GKN Aerospace – Update for Investors
Farnborough Air Show
July 2014
GKN PLC: Delivering to our markets
A global engineering group
Sales of £7.6 billion in 2013
50,000 people in more than 30 countries
Founded in 1759
2013 – Sales and Trading Profit by division
Sales
GKN Aerospace
A leading first tier supplier to the
global aviation industry focussing on
aerostructures, engine systems and
specialty products.
GKN Driveline
A world leading supplier of
automotive driveline systems
and solutions, including
all-wheel drive.
Trading Profit
Land
Systems
11%
Land
Systems
12%
Driveline
36%
Driveline
45%
Aerospace
30%
Powder
Metallurgy
12%
Aerospace
39%
Powder
Metallurgy
14%
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
GKN Powder Metallurgy
The world’s largest manufacturer of
sintered components,
predominantly to the automotive
sector.
GKN Land Systems
A leading supplier of technologydifferentiated power management
solutions and services to the
agricultural, construction, industrial
and mining sectors.
GKN Aerospace
$3.5 billion Global Aerospace company, 35 sites in 9 countries, 11,700 people.
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
GKN Aerospace – World class product portfolio
Aerostructures Global #3
Engine structures
45% of Sales 2013
50% of Sales 2013
Wing
Fuselage
Nacelle and
Pylon
Global #2
Engine Systems and Services
Engine structures
Engine rotatives
Special
products
Global
#1/2
5% of Sales 2013
Transparencies
and Protection
Systems
J-UCAS Fuselage
A380 Fixed Trailing Edge
B747-8 Exhaust
B787 Anti-icing System
A350XWB Rear Spar
CH53K Aft Fuselage
A400M Engine Intake
V22 Fuel Tanks
A330 Flap Skins
B787 Floor Grid
B767 Winglet
HondaJet Fuselage
B787 Cabin Windows
B787 Inner Core Cowl
Full Engine MRO and support
Ariane 5 Exhaust nozzle
F35 Canopy
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
A broad customer base
Aerostructures
Airbus Commercial
Airbus Military
GKN Aerospace Sales Growth 2003 - 2013
Boeing Commercial
2.5
0.6%
NorthropGrumman
Gromman
Northrop
4.0%
Boeing
4.4%
Bell Helicopter
1.5
1.0
0.5
2003
2004
2005
2006
2007
2008
GE
GE
14.3%
2.0
Engine
Systems
UTC
8.2%
4.4%
Lockheed Martin
$bn
Spirit
Airbus
2.7%
2.7%
3.0
Boeing Military
20.2%
18.2%
3.5
UTC
P&W
(8.1%)
Sik
(5.4%)
3.2%
2.1%
1.0%
0.6%
13.5%
Snecma
Rolls Royce
MTU
Honeywell
Military 27%
Other
Civil 73%
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
2009
2010
2011
2012
2013
Market Update:
Combined Airbus and Boeing deliveries for 2013 reached 1,274
aircraft, up from 1,189 in 2012.
Airbus and Boeing forecast deliveries of between 29,000 and 35,000
new single aisle and wide-body aircraft by 2032
− c40% for replacements, c60% for fleet growth
Large commercial aircraft backlog is at a new high (>10,000 aircraft >$1.1 trillion), as is the firm engine order book - current build rate
production is covered for over 8 years. This sustained order growth has
led both Airbus and Boeing to increase production levels for single aisle
and wide bodied aircraft.
Worldwide defence spending remains subject to budget cuts
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Civil Market Dynamics – Continuing Positive Trend
A320/B737 Rate Increases
A320neo/B737MAX Launch
A330/B777 high rates, B777X launch
A350/B787 Production Ramp-up
MRJ/C-Series/MS21 Market Entry
A380/B747 Stable/declining
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Military Market
F-35 JSF
Rate Readiness Phase
C130J
Reducing/Sustaining
F18 Super Hornet
Declining
A400M Atlas
In ramp-up phase
Blackhawk
Reducing/ Sustaining
CH53K
In development
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
GKN Aerospace – well positioned for the future
B737 / A320
HTF7000
A350
B787
A330
A380
Blackhawk
A400M
C130J
JSF
CH53-K
F/A-18
1
2
3
Ship set values $m
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4
5
6
Targeted Innovation – Technology
Future Wing
Technologies
Advanced
Fuselage
Nacelle and
Pylon
Engine
Statics
Engine
Rotatives
Composite Technology
Metallic Technology
Supporting Technology
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Transparencies Protection
& Coatings
Systems
Significant technology achievements in past 12 months
Supported A350 first flight & ultimate test
Lead in
chosen
markets
Supported GTF certification
Launched 4 Additive Manufacture Technology Centres
Increased investment in technology
Opened GKN Engineering Office in Bangalore
Expanded US technology activities (composites & metallics)
Secured key business wins (e.g 737 MAX winglet)
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Leverage
global
footprint
Technology
driving
margin
Operational
excellence
Sustain
above market
growth
Product & Technology Strategy
Near Term
Strategic
Products
Differentiated
Manufacturing
Processes
Airframe structures
Engine structures
1. Deliver Existing
Commitments
Automated composite processes
Secure maturity of
current development
programmes
Rapid Machining & ECM
3. Secure position on
strategic platforms
Mature emerging
technologies for use on
new development &
platform upgrade
programmes
Fabrication & Joining
Additive Manufacture
2. Technology
insertion campaign
Improvement on
existing products &
securing position on
under represented
platforms
High temperature materials
Material
Know-How
Mid/Long Term
Powder materials
Coatings & Surface
technologies
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4. Develop long term
product positioning
Prepare for step
change products &
technologies
Metallic
AM Landscape & GKN Priorities
Metal
AM
DEPOSITION
DESIGNATED
ICON
POWDER BED
PLASMA
EB
LASER
LASER
LASER
EB
BINDER
(WIRE)
(WIRE)
(WIRE)
(POWDER)
(POWDER)
(POWDER)
(POWDER)
P
EB
L
L
L
EB
B
PICTURE
DESCRIPTION
Free deposition of
wire fused using
plasma arc to
produce part
Deposition of wire fused using electron
or laser beam in a chamber to produce
part
Deposition of powder
fused using laser in a
chamber to produce
part
Laser or electron beam
selectively fuses powder on a bed
in a chamber to produce part
Powder / binder
system requiring
down-stream
consolidation
High geometric complexity enables next
generation small prismatic components.
Net-shape parts
achievable at
automotive rates
APPLICATIONS
High material fusion rate and deposition technique
enable large scale near-net shape parts or grow-outs
Accurate but nearnet parts and
claddings
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Synergy with GKN Powder Metallurgy
Hoeganaes
Powder production
240,000 tons of powder
per year
Global # 2
22% global share
Sinter Metals
Component manufacture
6 billion parts per year
many applications
Global # 1
18% global share
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Diverse customer base
80% automotive/
20% industrial
3,000 customers
globally
Key drivers to medium term margin progression
Volvo integration
A350XWB – exit development phase, ramp-up
B787 – production ramp-up
F35 – production ramp-up
Technology insertion in new platforms
Cost base management
Lean deployment throughout value chain
Military budgets - C130J, F18
Customer price pressure
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
GKN Aerospace summary
Growth
above market
Good position on existing
and new commercial
programmes
Well placed on growing
military platforms
Margin range
11% to 13%
ROIC
>20%
GKN technologies bringing
customer value
Low cost manufacturing
footprint
Lean deployment throughout
value chain
Strong Engine Systems postacquisition performance
Business
performance
Strong cashflow
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Capital allocation
Effective make or buy
Summary
GKN Aerospace - Summary
GKN Aerospace has grown to a $3.5 billion global Aerospace company,
with 35 sites in 9 countries, employing 11,700 people. GKN Aerospace are
market leaders in airframe structures, engine components and
transparencies
GKN Aerospace is continuing to grow its investment in leading edge
technologies, bringing their Customers high technology solutions through
effective deployment of innovative solutions
GKN Aerospace is continuing to develop its global manufacturing
presence, with a growing low-cost footprint a key part of the drive towards
increased cost competitiveness
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INVESTOR BRIEFING FARNBOROUGH JULY 2014
Questions