Mahindra Forgings Feb 2012 / Investor Meet Systech Sector
1 Mahindra Forgings : Structure Holding structure created to enable global strategy M&M MFL SCHONEWEISS JECO 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 MFL M&M: ~53% Others: ~47% STOKES JECO (renamed MFE) MFL: 99.9% MFL: 100.0% SCHONEWEISS MFL: 100.0% Note: Investments in JECO & Schöneweiss are held through investment companies in Mauritius Systech Sector
2 Mahindra Forgings: Capabilities Each acquired company has a distinct value proposition Location India UK Germany Germany Plants 1 Plant 2 Plants 4 Plants 2 Plants • Leading supplier of • Expertise in • Provides a • Among leading crankshafts and producing basket of axle beam „ flashless ‟ parts and stub-axles for cars/ forgings manufacturers MUVs in India near-net forgings products to globally Key • Machined products • Focused on truck for car market truck industry highlights • Cost Leader market • Machined • Very strong co- products development abilities % of Revenue 19% 8% 50% 23% (FY11 = Rs 19310 mn) “German operations are the largest” Systech Sector
3 Mahindra Forgings: End User Segments Europe and India have complementary products and end user segments Europe India % of Sales (FY11) % of Sales (FY11) HCV LCV MCV 4% 10% Non 1% UV Auto, MPV 36% 1% 33% Non Auto CVs, 4% 60% Cars, Passenger 7% Tractor Car 12% 32% Market Share Market Share • Market • Market leader in CV forgings with a leader in crankshaft & knuckles for cars/ MUVs and tractor basket of products but excluding crankshafts market Systech Sector
4 Mahindra Forgings : Customers Supply to Market Leading OEMs Europe / CV Market India / Vehicles < 3T 2010 Share MFE Customer 2010 Share MFL Customer Daimler 24% MarutiSuzuki 32% MAN 17% Hyundai 18% n/a Paccar DAF 14% Tata Motors 17% Volvo 11% M&M 10% Scania 10% Ford 4% n/a Iveco 10% GM 4% Renault 10% Toyota 3% n/a source: Daimler 2011 VW 3% n/a source: CSM n/a: OEM does not use or buy forged crankshafts in India Systech Sector
5 Market Situation : Europe Stable market in the near term Registration of Heavy Trucks (>6T) in Germany (Quarter-wise) 50000 45679 Q-o-Q Growth rates: 45000 Market MFE (CV>6T) 40000 Q1F12 30% 43% 35000 Q2F12 12% 26% 30000 26442 Q3F12 0% 9% 20448 21529 21527 23327 22917 21491 25000 19646 17974 16979 16355 15217 20000 12650 13734 15000 10000 5000 0 Q1F09 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q3F12 Note: Year in the graph refers to Financial Year Source - VDA Systech Sector
6 Market Situation: Europe Long term outlook remains positive • Commercial vehicles production in Germany is our core market 60-70% of the production is exported , exports to non W European countries account for 35-40% of production (Source: VDA) • CV Industry is susceptible to fluctuations in the economy but experts forecast a stable growth CAGR~7-9% for our key customers in the next three years (Source: E&Y) Transportation demand in Europe will continue to be strong because of inequities between Western and Eastern Europe • New emission regulations driving new products and fleet renewal All major truck OEMs planning new launches in the next 3-5 years We expect higher share of business in the new launches Systech Sector
7 Performance Overview: MFE Breakeven : Q2F12 EBITDA% = Q2F09 EBITDA% @ 75% of volumes ~ MFE Quarterly Revenue & EBITDA(Euro mn) 102 99 80 78 77 Revenue 73 72 67 62 Press 56 Breakdown 50 49 9.7 9.3 38 36 36 EBITDA 7.3 6.8 6.5 5.7 5.5 5.3 5.1 3.4 1.7 1.7 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 -1.8 -2.1 -5.6 EBITDA 9.5% 9.4% 2.4% -3.6% -15.6% 4.7% -5.5% 6.9% 10.2% 8.5% 8.2% 8.4% 8.5% 9.4% 7% % Note: Year in the graph refers to Financial Year Systech Sector
8 Key Initiatives: MFE Focus on profitability : ROCE> WACC, EBITDA% & FCF • Maximise utilisation of existing forgings capacity • Focus on product portfolio and personnel costs to boost profitability Increased share in new launches will help boost margins • Increase share of machined parts Growth Capex focused on machining (plus some maintenance required to keep the plant in good condition) to increase margins • Self funding of capex (cash flow) • Improvement of Gearing Systech Sector
9 Market Situation : India Healthy growth/ near term headwinds Production of Vehicles in India (Quarter Wise) 853074 900000 760553 730645 709755 737777 800000 672581 653276 700000 742570 566620 600183 600000 499202 495697 457384 476422 Passenger Vehicles (PV) 500000 392818 400000 71629 89890 102743 132910 139979 189953 163061 184312 184776 220768 202711 228293 228744 300000 127688 127284 200000 100000 Commercial Vehicles (CV) 0 Q1F09 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q3F12 Q-o-Q Growth rates Note: Year in the graph refers to Financial Year PVs CVs MFL Q1F12 16% 24% 21% Q2F12 -2% 24% 23% Q3F12 -4% 24% 21% Source - SIAM Systech Sector
Performance Overview: MFL India 10 Back on track MFL India Quarterly Revenue & EBITDA(Rs mn) 1123 1099 966 Revenue 952 910 912 841 785 768 742 733 696 617 599 EBITDA 128 129 124 120 116 97 397 93 87 82 72 68 66 39 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 -19 -31 EBITDA 6.3% 8.9% -7.8% -3.2% 13.4% 17.3% 16.4% 15.3% 10.5% 7.3% 10.6% 7.5% 9.1% 11.0% 10.6% % Note: Year in the graph refers to Financial Year
11 Key Initiatives: MFL India • Growth F12: Better than market growth F13: In line with market growth • To sustain growth momentum, initiate action now to diversify product range and increase export business (both directly and through MFE) without losing sight of current competencies One project on shifting parts from MFE stabilised while another is WIP Other projects from MFE to be evaluated for cost benefits • Build internal competencies in quality, productivity & process parameters to become a global forging company via mentorship program with MFE • Build technical competencies for Compact crankshaft forging and Machining
12 Mahindra Forgings : Strategy Summary Challenges Ahead India Europe • Maintain customer traction • Operational excellence F12/F13 – Innovation to improve customer – Use mentorship program to (Short term) relationships: 20 patents, higher sob improve consistency in EBITDA% Focus @Daimler Actros • Keep an eye on costs • Centre of Excellence in • Respond to changing market needs F14+ – emission norms, lightweighting crankshafts (Medium term) • Address capacity plateau • Product Diversification, Exports Focus Systech Sector
13 Mahindra Forgings: Financials Financial Summary Consolidated Financials INR Mn FY 09 FY10 FY101 YTD Dec,F12 Net Sales 22429 13281 19258 18258 EBITDA 1434 -88 1764 1778 EBITDA (% of net sales) 6.4% -0.7% 9.2% 9.7% One-time write-off (Stokes) -182 Profit (loss) (excluding one-time writeoff) -1166 -1663 38 541 Shareholders' Funds 7444 7943 7912 Total Debt 8740 6536 6970 Total Fixed Assets (inc CWIP) 14004 12355 12031 Cash and Bank Balance 348 287 183 Standalone Financials INR Mn FY 09 FY 10 FY 11 YTD Dec,F12 Net Sales 2380 3012 3573 3174 EBITDA 71 470 320 328 EBITDA (% of net sales) 3.0% 15.6% 9.0% 10.3% One-time write-off (Stokes) -902 Profit (loss) (excluding one-time writeoff) -414 -45 -32 57 Shareholders' Funds 6710 8026 8026 Total Debt 2430 1487 1382 Total Fixed Assets (inc CWIP) 2391 2266 2276 Cash and Bank Balance 47 78 19 Systech Sector
14 India: Auto Components Growing as Forecast, but Cost Challenges Emerging Outlook holding up 600,000 – Exports accelerating INR, Crores Challenges – 500,000 Inflation – Power (Cost and Availability) – Labor (Cost and Availability) 400,000 – Export Incentives Opportunities 300,000 – Localization – Volumes – 200,000 Rupee Depreciation 100,000 Market 2011-12 2012-13 - 2009 2015F 2020F Domestic 16~18 % 13~15% Dom. Potential Exp. Potential Export 23 % 25 % Source: E&Y Source: E&Y Systech Sector
15 Mahindra Systech : Business Snapshot Diverse Products with Diverse Automotive Markets F2011 Revenues USD929M / INR42B Systech Sector
16 Mahindra Hinoday Technical Leadership in Ductile Iron and Magnetic Materials CASTINGS MAGNETS India‟s leading ductile iron foundry India‟s largest producer of magnetic Leadership in axle & transmission products components and turbocharger Key products include arc magnets, housings cores and ferrite bars for auto and Casting weight upto 70 kg non-auto applications New materials in production include Innovation-driven growth to ADI energy efficient product solutions Machining lines for turbocharger like Industrial Lighting housings 1 Plant 1 Plant Systech Sector
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