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Disclaimer
• The content of this presentation contains time-sensitive information that is accurate as of the time hereof.
• A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by PKC Group.
• If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, PKC Group will not be reviewing or updating the material that is contained herein.
2April 3, 2013 Capital Markets Day
The Agenda
Capital Markets Day 2013
12.30 Opening wordsMatti Hyytiäinen, President & CEO
12.30 – 13.00 PKC’s StrategyMatti Hyytiäinen, President & CEO
13.00 – 13.20 Developing PKC Uniqueness further Jyrki Keronen, Senior Vice President, Business Development & APAC
13.20 – 13.40 Maximizing current PKC set-up Rico Mutone, Vice President, Sales and Engineering, North America
13.40 – 13.50 Coffee break
13.50 – 14.10 Penetrating into APACMatti Hyytiäinen, President & CEO
14.10 – 14.25 Exploring Opportunities to Expand within Transporta tion IndustryFrank Sovis, President, Wiring Systems, North America
14.25 – 14.45 FinancialsJuha Torniainen, CFO
14.45 – 15.00 Closing StatementMatti Hyytiäinen, President & CEO
3April 3, 2013 Capital Markets Day
Definition: Electrical Distribution Systems
5
PKC delivers Nerve Systems
to vehicles
April 3, 2013 Capital Markets Day
Definition: PKC in Transportation Industry
6April 3, 2013 Capital Markets Day
Railway Vehicles Commercial Aircraft
Material Handling Vehicles
Mining Machinery
Potential Customer SegmentsCurrent Customer Segments
Light Commercial Vehicles (LCV)
Trucks & Buses (HCV & MCV)
Construction Equipment
EnginesAgriculture and Forestry
Recreational Vehicles
PKC Today
“Today, PKC is the Preferred Supplier for the main global Commercial Vehicle brands, supplying Electrical Distribution Systems.
The customer programs are typically 5-10 years long, which gives us a good view ahead. PKC is a critical partner in its customers’ value chain.
We see plenty of opportunities to grow our topline.”
7April 3, 2013 Capital Markets Day
PKC Uniqueness
“Our current position is based on PKC Uniqueness. That is how we call our unique know-how of managing complex processes of individually tailored products and thousands of product variants.
PKC Uniqueness makes us an asset to the customers because we can integrate into their processes, enabling our customers an unlimited product offering, with very short lead-times.
PKC Uniqueness is scalable and hard to copy, which gives us a significant competitive edge.”
8April 3, 2013 Capital Markets Day
PKC Capturing Growth
“We see interesting and above average growth possibilities in our current customer base, in penetrating into Asia and in expanding within the Transportation Industry globally.”
9April 3, 2013 Capital Markets Day
Growth Dynamics
0
1 000
2 000
3 000
4 000
2010 2011 2012 2013 2014 2015 2016 2017 2018
10
• Global heavy and medium duty vehicle production will grow approximately 50% from 2012 to 2018
• EDS content and value will grow approximately 60% from 2012 to 2018 driven by emission standards and technological advancement
• Within Transportation Industry in-house production is historically dominant. This provides PKC an opportunity as outsourcing is gaining momentum.
Global heavy duty and medium duty vehicle production volume
April 3, 2013 Capital Markets Day
1,000 pieces
Source: LMC Automotive forecasting Q4/2012 / PKC own estimation
2012 – 2018 CAGR 6.0%
PKC’s Financial Targets
“Financially we aim high. We target our topline to grow up to 1.4 billion euros by 2018, with EBITDA target >10% while maintaining healthy balance sheet.”
11April 3, 2013 Capital Markets Day
STRATEGIC INITIATIVES
PKC’s Strategy Captures Growth Opportunities
VISION 2020
PKC is the Preferred Supplier in Electrical Distribution Systems for Transportation Industry globally.
12April 3, 2013 Capital Markets Day
Managing the Complexity
Developing PKC Uniqueness further
Maximizing currentPKC set-up
Penetrating into APAC
Exploring opportunities
to expand within Transportation
Industry
Developing Electronics business as a stand alone wi thin PKC Group
13
Capital Markets Day
Developing PKC Uniqueness further
April 3, 2013
Jyrki KeronenSenior Vice President, Business Development & APAC
Developing PKC Uniqueness further
April 3, 2013 Capital Markets Day 14
Managing the Complexity
Developing PKC
Uniqueness further
Maximizing currentPKC set-up
Penetrating into APAC
Exploring opportunities
to expand within Transportation
Industry
Complexity as a Trend will Prevail
April 3, 2013 Capital Markets Day 15
Urbanization
Transportationstandards,
special purpose vehicles
Emerging markets
APACSouth America
Green initiatives
Pollution, fuel efficiency
Mass Customization
High mix, low volumes, architecture platforms
Business evolution
TCO, Technology, Push to pull, Consolidation
Technology
Power & signal, consistency, reliability, light weight materials
Managing the Complexity is a global challenge
PKC Uniqueness –Managing the Complexity
April 3, 2013 Capital Markets Day 16
More than 1 Engineering Change per day over
the lifecycle of product platform
810 routings 2,650 harnesses
5,200 active part numbers11million parts delivered for 50,000 trucks annuall y
Example platform:
PKC Uniqueness – Key Elements
• PKC’s own developed data management process and tools enables seamless interface and data transfer from customer systems to PKC’s design and production
– PKC Data Management -process
• Special PKC COP and PKC LAD tools to support efficient manufacturing ensuring short lead time
– PKC Order Fulfilment -process
• PKC Safe Launch concept, efficient new product launch ramp-up tool
April 3, 2013 Capital Markets Day 17
PKC’s Own Data Management System
April 3, 2013 Capital Markets Day 18
CUSTOMER
Component libraryFunctionalities
3D wiring
CUSTOMER
Daily call-offsSequencing
Timing
CUSTOMER
To assembly lineSequencing
PKC
Data ProcessingMaster / Composite
PKC Data Management -process
PKC
Data ProcessingCutting, Crimping,
Assembly & Final Assembly,Testing, Shipping
PKC Order Fulfilment -process
• Key elements of PKC Uniqueness are developed further in NPI centres – Keila, Estonia
– Acuña, Mexico
– Curitiba, Brazil
• Development focus in– Methods
– MRP system
– Plant logistics / layout
– Production technology
– Processes
– Organization
NPI Centers Enable Continues Development of PKC Uniqueness
19April 3, 2013 Capital Markets Day
PKC Uniqueness - Benefits
• PKC Uniqueness - benefits for customers – Short lead time
– Unlimited customization
– Robust change management
– Fast and secured product launches and ramp-ups
– Competitive TCO (Total Cost of Ownership)
April 3, 2013 Capital Markets Day 20
21
Capital Markets Day
Maximizing Current PKC Set-up
April 3, 2013
Rico MutoneVice President, Sales and Engineering, North America
Maximizing C urrent PKC set-up
April 3, 2013 Capital Markets Day 22
Managing the Complexity
Developing PKC Uniqueness further
Maximizing current
PKC set-upPenetrating into
APAC
Exploring opportunities
to expand within Transportation
Industry
PKC Positioning in Value Chain
April 3, 2013 Capital Markets Day 23
Features
Vehicle Electrical Architecture
Software Hardware Data inputs & outputs
Power Distribution
Components
Wiring Harnesses
Vehicle Electronics
OEM’s
PKC and / orComponents
suppliers
PKC
Global Leader Position as a Target
• Current business relationship with all key western OEMs in commercial vehicle industry enable future growth
• Global leader position as a target
24
32 %
68 %
North America South AmericaEurope
Medium Commercial Vehicle
HeavyCommercialVehicle
PKCOtherSource: ACT report, January 2013, LMC Automotive forecasting Q4/2012. Note: Europe comprised of EU27 + Efta
April 3, 2013 Capital Markets Day
1 %
99 %
APAC
0 %
100 %
Maximizing PKC’s Current Set-up
• Globalizing relationships with our customers
• Expand manufacturing footprint to meet the growing market demand
• Participate future full range commercial light vehicle programs
April 3, 2013 Capital Markets Day 25
0
250
500
750
1 000
1 250
1 500
SouthAmerica
NorthAmerica
EU &Russia
Japan India China
2012 2018 Estimation
Heavy duty and medium duty commercial vehicle production Volume,
1,000 pieces
Source: LMC Automotive forecasting Q4/2012
Penetrating into APAC
April 3, 2013 Capital Markets Day 27
Managing the Complexity
Developing PKC Uniqueness further
Maximizing currentPKC set-up
Penetrating into APAC
Exploring opportunities
to expand within Transportation
Industry
PKC Focus Countries in Asia-Pacific
28
• China is the biggest truck market in the world
– Total production 830,000 trucks in 2012
– Dominated by seven state-owned manufacturers
– Strong governmental influence
• India’s truck market grow steadily
– Total production 280,000 trucks in 2012
– Growth focus in light and medium duty
• Japan has mature market
– Total production 290,000 trucks in 2012
– Growth focus in medium duty
PKC
Current and potential customer
April 3, 2013 Capital Markets Day
APAC Market Dynamics
• Asia, especially China, is the world’s largest commercial vehicle market that is forecast to continue to grow significantly– PKC’s current global customers actively focus their growth into these markets
– In addition to market growth, Asian commercial vehicle markets are subject to a structural change
– New emission standards and customers’ need for uniquely optimized vehicles.
– Technological contents of commercial vehicles increases which adds complexity
• PKC’s core competence is to be able to mass produce high quality uniquely tailored products with infinite variants with very fast turnaround time
– PKC has excellent competitive position to expand its business in Asia to current customers and the leading Asian and Chinese truck manufacturers
April 3, 2013 Capital Markets Day 29
Global Brands in Asia
• Global brands are penetrating into Asian markets with strategies adapted to each local market
– MAN• Sinotruck, China
• Force Motor, India
– Daimler• Fuso, Japan
• Foton, China
• BharatBenz, India
– Volvo • Nissan Diesel/UD Truck, Japan
• Dong Feng, China
• Eicher, India
• SDLG Construction Vehicles, China
– Navistar
• JAC, China
– Iveco
• SAIC, China
– Ford
• Jiangling Motor, China
30April 3, 2013 Capital Markets Day
EDS Base in Asia
• China: 90% of commercial vehicle EDS in-house production– Very limited customization
• Japan: outsourced locally– Cost pressure
• India: outsourced locally – Limited competition and
competence
April 3, 2013 Capital Markets Day 31
PKC’s Strategy in Asia
• Develop our Existing Business Framework– Expand the existing business as
we support our global key customers doing business in China, India and Japan
– Greenfield
• Explore Avenues for New Partnerships– Collaborate with market-leading
customers in China, India and Japan
– Outsourcing deals, joint ventures and acquisition
April 3, 2013 32Capital Markets Day
33
Capital Markets DayExploring Opportunities in Transportation Industry
April 3, 2013
Frank SovisPresident, Wiring Systems, North America
Developing PKC Uniqueness further
April 3, 2013 Capital Markets Day 34
Managing the Complexity
Exploring opportunities
to expand within
Transportation Industry
Maximizing currentPKC set-up
Penetrating into APAC
Developing PKC Uniqueness further
PKC Uniqueness as the Basis
PKC Uniqueness
A global leader in commercial vehicle electrical systems
Expert in Managing the Complexity
Understanding customers and their processes
April 3, 2013 Capital Markets Day 35
• OEMs in the transportation industry face similar challenges than OEM’s in commercial vehicle industry
• PKC specializes in managing these challenges
• PKC’s Uniqueness can be leveraged to add value to adjacent markets
Interesting Segments to Explore
36April 3, 2013 Capital Markets Day
Railway Vehicles Commercial Aircraft
Material Handling Vehicles
Mining Machinery
Potential Customer SegmentsCurrent Customer Segments
Light Commercial Vehicles (LCV)
Trucks & Buses (HCV & MCV)
Construction Equipment
EnginesAgriculture and Forestry
Recreational Vehicles
Interesting Segments to Explore
37April 3, 2013 Capital Markets Day
Railway Vehicles Commercial Aircraft
Material Handling Vehicles
Mining Machinery
Potential Customer Segments
• Sizeable market– Available total end market of
these four combined segments is the same as our current customer segments (excluding light commercial vehicles)
• Traditional Supply Chain– In-house production and
fragmented supply base
• Similar complexity as our current customer segments– Similar quality and reliability
demands
Market Expansion Rationale
April 3, 2013 Capital Markets Day 38
• PKC Uniqueness is scalable and it is not only commercial vehicle related knowhow
• PKC is actively seeking expansion opportunities within Transportation Industry– Study growth opportunities in selected
Transportation Industry Segments– Leverage PKC Uniqueness to provide
value to customers in adjacent markets– Increase economies of scale of purchased
materials
• Rationale for expanding within Transportation Industry– Utilizing the existing PKC knowhow– Better pricing/profit opportunity– Growth opportunities– Increase PKC’s market value
40
Delivering Growth
40
66 84 114 129 125 134 146 178 199 229289 312
202
316
550
928
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Net Sales, EUR million
CAGR 19% during 1997-2012
1997 1998 2000 2002 2003 2005 2006 2007 2008 2009
� Brazilian factory was opened
� Acquisition of electronics business
� Acquisition of Estonian production
� Operations started in China
� PK Cables listed in the Helsinki Stock Exchange
� Acquisition of Russian production
� Acquisition of Electro Canada in Canada, the USA and Mexico
� Acquisition of MAN business in Poland
2010 2011
� Acquisition of SEGU in Germany, Poland and Ukraine
� Acquisition of AEES in North America, Brazil and Ireland
April 3, 2013 Capital Markets Day
Delivering Profitability
38
16
42
60
83
30
7
34
49
65
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
70
80
90
2008 2009 2010 2011 2012
EBITDA (adjusted*) EBITA (adjusted**) EBITDA* % EBITA** %
41
EUR million %
* excluding non-recurring items in EBITDA ** excluding non-recurring items and PPA depreciation and amortization in EBIT
April 3, 2013 Capital Markets Day
Strong Cash Flow over the Cycles
25
42
23
40
76
-10-4 -8 -11 -13
-22
0
0
-80
0
-6
38
15
-50
64
-100
-80
-60
-40
-20
0
20
40
60
80
100
2008 2009 2010 2011 2012
Cash from operations Net capex (organic)Acquisitions Free cash flowCash after net capex
42
EUR million
April 3, 2013 Capital Markets Day
Earnings, Cash Flow and Dividend per Share
43
0,310,13
1,09 1,16 1,120,87
2,32
0,82
1,46
2,97
0,150,40
0,55 0,60 0,70
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2008 2009 2010 2011 2012
Earnings per share
Free cash flow (excl. acquisitions) per share
Dividend per share
EUR
April 3, 2013 Capital Markets Day
Improving Net Working Capital
44
6244
58
125106
5236
58
111
88
-33 -34
-55
-135-121
26
31
17
15
9,3
0
5
10
15
20
25
30
35
-150
-100
-50
0
50
100
150
2008 2009 2010 2011 2012
Receivables Inventories Payables NWC* % of net sales
EUR million %
* Average of beginning and end of the year
April 3, 2013 Capital Markets Day
Solid Balance Sheet and Returns
45
42
49
57
3034
0
10
20
30
40
50
60
2008 2009 2010 2011 2012
Equity ratio, %
76
36
-2
73
34
-100
1020304050607080
2008 2009 2010 2011 2012
Gearing, %
60
28
-2
111
57
-20
0
20
40
60
80
100
120
2008 2009 2010 2011 2012
Net debt
7
3
1917
15
21
6
26
1917
0
5
10
15
20
25
30
2008 2009 2010 2011 2012
ROE, % ROI, %
%%
EUR million%
April 3, 2013 Capital Markets Day
Funding Structure
46
68
8 8 8
47
0
10
20
30
40
50
60
70
80
2013 2014 2015 2016 2017
Loan maturities (excl. leases)EUR million, Dec 31, 2012
Long-term loans from banks 71.8Long-term financial leases 2.8Short-term loans from banks 68.6Short-term financial leases 0.6Total borrowings 143.8Cash 87.2Net debt 56.6
Un-utilized credit facility 30.0
April 3, 2013 Capital Markets Day
Long-Term Financial Targets
Annual Revenue EUR 1.4 Billion by 2018
EBITDA > 10%
Gearing < 75%
Dividends 30 – 60% of Free Cash Flow
Annual Revenue EUR 1.4 Billion by 2018
EBITDA > 10%
Gearing < 75%
Dividends 30 – 60% of Free Cash Flow
Developing PKC Uniqueness
further
Developing PKC Uniqueness
further
Maximizing current PKC set-up
Maximizing current PKC set-up
Penetrating into APAC
Penetrating into APAC
Exploring opportunities
to expand within Transportation
Industry
Exploring opportunities
to expand within Transportation
Industry
47April 3, 2013 Capital Markets Day
PKC is an Excellent Investment Opportunity
• PKC is a growth-driven company
• PKC has unique technological capabilities that deliver major benefits to our customers
• Solid financial position
April 3, 2013 Capital Markets Day 49