Ampco-Pittsburgh Corporation March 29, 2017 Sidoti & Company Spring Convention New York, NY
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward- looking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statements in this document other than statements of historical fact are statements that are, or could be, deemed forward-looking statements within the meaning of the Act. In this document, statements regarding future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words such as “may,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “forecast” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For Ampco-Pittsburgh, these risks and uncertainties include, but are not limited to, those described under Item 1A, Risk Factors, of Ampco-Pittsburgh’s Annual Report on Form 10-K. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise. 2
Agenda Introduction to Ampco-Pittsburgh Acquisitions Performance and 2016 Challenges Restructuring/Strategic Direction Looking Ahead 3
Ampco-Pittsburgh Corporation Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the world. • Traded on NYSE (Symbol – AP) • Headquarters: Carnegie, PA, U.S. • ~ 1,900 employees • 2016 Revenue: $331.9M • Forged and Cast Engineered Products (approx. 75% of 2016 revenues) A world leader in the manufacture of steel rolls (cast and forged) – Union Electric Åkers • 90+ years of experience • 12 sales offices • Six manufacturing facilities in U.S. • Three roll manufacturing plants in China (JVs) • Three roll manufacturing plants in Europe • 4
Ampco-Pittsburgh Corporation (cont’d) • In July 2015, acquired Alloys Unlimited and Processing (Ohio) Supplier of specialty tool, alloy, and carbon steel round bar • Forged and cast product distribution center for quick turnaround requests • • In March 2016, acquired Åkers AB and certain of its affiliates (Sweden) – International roll producer and largest former competitor • In November 2016, acquired ASW Steel Inc. (Ontario) – Specialty steel producer • Air and Liquid Processing (approx. 25% of 2016 revenues) Custom-designed, specialty heat exchangers, air handling systems, and centrifugal pumps • Three U.S. manufacturing facilities: Virginia (two plants) and New York • 5
Ampco-Pittsburgh Global Footprint Locations Manufacturing 6 Sales Office
Ampco-Pittsburgh Corporation (cont’d) Two Segments Reported: 2015 Revenue 2016 Revenue Forged and Cast Engineered Products $152.3M $247.7M* Forged and Cast Rolls • Open Die Forged Products • Air and Liquid Processing $86.2M $84.2M Aerofin- Heat Exchangers • Buffalo Air Handling - Custom Air Handling Systems • Buffalo Pumps – Specialty Centrifugal Pumps • The Corporation $238.5M $331.9M * Revenues for 2016 include that of Åkers and ASW from their respective dates of acquisition in 2016. For the ten months ended December 31, 2016, net sales for Åkers approximated $121.1M. For the two months ended December 31, 2016, net sales for ASW approximated $7.5M. 7
Forged and Cast Engineered Products Segment 8
Backup Roll Work Roll 9
Rolls Staged in Hot Strip Mill (HSM) 10
2016 Global Roll Market • Cast Rolls $1.3B/yr. • Forged Rolls $0.8B/yr. • Total $2.1B/yr. • U.S. Roll Market $0.3B/yr. 11
Key Customers 12
Competing Companies in Global Roll Industry Cast Rolls Forged Rolls *Ampco-Pittsburgh completed acquisition of Åkers in Q1 2016. 13
Air and Liquid Processing Segment (A&LP) 14
Aerofin Products 15
Buffalo Air Handling Custom Air Handling Systems 16
Buffalo Pumps Products Specialized Centrifugal Pumps 17
Åkers and ASW Steel Inc. Acquisitions 18
Benefits of Åkers Acquisition Acquired March 3, 2016 for $74.2M Should contribute to stabilizing UES and improving performance of Ampco Revenue from roll business should grow substantially Cost reduction and other synergies estimated to be $15M or greater Synergies estimated to be fully realized by end of 2017 Estimated cost to realize remaining synergies: $3M to $5M more Provides improved currency “balance” Combined new product development capability 19
ASW Steel Inc. Acquired November 1, 2016 for $13.1M Located in Welland, Ontario, Canada Premier specialty steel-making facility Offers a unique combination of carbon, stainless, and other specialty steelmaking capabilities Flexible steel refining methods include: argon oxygen decarburization, vacuum oxygen decarburization, vacuum degassing, ladle metallurgical station ASW Steel's specialty metals and flexible steel refining methods allow for the production of various high-quality products “Bolt-on” acquisition Annual revenue approximately CAD 65 million 20
Benefits of ASW Acquisition ASW’s broad expertise in flexible steel refining methods provide us with the capabilities to manufacture the additional chemistries needed to expand our reach into the open-die forging market Enhances our ability to grow and add new markets for customers in the following markets: Oil & Gas Power generation Aerospace Transportation Construction 21
Restructuring of Chinese Joint Venture Union Electric Steel MG Roll Co., Ltd. historical poor performance Restructuring completed November 2016 Added third partner, Gongchang Also roll manufacturer Taken over day-to-day operations Before the restructuring After the restructuring Masteel (Group) Holding Company – 51% Masteel (Group) Holding Company – 34% • • Union Electric Steel Hong Kong, Ltd. - 49% Union Electric Steel Hong Kong, Ltd. - 33% • • Jiangsu Gongchang Roll Co., Ltd. – 33% • 22
Ampco-Pittsburgh Recent Performance and 2016 Challenges 23
Ampco’s financial performance has deteriorated in recent years primarily due to UES performance Global steel market depressed since 2011 UES sales, margins, and profits have declined as customers reduced production and costs Air and Liquid Processing profitable, consistent performer, but lacks growth 24
2016 Summary Financials ($ Millions USD) 2016 2015 Net sales $331.9 $238.5 Cost of products sold $276.5 $196.1 Selling and administrative $58.2 $39.5 Depreciation and amortization $20.5 $11.8 Charge (credit) for asbestos litigation $4.6 ($14.3) Charges for impairment $26.7 - (Loss) income from operations ($54.5) $5.0 Other income (expense) ($3.0) ($0.5) Income tax (provision) benefit ($22.7) ($2.6) Equity income (losses) in Chinese JV $0.4 ($0.5) Net (loss) income ($79.8) $1.4 E.P.S ($6.68) $0.13 25
Key Factors Impacting 2016 Profitability Low roll product volume demand ($13.0M) Unfavorable pricing Manufacturing capacity utilization not adequate Non-recurring M&A related costs ($12.8M) Impairment charge (Goodwill) ($26.7M) Asbestos charge, net ($4.6M) Tax Valuation Allowance Reserve ($30.4M) 26
Strategies to Improve Ampco Performance 27
Strategies to Improve Performance are in Process Diversify UES into open die market (in addition to rolls and frac blocks) Bifurcate roll pricing model: commodity vs. high-performance Launch new products (rolls and open die) Pricing strategy Increase plant efficiency, utilization, and cost reductions Replace Aerofin fossil fuel market lost sales 28
Reasons For UES Diversification Cyclicality of steel and aluminum industries drove decision to strategically diversify the company Lack of market size growth Manufacturing requirements for open die forge market are strong match for our manufacturing assets Four year successful record in penetrating the oil field services industry 29
30 Source: FIA
Roll Market 31 Source: FIA
Strategies to Diversify UES Product Portfolio for Growth Utilize flexible manufacturing assets to diversify and offset roll/steel industry cyclicality Capitalize on opportunity to diversify into broader markets beyond oil field services in open die industry Optimize ASW/UES “go to market” strategy 32
Ampco-Pittsburgh Corporation Revenue Trend 7.7% CAGR 33
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