Trading margin 8.5%
Starting to deliver on division’s potential
Unique position with both Powder and Sinter
technology and capability
“Design for PM” gathering pace – higher margin
Value of PM content per vehicle outgrowing market
£m
1000
Divisional sales and margin
%
10
8
800
6
600
4
400
2
200
0
-2
0
Priority – Drive up ROIC
2006
Accelerated growth in India, Brazil and China
Increasing penetration in industrial markets
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2007
2008
Sales
2009
2010
% ROS
2011
GKN Aerospace – World class composite capability6
Sales £1,481m; Trading margin 11.2%
Delivering on major civil platforms
− Delivered first Airbus A350 XWB composite
wing spar set
− Boeing 787 now in service
HondaJet contract for composite fuselage
− New plant in Orangeburg, S. Carolina, USA.
Priority – Deliver growth
Strong platform on existing programmes (Boeing
& Airbus backlog of 7000+ aircraft)
Increasing build rates as new programmes
gradually ramp up production
Technology development for future programmes
(e.g. Rolls-Royce JV for composite fan blades)
Aero engines focus for capability development
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GKN shipset values
Airbus A380
$8.0m
Boeing 787
$2.6m
Airbus A350
$2.5m
HondaJet
$0.5m
GKN Land Systems – Building a world leader in industrial power management
Sales £885m; Trading margin 7.6%
including acquisitions & disposals
End market sales split
(using proforma Stromag)
Industrial power management focus
− Stromag acquisition
− New competencies in new industries
Industrial
30%
Agriculture
35%
Priority – Deliver growth
Fundamentals for agricultural, construction and
industrial markets good
Commercial
vehicles & cars 24%
− Population, urbanisation, diet, automation
Moving into new markets – industrial and
renewables
Rapid geographic expansion
Develop broader “systems and solutions supplier”
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Construction &
Mining 11%
GKN is growing
Strong growth over five years
Growth resumed after interruption of recession
Sales increased from £3.8bn in 2006 to £6.1bn in 2011
CAGR of 10%
2011 each division grew ahead of its markets
Management sales, including acquisitions
7
CAGR 10%
6
5
£bn
4
3
2
1
2006
2007
2008
2009
2010
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2011
First quarter 2012 trading update
Market conditions in Q1 consistent with expectations at the time of
the announcement of the 2011 results
− Global light vehicle production up 4%, civil aerospace improving and further growth
in agricultural and construction/mining markets
All businesses making good progress, underlying sales up 8%
Management basis
Sales
Trading Profit
Trading Margin (%)
Profit before Tax
2012 Q1 £m
Change
1,742
17%
142
19%
8.2%
0.2pts
125
17%
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Summary
GKN’s strategy
Four strong businesses
Clear strategy
Lead in chosen markets
Excellent basis for future success
Leverage global footprint
Technology driving margin
Sustain above-market growth
Creating long-term shareholder value
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Disclaimer
Cautionary Statement
This presentation contains forward looking statements which are made in
good faith based on the information available at the time of its approval. It is
believed that the expectations reflected in these statements are reasonable
but they may be affected by a number of risks and uncertainties that are
inherent in any forward looking statement which could cause actual results to
differ materially from those currently anticipated. Nothing in this document
should be regarded as a profits forecast.
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