GRUPO IN INDUSTRIAL SALTILLO, S.A .A.B. DE C.V. Corporate Presentation February, 2018 1
Forward Looking Statement This presentation and discussion may contain forecasts or projections in accordance with the vision and expectations of the Administration with respect to the performance of the Company, the businesses and future events. These forecasts and projections are subject to risks, uncertainties and assumptions that are uncertain. Several factors can cause actual results to differ materially from those forecasts, projections and plans of the Administration, including, without limitation, business development and marketing of new products, the demand for and acceptance of the Company’s products, economic conditions in the product markets and the different regions, the cost of raw materials and energy and the fluctuation of the exchange rate. FINANCIAL EXPECTATIONS The financial expectations, forecasts and projections in this presentation reflect the current beliefs of the Company and its Administration. The Company is not required and does not acquire duty to update this presentation or any forecast, projection or expectation as a result of new information, events or circumstances subsequent to this date. 2
Diversification Auto Parts Construction Housewares Casting and machining of auto Ceramic and Porcelain Tiles, Kitchen and tableware in parts in gray iron, ductile iron, Water Heaters* and Pipe Fitting aluminum, enamel on steel and and aluminum; for brake, engine, products*. ceramic. transmission and suspension * In process of Divestment. systems. 3 * Subject to COFECE authorization.
Breakdown GIS figures 2017 including Calorex Auto Parts 79% 2010 to 2017: 59% Over $650 Million USD CAPEX for Organic growth and Acquisitions. * 33% Iron Casting Annual Capacity grew 17% from 78 k to +550 K tons. * 8% 4% Sales EBITDA HOUSEWARES AUTO PARTS CONSTRUCTION 4 * Including Evercast (JV with TRW)
GISSA at a Glance 90 90 Year St Story 40 40+ + years lis listed in in BMV + + 80 8000 00 em employees 25 25 man anufacturin ing facili litie ies $1B USD Sa $1 Sale les fr from 20 2014 14 to o 20 2017 17 in in 7 7 cou ountr trie ies & 3 3 conti tinents 15% EBIT 15 ITDA Mar argin in Sale Sa les dou ouble led an and EBIT ITDA trip triple led 5 GIS figures including Calorex
Strategic Repositioning Up to USD $308 USD $50 USD $65 USD $50 millions to Acquire INFUN Group millions design, casting y machining of parts for millions millions engine, transmission and suspension – JV with Fagor Ederlan for Acquisition Auto Parts To double the installed machining of iron parts Auto Industry. Facilities in Spain, Italy facility in SLP capacity of SLP facility and China * 2011 2012-2013 2015 2010 2012 2014-2015 2016 2017 USD $88 USD $210 USD $30 USD $439 USD $120 Millions to Acquire ACE Group Millions millions of millions JV with TRW millions Facilities in Spain, Poland and the Czech Water Heaters BU Divestment of for casting and To increase capacity in Republic. Iron casting and Aluminum Blocks and Heads machining of parts for Divestiture Saltillo and Irapuato casting and machining. Leader in parts for Division brake systems Announcement ** brake systems in Europe 6 * US $352 including Net Debt * Subject to COFECE authorization
Global Footprint GIS figures 2017 including Calorex Re Revenue by by G Geography Re Revenue by by Curr urrency Pre e Inf nfun Ac Acquisi sition Pre e Inf nfun Ac Acquisi sition Pro-forma Inf nfun Ac Acquisi sition Pro-forma Inf nfun Ac Acquisi sition Asia CNY Europe EUR USD 4% 4% USD 17% 17% EUR Europe 33% 30% 30% 39% 66% MXN 44% 83% America 7 America MXN 33%
Highlights of Globalization • Auto Parts developed a Di Differentiated Valu alue Proposal. • Expansion in the Auto Parts Industry: Ne New Ge Geographie ies and growing our customer base • Exposition to Nafta market is reduced because of Di Diversification to to Europe an and Chin ina. • Alu lumin inum Cas astin ing process added to portfolio. • Machining + Co-design (R&D): Valu lue Chain ain In Integration . • Chall allengin ing year of Transit ition and Focus on In Integration . • Tale alent development to achieve Synergies an and Best Practic ices. 8
AUTO PARTS SECTOR 5 Business Units and facilities in Mexico, Spain, Italy, Poland, Czech Republic and China, we supply iron and aluminum components to our customers at the most important regions in the world. Mexican and European leaders in the production of calipers for brake systems and engine crankshafts. 9
Auto Parts Business Units 6 Business Units in North America, Europe and China. Installed capacity of +550 k tons iron foundry, + 10 k tons aluminum & + 15 machined million pieces. Iron Foundry Iron & Aluminum Iron Foundry + Iron Foundry + Machining Machining Foundry + Machining Machining Machining México Spain, Poland & Spain, Italy & China México México China Czech Rep. 235k tons 82k tons (Iron) 193k tons 52k tons 3.5 Mill. Pc. 2.5 Mill. Pc. 10k tons (Alum) 2.5 Mill. Pc. 6 Mill. Pc. 3.5 Mill. Pc. (Mac) 85% Tiers 100% Tiers 74% OEM 100% Tiers 100% Tiers 100% Tiers 15% OEM 26% Tiers Brake, Engine, Brake Engine, Suspension Brake Suspension, Suspension Suspension & and Transmission Transmission & Brake 10 Transmission
Auto Parts Product Portfolio Engine (27%) Suspension (13%) • Crankshafts • Bearings • Knuckles • Exhaust manifolds • Control arms • Flywheels • Dampers Brake (44%) Transmission (16%) • Rotor / disk • Drums • Differential Case • Spacers • Yokes • Brackets • Gear box • Clutch Plates • Calipers • Cylinder Wheel 11
Auto Parts Highlights • Largest independent manufacturer of Crankshafts in the world rld. • La Largest independent Foundry in Mexic xico. • From 2010 to 2017 the Iron Casting Annual Ca Capacit ity grew from 78K to 550K tons. • Co-Design + R&D + Casting + Machining: In Integrated Valu lue Chain in. • 60 60% Revenues Europe + Ch Chin ina and 40% Revenues in North America. • EBI BITDA margin in exp xpansio ion . 12
Differentiated Value Proposal Material Strategic Global Co-Designing Diversification Footprint Iron Molding Multi-region Process R&D Platforms Diversification Focus on 6 Strategic Machining Value Efficiency based Products Added Process Competitiveness Customer Oriented 13
INDUSTRY OVERVIEW 14
Industry Cycle – North America • 2017 Light Vehicles Production ~ 17.1 million • 2017-2021 CAGR 1.3% * • Production Growth Driver: México • SUV’s most dynamic category Our Posit ition: Competitiv ive Advantage: • Iron Foundry Market Share in México ~ 30% • Machining (value added) capabilities • Future • Recognized demand growth in Mexican Iron Foundry as experts in safety critical Capacity – Expansion Opportunity components • ~ 75% of GIS NA Auto Parts Sales to Pickups & SUVs • Strategic Facilities Location 15 * IHS Automotive Light Vehicle Production Forecast @ August 2017
NAFTA Negotiations KE KEY ISS ISSUES OF OF CONTROVERSY MIT ITIGATING FACT CTORS • • Regional Content (62.5% to 85%) GIS NA Auto Parts ~ 90% (Average) of Regional Content • • US Content (50%) Long lifecycles / Limited capacity in the US • • Sunset Clause Structured review vs Automatic termination • NAFTA CA CANCELLATION Tactics as dramatic rhetoric • Will only raise vehicle prices for American consumers • ~ 3% tariffs under WTO rules (MFN) 60% of GIS Auto Parts Sales made in Europe and China 16
Industry Cycle - Europe • 2017 Passenger Cars Production ~ 19.8 million • 2017-2021 CAGR 2.6% * • Production Growth Driver: Eastern Europe • German OEMs increasing Market Share Our Posit ition: Competitiv ive Advantage: • ACE Brakes Market Share ~ 25% • Strong and specialized European supplier • Iron & Aluminum (Foundry & Machining) • Leading edge capabilities in new products development • Ongoing Capacity Expansion in Czech Republic and Spain • Western and Central Eastern Europe Presence 17 * PWC July 2017 Passenger Cars / PanEurope: Europe, Turkey and Russia
Industry Cycle - China • 2017 Vehicle Production ~ 28 million • 2017-2021 CAGR 3.1% * • World´s production leader • Japan & Korea production decreasing Our Posit ition: Competitiv ive Advantage: • Iron Foundry & Machining • Local Customers Access • Possible Capacity Expansion • Regional Export Capabilities • Machining JV with Fagor Ederlan • World Class Facilities (Customer Awarded) 18 * IHS
INDUSTRY TRENDS 19
Industry Disruptive Trends • Elect lectrif ification ‐ * 2025 Global Sales ~ 104 million vehicles, expected mix: ‐ 86% ICE + Hybrid ‐ 14% Electric ‐ GIS Components compatible to ICE + Hybrid (including Crankshaft) ‐ Our customer, Chassis Brakes International (CBI) assigned Fuchosa (an ACE facility) a platform for electrical vehicles to supply Volkswagen. The operations are expected to begin by mid 2019. We believe this will be approximately 3,000 tons/year program. ‐ Ongoing negotiations to capture additional volume for electrical vehicles (not only in Brakes auto parts). 20 * UBS, IHS, ACEA, CAAM, Fourin, May- 17
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