GKN: Engineering that moves the World
J P Morgan Cazenove CEO Conference
Nigel Stein | CEO, GKN plc | 12 June 2014
A Tier 1 Supplier to the major OE manufacturers in Auto, Aero and
Land Systems markets
Global engineering group
Sales of £7.6 billion in 2013
48,000 people in more than 30 countries
2013 - Sales by division
Land Systems
(12%)
£899m
Other
(1%)
£104m
Driveline
(45%)
£3,416m
Aerospace
(30%)
£2,243m
GKN Aerospace
A leading first tier supplier to the
global aerospace industry.
GKN Driveline
A world leading supplier of
automotive driveline systems
and solutions.
GKN Powder Metallurgy
One of the world’s largest
manufacturers of metal powder
and sintered components.
GKN Land Systems
A leading supplier of engineered
power management products,
systems and services.
Powder Metallurgy
(12%)
£932m
All group financial data in this document relates to 2013 unless otherwise stated. Sales figures are presented on a management basis
J P MORGAN CAZENOVE CEO CONFERENCE – 12 JUNE 2014
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Our strategy
Four strong
divisions
Creating long-term
shareholder value
Five strategic
objectives
Lead in chosen
markets
Growth target:
Above market
Growth
Leverage global
footprint
Technology driving
margin
Margin
Operational
excellence
BUSINESS
PERFORMANCE
Group target:
8-10%
ROIC
Target: 20%
Cash Flow
Sustain above
market growth
J P MORGAN CAZENOVE CEO CONFERENCE – 12 JUNE 2014
Increasing cash flow,
EPS and dividends
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Key financial metrics
£9bn
Sales
£7.6bn
£7bn
£5bn
FY 2010
FY 2011
FY 2012
FY 2013
9%
Margin
8.7%
7%
5%
FY 2010
FY 2011
FY 2012
FY 2013
FY 2012
FY 2013
20%
18%
16%
14%
ROIC
17.3%
FY 2010
FY 2011
£400m
Free cash flow
£346m
£200m
£0m
FY 2010
FY 2011
FY 2012
FY 2013
All group financial data in this document relates to 2013 unless otherwise stated. Sales figures are presented on a management basis
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GKN Aerospace – at a glance
11,700 employees
32 manufacturing
locations
Nine countries
GKN Aerospace is a world leading global tier one supplier of airframe
and engine structures, components, assemblies and transparencies to
a wide range of aircraft and engine prime contractors and other tier
one suppliers. It operates in three main product areas: aerostructures,
engine components/sub-systems and special products.
Sales: £2.24bn
GKN Aerospace
Sales by market 2013
GKN Aerospace
Sales by product 2013
£114m Special products
27%
Military
£1,016m
Aerostructures
£1,113m
Engine components
and sub-systems
73%
Commercial
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GKN Aerospace - Strong customer relationships
GKN Aerospace
Sales by customer 2013
Other 19%
Airbus 23%
Lockheed 2%
Spirit 3%
Honeywell 3%
UTC 13%
MTU 3%
Rolls Royce
4%
Snecma 5%
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Boeing 12%
GE 13%
5
Strong commercial outlook
Airbus A380
30,000 passenger aircraft forecast to be
delivered between now and 2032
− Order backlog of 8,500 large commercial
aircraft >$1 trillion
Boeing 737 MAX
Civil rotorcraft and large business jets –
markets strengthening
BUT…
Western defence spending remains
subject to budget cutbacks
Airbus A350
− until F35 ramps up
F-35 Joint Strike Fighter
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GKN Aerospace - summary
Key growth drivers
Commercial (73% of sales)
− Strong position on existing programmes with increasing build rates from
2016/2017
− New programmes now set to ramp-up production – 787, A350
Military (27% of sales)
− Ending of older military programmes (C17, F/A-18) will present a headwind
before new programmes ramp up (JSF)
Good technology – aim to win new positions on growth programmes
Successful integration of Volvo Aero; good track record on acquisitions
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GKN Driveline – at a glance
24,000 employees
45 manufacturing
locations
22 countries
GKN Driveline is a world leading supplier of automotive driveline
systems and solutions. As a global business serving the leading
vehicle manufacturers, GKN Driveline develops, builds and supplies
an extensive range of automotive driveline products and systems –
for use in the smallest ultra low-cost car to the most sophisticated
premium vehicle demanding the most complex driving dynamics.
Sales: £3.42bn
GKN Driveline
Sales by product 2013
GKN Driveline
Sales by customer 2013
CVJ systems
Other
18%
AWD systems
Trans-axle
solutions
eDrive systems
VW
15%
Volvo Cars
4%
Mitsubishi
Group 4%
GM Group
12%
BMW 4%
Tata Group
5%
Other
Fiat
Chrysler
11%
Toyota
Group 6%
RenaultNissan 10%
J P MORGAN CAZENOVE CEO CONFERENCE – 12 JUNE 2014
Ford Group
11%
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GKN Driveline - Truly global footprint
GKN Driveline
Sales by region 2013
27%
Rest of
world
37%
Europe
36%
Americas
(Million vehicles)
Global light vehicle production trend
85
87
90
94
98
100
102
Manufacturing plant
Joint Venture
Corporate office /
Engineering centre
2013 2014 2015 2016 2017 2018 2019
Source: IHS Automotive, April 2014
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GKN Driveline - A complete driveline solution
Leadership in all major product lines
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GKN Driveline – summary
Key growth drivers
CVJ – unrivalled global footprint and increasing global platforms
AWD – increased content per vehicle and broadening customer base
− China is a special market for AWD growth
Well positioned to outperform global markets
− Targeting 2% outperformance relative to market
Priority to enter margin rate of 8% to 10%
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GKN Powder Metallurgy – at a glance
c.7,000 employees
34 locations
14 countries
GKN Powder Metallurgy comprises Hoeganaes and GKN Sinter
Metals. Hoeganaes is one of the world's largest metal powder
manufacturers and produces the metal powder that GKN Sinter Metals
and others use to manufacture precision automotive components as
well as components for industrial and consumer applications.
Sales: £932m
GKN Powder Metallurgy
Sales by region 2013
GKN Powder Metallurgy
Sales by customer 2013
Hoeganaes
16%
Sinter
Rest of world
8%
Ford
10%
GM
8%
ZF 4%
Sinter
Americas
41%
Other
64%
Fiat Chrysler 4%
Hilite 3%
Linamar 3%
VW Group 2%
Bosch 2%
Sinter Europe
35%
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GKN Powder Metallurgy - Accelerated trend towards design for PM
Key growth drivers
Fuel efficiency
Reduced emissions
Electrification
Weight and space saving
Sales by product type (Component)
Automotive products
P-Rotor Pump components
Differential gears
Variable Valve Timing components
Torque converter
Magnetic clutches
Industrial
20%
Automotive
80%
Electrical Power Steering Parts
J P MORGAN CAZENOVE CEO CONFERENCE – 12 JUNE 2014
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GKN 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”
Addititive layer manufacturing / 3D printing – complementary process
GKN Powder Metallurgy targets growth 2%-3% above market with
continued margin expansion
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GKN Land Systems – at a glance
GKN Land Systems is a leading supplier of engineered
power management products, systems and services. It
designs, manufactures and supplies products and
services for the agricultural, construction, mining and
utility vehicle markets and key industrial segments,
offering integrated powertrain solutions.
c.5,400 employees
34 locations
15 countries
Sales: £899m
GKN Land Systems
Sales by market 2013
GKN Land Systems
Sales by customer 2013
GKN Land Systems
Sales by Region 2013
Asia, 3%
Ford
10%
Industrial
23%
GM
8%
Americas,
21%
ZF, 4%
Fiat Chrysler, 4%
Hilite, 3%
Other
64%
Linamar, 3%
VW Group, 2%
Automotive
19%
Agriculture
45%
Europe,
76%
Bosch, 2%
Construction &
mining 13%
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GKN Land Systems – integrated Powertrain components
Clutches
PTO shafts
Gearboxes
World no 1 global supplier of agricultural power take off
shafts and high speed primary driveshafts
A leading global supplier of clutch and brake solutions
A leading global supplier of off-highway wheels
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GKN Land Systems - summary
Key growth drivers
Continued “industrialisation” of agricultural and urbanisation provide
good underlying market fundamentals
Leveraging customer relationships to increase content per vehicle
Geographic expansion – China and North America
Exploit Group technology and develop market leadership in electro
mechanical power management
Targeting organic growth above global market; margin target range of
8-11%
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Looking forward
18
Developing technology
Investing for the long term
Increasing R&D
Additive Manufacture in development at GKN
Aerospace’s facility in Filton, UK
3.2% of sales
− Step towards 4% target
Increasing capex by £60m in 2014 to support
organic growth
Future technologies
Future wing design – Aerospace
Advanced composites – Aerospace
Concept lightweight bracket
for aircraft wings
eDrive/Hybrid drive – Driveline/Land Systems
Hydrogen storage technologies – PM
Advanced presses and tooling – PM
Additive Manufacture/3D printing – Group
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GKN summary
Well positioned to deliver sustainable growth
Delivering shareholder value through a balance of:
Growth in excess of the markets
Improving margins
Return on invested capital
Increasing cashflow and dividends
Additional growth through strategic, bolt-on acquisitions
- adding capability, market position and global footprint
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Questions
21
Appendix
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Key financial metrics
Profit before tax
£578m
£750m
£500m
£250m
£0m
FY 2010
FY 2011
FY 2012
FY 2013
30p
Earnings per share
28.7p
25p
20p
FY 2010
FY 2011
FY 2012
FY 2013
FY 2012
FY 2013
9p
Dividend per share
7.9p
6p
3p
FY 2010
FY 2011
£1,000m
Net debt
£732m
£500m
£0m
FY 2010
FY 2011
FY 2012
FY 2013
All group financial data in this document relates to 2013 unless otherwise stated. Sales figures are presented on a management basis
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GKN Aerospace – World class product portfolio
Aerostructures
Global
#3
WINGS & FUSELAGE
45% of Sales 2013
Engine structures
NACELLE & PYLON
50% of Sales 2013
Global
#2
ENGINE SYSTEMS & SERVICES
Special
Products
Global
#1/2
5% of Sales 2013
Engine structures
B747-8 Exhaust
Transparencies and Protection
Systems
B787 Anti-icing System
A380 Fixed Trailing Edge
B767 Winglet
Engine rotatives
V22 Fuel Tanks
A400M Engine Intake
A350XWB Rear Spar
B787 Floor Grid
B787 Cabin Windows
Full Engine MRO and support
J-UCAS Fuselage
Ariane 5 Exhaust nozzle
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F35 Canopy
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GKN Aerospace - Well positioned for the future
Commercial
B737 / A320
HTF7000
A350
B787
A330
A380
Blackhawk
Well positioned for the future
V22
Military
C130J
A400M
JSF
CH53-K
F/A-18
C17
1
2
3
4
5
6
7
8
Ship set values $m
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GKN Driveline - Developing technology
The future of eDrive
Exceptionally demanding Porsche vision for a supercar
GKN developed new single speed disconnect eAxle with eMotor assembly
“Nurburgring fast, but with great fuel efficiency”
Porsche 918 Spyder plug-in hybrid super sports car
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Disclaimer
Cautionary statement
This presentation contains forward looking statements which are made in good faith
based on the information available to 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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