M hi d Mahindra Forgings g g 9MAR2011 / Investor Meet 9MAR2011 / Investor Meet Systech Sector
1 Overview � Mahindra Forgings : An Overview � Mahindra Forgings : Market Situation � Mahindra Forgings: Short Term & Long Term Strategy � Mahindra Forgings : Financials � Mahindra Systech : An Overview � Mahindra Systech : Strategy & Financials � O � One Systech S t h Systech Sector
2 Mahindra Forgings : Origins Organic & Inorganic Growth to achieve scale, technology & customer reach • Doubling of c/ shaft machinging capacity ongoing at Chakan • QIP of shares completely Q4 10 • Installation of 12,800 T press in Germany Q1 09 and 6,300 T press in Chakan • 2 nd 4,000T press at Chakan Q4 08 Birmingham • 1st 4,000T press at Chakan Q3 08 • New m/ c shop at Jeco • New tool and die shop at Chakan • Mahindra Forgings Europe formed Q2 08 • Machining at Stokes • 2nd steering knuckle machine line Q1 08 Q4 07 • Acquired Schoeneweiss Q3 07 • Acquired Jeco Q2 07 Q2 07 • 1st steering knuckle machine line • 1st steering knuckle machine line Q1 07 • Crankshaft machining line Mahindra Pune 3 Countries Forgings Q3 06 • Acquired Stokes 10 Plants Q2 06 • Acquired Amforge Q1 06 Q1 06 • Acquired Vauxhall machining lines Systech Sector
3 Mahindra Forgings: Manufacturing Capabilities German operations are the largest Location India UK Germany Germany Plants 1 Plant 2 Plants 4 Plants 3 Plants • Crankshafts • Hubs / Spindles • Links / Arms • Links / Arms • Knuckles • Links / Arms • Piston • Knuckles Key products y p • Con Rods • Shafts / Gears • Knuckles • Wheel Carriers Truck + Cars • Links / Arms • Flanges / Yokes • Ball Joints • Spindles • Shafts • Levers / Bracket • Shafts • Shafts • Stub Axle • Front Axle Beams Among leading axle • Leading supplier of • Expertise in producing • Value-added/ • crankshafts and stub- beam manufacturers ‘flashless’ parts and machined products axles for cars/ MUVs in axles for cars/ MUVs in near-net forgings for near net forgings for Provides a basket of Provides a basket of globally globally • car market forgings products India • Focused on truck market Key to truck industry Very strong co- • highlights development abilities • Non-auto presence(marine / stationary engines) • Cost Leader % of Revenue 11% 23% 22% 44% (FY10 = Rs 23% 13345 mn) Systech Sector
4 Mahindra Forgings : Structure Holding structure created to enable global strategy M&M M&M MFL MFL SCHONEWEISS SCHONEWEISS JECO JECO STOKES STOKES M&M: 67.9% M&M: 47.1% M&M: 100.0% M&M: 99.5% Others: 32.1% Others: 52.9% M&M M&M M&M: ~51% MFL MFL Others: ~49% Others: ~49% Managed independently M&M: 99.9% JECO (renamed MFE) JECO (renamed MFE) STOKES STOKES M&M: 100.0% by European operations team which works closely with the Indian operations team in Pune SCHONEWEISS SCHONEWEISS M&M: 100.0% Note: Investments in JECO & Schöneweiss are held through investment companies in Mauritius Systech Sector
5 Mahindra Forgings : Overview of Operations Europe and India have complementary products and end user segments Europe Europe India India Main area of operation - CV Forgings A Leading manufacturer of crankshaft and stub • • axles for Indian cars/ MUVs and tractor • > 100 years of manufacturing history > 100 years of manufacturing history manufacturers • Strong innovation culture – 3 patents awarded and • Non-M&M business accounts for > 70% of total sales applied for 11 others • New Chakan unveiled after acquisition • Co-development partner of OEMs – 4 new presses installed • Wide range of forging capabilities – hammer forging, press forging, hot extrusion, precision forging, friction – 2 machining lines installed welding, 12,800T press in Germany – Invested in well equipped die-shop • Strong tool, die and machining capabilities • Exports to customers like Renault, Benteler, ZF, VM • Daimler and MAN are top customers Motori End User Segments End User Segments End User Segments End User Segments Commercial Vehicles segment accounts for more Passenger Cars & UVs constitute >60% of • • than half of the revenue revenues • Non-auto segment also accounts for a significant • Non-auto segment also accounts for 20% of the portion of the revenues. It includes – portion of the revenues It includes revenues It includes revenues. It includes – • Marine (stationary engines) • Tractors • Railways • Others incl. railways • Other segments are cars & tier 1 suppliers • Other segments are LCVs Systech Sector
6 Mahindra Forgings: Product Portfolio Europe Europe India India Crankshafts Commercial Front Axle Beam Steering Knuckle Pitman Arms Vehicles Stub Axle / Rear Axle Flange Levers Steering Steering knuckle Suspension/ Cross Beam Rear Bearing Hub Front Knuckle Passenger Chassis Cars Cars Parts Full Floating Axle Steering Knuckle Gear Blanks Cable Clamp Camshaft Non-Auto Fully assembled stabilizer bar Revolving tubes for Sky Connecting Rod Connecting Rod Lifts Lifts Systech Sector
7 Mahindra Forgings : Customers Marquee Customers Europe Europe India India DAIMLER DAIMLER DAIMLER Systech Sector
Source - SIAM 100000 100000 150000 200000 200000 250000 300000 50000 Market Situation : India Trajectory of continuous growth 0 Jan ‐ 08 Feb ‐ 08 Mar ‐ 08 Apr ‐ 08 May ‐ 08 Jun ‐ 08 Jul ‐ 08 Production of Vehicles in India (Month-wise) Aug ‐ 08 Sep ‐ 08 Oct ‐ 08 Nov ‐ 08 Dec ‐ 08 Jan ‐ 09 Feb ‐ 09 Mar ‐ 09 Apr ‐ 09 May ‐ 09 Jun ‐ 09 Jul ‐ 09 Aug ‐ 09 Sep ‐ 09 Oct ‐ 09 Nov ‐ 09 Dec ‐ 09 Jan ‐ 10 Feb ‐ 10 Mar ‐ 10 Cars & UVs Apr ‐ 10 May ‐ 10 CVs Systech Sector June ‐ 10 July ‐ 10 Aug ‐ 10 Sept ‐ 10 Oct ‐ 10 Nov ‐ 10 8 Dec ‐ 10
9 Market Situation : Germany @ 60% of peak levels Production of Heavy Trucks (>6T) in Germany (Month-wise) Source - VDA Systech Sector
10 Market Situation : Germany MFE Customers have a Positive Outlook Commercial Vehicle Production Volume Growth Group Name 2009 2012F 2015F CAGR Daimler Group 179 357 445 9% Volvo Group 85 250 305 12% Tata Group 129 198 222 5% MAN Group 73 139 179 9% Paccar 59 166 161 10% Isuzu 66 128 155 8% International 65 122 126 6% Ford Group 54 87 118 7% IVECO Group 37 84 110 10% Scania Group 30 74 95 11% Toyota Group 44 76 93 7% Nissan 1 3 5 18% GM Group 6 0 0 -100% Mahindra Forgings Europe Customer Source: National sources; Industry sources; J.D. Power Automotive Forecasting; ACT Research, E&Y analysis Note 1: ERF volumes in Austria/Germany now included with MAN Note 2: VW/Brazil volumes now included with MAN Note 3: Chinese MHCV manufacturers are not shown Systech Sector
11 Market Situation : Germany Manufacturing revival expected to sustain in the future Monday, Mar. 0 7, 20 11 How Germany Became the China of Europe By Michael Schum an / Stuttgart “… The small, often family-owned enterprises that make up the backbone of German manufacturing have historically specialized in the unsexy side of the industrial spectrum: not smart phones or h d f h d l h iPads but machinery and other heavy equipment, m etal bashing infused w ith sound technology and disciplined engineering. … But in recent years, German firms, aided by farsighted government reforms, have turned that into an art form, forging the m ost com petitive industrial sector of any advanced econom y . The proof is a boom in exports, which jumped 18.5% in Th f i b i t hi h j d 18 5% i 2010, that is the envy of the developed world… ” Systech Sector
12 MFE : Performance Overview Breakeven lowered EBITDA% • Markets recovering • Markets recovering • Headcount lowered 9.5% 6.7% 9.8% 8.3% 8.2% 5.1% (30%) 9.4% • Core team retained Core team retained 2.4% ‐ 6.0% 6 0% • 15 patents ‐ 4.1% 9 9 9 9 0 0 0 0 1 1 1 0 0 0 0 1 1 1 1 1 1 1 1 2 3 4 1 2 3 4 1 2 3 Q Q Q Q Q Q Q Q Q Q Q ‐ 18.9% • Shape of recovery? EBITDA% H1F11 @ 60% utilisation • L, U, W, √ … = EBITDA% H1F09 @100%utilization Systech Sector
13 MFL, India : Performance Overview Recovering after a dip EBITDA% 17.2% 16.4% • Peak quarterly EBITDA % 13.4% 15.3% of 17% in Q210 8.7% 6.9% • Machining capacity being g p y g 10.7% doubled post QIP 10.5% 7.5% Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q Q Q Q Q Q Q Q Q Q Q • MFL performance not sustained • Mentorship program with MFE for performance improvement Systech Sector
14 Mahindra Forgings: Long Term Strategy Focus on creating differentiation and capturing growth Test and validate Europe India Testing & products Validation d Value Add Ad Adopt new t Expand co development Advanced technologies Technologies Co- C/S COE C/S CO Process V Development World class ops Large Press creasing Machined parts M/C Increase World Inc Integration Program Class Operations Domestic leadership in crankshafts Domestic Leadership F11 F12 F13 F14 F15 Systech Sector
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