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Midea Group
IR presentation
2016.12
1
2
Corporate Snapshot
3
Milestones
Successful transition into a multi-product and global industry leader
Return to Shareholders
4
Stable dividend distribution to shareholders every year
RMB Bn
5
Market Cap and rankings
Market cap: ~ RMB 200bn
Ranking among A-share companies: 26
Ranking among A-share companies (excl.
financial and energy companies):4
Ranking among Shenzhen stock exchange: 2
+
Overview
Leading Global Manufacturer of Home Appliances and HVAC Systems
FY 2015
$22 billion Export to
200+ Revenue Countries/Regions
Ranked
481th Fortune 2016
Credit ratings
A-/A3/A- S&P/Moody’s/Fitch
FY 2015, US$ Bn
# 1 Global Home Appliances Player by Revenue
2015 Revenue, US$ Bn
6
Product Portfolio
One of the Most Extensive Product Portfolio of Any Global White Goods Players
Rice Cooker/
Pressure Cooker
Kettle
Water
Purifier
General SDA
Products
Vacuum
Cleaner
Heater
Fan
Kitchen
Appliances
Split A/C
Standing A/C
Movable A/C
Residential A/C
Major Domestic
Appliances
side by side
Refrigerator
Roof-top
U.S. Ducted
VRF
Mini VRF
Chillers
Commercial A/C
Dish
Washer
Electric
Oven
Microwave
Cooktop
Juicer
Washing
Machine
Rice Cooker
French Doors
Refrigerator
Freezer In-line Water
Heater
Central A/C
System
Key Components
A/C and REF
Compressor
Electric
Motor
HVAC and
Appliance Motor
Hood
Electronic
Controller Magnetron
Range
Smart Washing
Machine
7
Market Position
No.1 No.2 No.1 No.1 No.1 No.2 No.2 No.3 No.2 No.3 No.3 No.3 No.1
Turnover Breakdown
HVAC account for close to half of revenue; international sales account for over 40%
8
Unit: RMB Bn
Source: 2016 Semi-Annual Report
2016H1 Main Business Turnover Breakdown
Manufacturing Footprint
9
Inside / Outside of China: 17 / 12 production facilities; ~90,000 / ~15,000 employees
Saudi Arabia
Residential AC, Washing
Machine, Refrigerator, Rice
Cooker, Fans
Vietnam (1)
India (2)
Egypt (1)
Brazil (2)
Argentina (1)
Microwave, Stoves
Belarus (1)
China (17)
Residential AC,
Commercial AC,
Refrigerators,
Microwaves, Stoves,
Ovens,
Disinfection cabinets,
Small Appliances,
Compressors, Motors
Lighting
Washing machines,
Vacuum Cleaners,
Water Heaters
Japan (2)
Rice Cooker,
Fan, Induction
Cooker
Refrigerator, Wash Machine, Rice Cooker, Microwave Oven
Thailand (1) Residential AC Residential AC,
Commercial AC Residential AC
Residential AC,
Commercial AC
Italy (1)
Commercial AC
10
Corporate Governance
Management Handover
11
A family enterprise managed by professional managers
Midea Group Shareholders of
Midea Electric
SDA Motor Logistics Midea Electric
(List Co)
Midea
Holding
Strategic
Investors Management
59.85% 21.15% 19%
Issue Shares
Share swap
Midea Group
(List Co)
SDA Motor Logistics Midea Electric
Midea
Holding
Strategic
Investors Management
35.49% 12.54% 11.27%
Others
40.70%
58.83% 41.17%
Prior to IPO
After IPO
In 2012, professional manager team came on board
Hongbo Fang (Paul) Chairman & President
Joined Midea in 1992
In 2013, Midea Group launched IPO
Mingguang Xiao (Peter) CFO
Joined in 2000
Wenxin Wu (Winson) VP
Joined in 1993
Fengtao Zhu (Frank) VP & GM of Kitchen
Appliances
Joined in 1993
Yanmin Gu (Andy) VP
Joined in 2000
Jinliang Wang (Kim) VP & Head of Domestic
Marketing
Joined in 1995
Ziqiang Hu (Zack) VP & Chief of Central
Research
Joined in 2012
Feide Li (Fred) VP & Head of Operations
Joined in 1999
Bitong Yin (Berton) VP & & GM of
Residential AC
Joined in 1999
Board composition:
4 executive + 2 non-executive + 4 independent
Organizational Chart
12
10 Product Divisions + 8 Platforms + Corporate Functions = Great Synergies
Midea Group
Kit
ch
en
Ap
pli
an
ce
s
To
sh
iba L
ifesty
le (
TL
SC
)
La
un
dry
Re
frig
era
tor
Liv
ing
Ap
pli
an
ce
s
Co
mm
erc
ial A
C
En
vir
on
men
tal
Ap
plian
ces
Wa
ter
He
ate
r
Pa
rts
& C
om
po
ne
nts
10 Product Divisions
International
Business
Platform
E-commerce
Platform
M-Smart
Institute
Financing
Platform
Service
Platform
Procurement
Platform R
es
ide
nti
al A
C
Logistics
Platform Central R&D
Institute
Incentive Schemes
13
Clear Shareholding Structure & long-term incentive plans
Midea Group
Controlling Shareholder
36%
Strategic Investors
4%
Management
4%
Other Shareholders
56%
Three terms of share option plans for employees.
Accumulatively account for 6% of TSO.
Majorly management in R&D and manufacturing.
Two terms of “Partners” Program (ESOP)
For key senior management.
From “professional managers” to “business partners”.
Share Option
Plan
“Partners”
Program
14
Strategic Transformations
15
Significant margin improvement and strong cash generation capabilities
Key Financial Changes
2011 2015 Change
Revenue (RMB Bn) 134.1 138.4 3%
Net Earnings (RMB Bn) 6.6 13.6 106%
Net Cash / Debt (RMB Bn) * -5.1 64.9 +70 Bn
Cash flow from Operating Activities (RMB Bn) 4.1 26.7 551%
Revenue per employee (RMB Mn) 6.8 13.1 91%
Number of Employees (‘000) 196 105 -46%
Net Asset (RMB Bn) ** 30.2 56 85%
* The calculation of Net Cash here includes Notes Receivable.
** In addition, the dividend paid to the shareholders of the list company and JV partners amount to RMB 18Bn
in total in the last five years.
16
Leading
Products
• Focus on consumer-centric; improve product competitiveness
• Increase investment in R&D and innovation
• Spin off loss-making product categories; improve product mix
Global
Operation
Efficiency
Driven
• Set up International Business Platform (MIB)
• HQ globalization, subsidiaries localization
• Business model from OEM to OBM
• Joint Ventures, Mergers & Acquisitions
• Launch 632 IT project to standardize and streamline process
• Invest on automation of factories
• Promote Just-in-time manufacturing and destocking initiatives
• Consolidate business support to 6 platforms to create synergies
Strategic Focuses
Strategic focuses shifted to Products, Efficiency, and Globalization
17
Technology & Innovation
Top Global Innovator with increased R&D expenses, personnel and centers
18
Efficiency Driven
Investment on automation & IT; reduction on overcapacity, inventory, leverage
RMB 7Bn on
factory
automation
RMB 2Bn on
632 IT
project
Product
categories:
6432
SKU:
>4,000
2,000
Inventory:
1610Bn
RMB
Loan:
14.44Bn
RMB
Lean organization, lean manufacturing, made to orders (T+3 model)
Investments Reductions
19
Proven Partner with Leading Global Brands
JV cooperation in China,
India, Egypt, Philippines
and South America
JV cooperation in China with
Bosch Thermotechnology
JV cooperation in HVAC
and compressors
JV cooperation on
Commercial Ac
JV cooperation in Belarus
Strategic JV with Little Swan,
OEM business
JV cooperation in China
with Yaskawa on robotics
13.5% Stake in Kuka and
cooperation in robotics
Joint development with Siix
on electronic controllers
Globalization
To achieve global allocation of capital and global operations
HQ
Globalization
Subsidiaries
Localization
Global
standardization
Local
Differentiation
Midea International Business (“MIB”)
• A management platform with corporate functions
• An interface between HQ and overseas subs
• A “Special Economic Zone” within Midea Group
• 15 nationalities of less than 100 employees
OEM OBM
Functional Brand
Emotional Brand
Aspirational Brand
20
Recent Transactions
美的以5亿美元,受让
Midea + Clivet Midea + Toshiba Midea + KUKA
Acquisition of 80.1% stake in the
home appliances businesses of
Toshiba with a consideration of
c.US$500 million
Being licensed to use the Toshiba
brand worldwide for 40 years;
Obtained over 5,000 IP assets
Significant synergies in brand,
channels, R&D, supply chain, etc.
Launched a voluntary tender offer at
EUR115 in cash per KUKA share;
Total consideration amounts to be
approximately EUR 3.7Bn
81.04% of shares being tendered,
plus the 13.51% shares acquired by
Midea prior to the takeover offer,
results in a total of 94.55% of all
issued shares of KUKA
All Completion Conditions are
satisfied. Settlement will be
completed in the first half of January.
Acquisition of 80% stake in Clivet, a
European leading company based
in Italy
Improve market share on the
European as well as global markets
Significant synergies in in product
offerings, market presence, supply
chain, manufacturing and
technologies
Being closed on 30 June 2016 Being closed on 31 October 2016 Still in progress
21
Future Strategies
New geographic expansion
Existing business
New business
“Leading Products” strategy
Focusing on strategic markets
Building, security, B to B business
22
Business Update
23
Revenue & Margins
Revenue growth recovered; both gross and net profit margin further increased
Note: Acquisition of TLSC was closed on 30 June 2016. Financial reports of TLSC has been consolidated since then.
24
Cash & Cash Flow
Abundant cash-in-hand; strong cash generation capabilities
* The calculation of Net Cash here includes Notes receivables.
25
Cash Conversion Cycle
Cash conversion cycle became negative
Thank you!
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