Spirax Group Plc. · LSE:SPX
Spirax — Investor Day (June 2022)
66 slides from Spirax's investor day presentation, Jun 29, 2022
Slide 1: Engineering a more sustainable future
1 Engineering a more sustainable future. Investor Seminar 29 June 2022
Slide 2: Welcome and Context
2 Investor Seminar Welcome and Context. Nimesh Patel Chief Financial Officer
Slide 3: Today's agenda
3 Today’s agenda Session 1 Session 5 Welcome and context Drivers of growth Nimesh Patel Armando Pazos Session 2 Session 6 ETS strategic fit What ETS will deliver Nicholas Anderson William Croyle Session 3 Session 7 Introducing ETS Q&A Armando Pazos Nimesh Patel Session 4 Why ETS is differentiated Ch
Slide 4: Group update
4 Group update • Global IP now forecasted at 3.6% for 2022, down from 4.4% in February • Strong demand and order books remain at all time highs • China lockdown impact in H1; no impact on full year absent further lockdowns • Manufacturing capacity expanded and supply chain disruption being managed •
Slide 5: Sources of our resilience
5 Sources of our resilience Over 60% of Group revenue derived from 85% of Group revenue generated from annual defensive, less cyclical end markets maintenance and operational budgets Maintenance and repair sales Typical invoice value £1.3k Small project sales Typical invoice value £10-50k Large proj
Slide 6: Our value proposition
6 Our value proposition Benefits of our direct sales approach Sustained organic growth above IP • Productivity and reliability • Sustainability Solutions to meet customers’ critical needs through the cycle 2,000 direct sales and service engineers • Efficiency and cost • Sustainability
Slide 7: Our long term investment case
7 Our long term investment case Long Term Addressable Market Growth Financial Track Record Continued growth in Demand for Delivery of Demand for energy organic Attractive global Industrial decarbonisation efficiency solutions… revenue margins Production (IP) solutions… growth >IP …driven by populati
Slide 8: ETS within our Group
2021 Group Revenue 8 ETS within our Group Three world-leading niche businesses £1,345m £408.3m £754.9m 30% 56% 14% Steam Specialties Electric Thermal Solutions £181.3m Watson-Marlow 2021 Group Adj. Operating Profit £340m £150.0m OM: 36.7% 41% £188.7 52% OM: 25.0% Steam Specialties 7% Electric Therma
Slide 9: ETS financial performance
9 ETS financial performance Demand growth ahead of sales Year End Order Book (£m) Revenue (Organic, £m) • Strength of demand reflected in year end order book, growth of 24 29 >40% (adjusted for US Navy order weeks weeks +7% in 2020) +28% • Significant demand growth in Thermocoax driven by semiconduc
Slide 10: Margin performance by Business
10 Margin performance by Business Profitable growth in Thermocoax and Chromalox Americas Average Adj. OP • Thermocoax margins already above Group Margin (2020-2021) average levels and demand growth strong Thermocoax • Chromalox Americas a large, growing business and achieving 20% margin objective Ad
Slide 11: Actions regarding Soissons
11 Actions regarding Soissons Process Update • Announced formal consultation process with trade unions to address financial challenges at Soissons; negotiations on-going • Consultation expected to complete in August based on legal framework; should be followed by validation by the French labour admi
Slide 12: Summary
12 Summary • Demand for ETS solutions remains strong and order books are at record highs • Key businesses are already at or above Group level margins • We are addressing the loss making situation in Soissons and the capacity constraints in Ogden • We will continue to see impact on 2022 financial per
Slide 13: ETS Strategic Fit
1 3 ETS Strategic Fit Nicholas Anderson Group Chief Executive
Slide 14: Why ETS fits with Steam Specialties
14 Why ETS fits with Steam Specialties Attractive, complementary market to Steam Specialties
Slide 15: Why ETS fits with the Group Business Model
15 Why ETS fits with the Group Business Model Fit with our Group business model and One Planet Sustainability Strategy
Slide 16: Progress in ETS to date
16 Progress in ETS to date Approval of refreshed ETS strategy Completed consolidation of Secured largest order in the Acquired and launch of ‘Engineering Thermocoax’s sites in Normandy, Group’s history from US Navy Chromalox Premium Solutions’ strategy France into one site 2017 2020 2020 2021 2019 2
Slide 17: Drivers of the decarbonisation opportunities
17 Drivers of the decarbonisation opportunities 30+ year opportunity Represents 50% of global • Governments/legislation Heat final energy consumption Drivers • Stakeholder sentiment • Energy intensity of industrial processes Industry Represents 50% of total Only 5% of industrial heat generated from
Slide 18: Decarbonising steam generation
18 Decarbonising steam generation Our unique position Conversion to Application of End-use Raw Materials Primary Energy Source Emissions Footprint Heat On-site Heat to Products Products Suppliers Customers e.g. A B Emissions from A fossil fuel energy Steam Loop and Fossil Fuel Associated B Zero emis
Slide 19: Implications for our growth
20 Implications for our growth From the drive towards decarbonisation • Industrial electric heating market is complementary to our Steam Specialties market • ETS provides access to a significant addressable market with headroom for growth • ETS has a clear fit with our business model and supports ou
Slide 20: Introducing ETS
2 0 Introducing ETS Our Business Overview. Armando Pazos President, Electric Thermal Solutions
Slide 21: An experienced leadership team
22 An experienced leadership team
Slide 22: Introducing ETS: key topics to cover
22 Introducing ETS Key topics to cover Our Businesses Competitive Landscape Our Technologies and Products Opportunities for Growth Leveraged through our Solutions, Sectors and Coverage Group and Strategy
Slide 23: Electric Thermal Solutions
23 Electric Thermal Solutions What we do Uses: electric heating for mission-critical industrial processes, freeze protection for pipes, valves and tanks, Heat and Control and component heating Heating Products: Industrial Heaters & Systems; Heat Tracing; Component Technologies; Mineral insulated cab
Slide 24: Introducing our three product segments
24 Introducing our three product segments 2021 Sales by Product Segment 20% 50% Industrial Heaters Component Heat Trace 30% & Systems Technologies Industrial Heaters & Systems Component Technologies Complex process heating Discrete heating and Thermal management Heat Trace solutions for mission sens
Slide 25: Product segments by sector
26 Product segments by sector Examples of where our products are utilised TEMPERATURE HEATING SOLUTIONS COMPONENT HEATING SOLUTIONS BUILDING AND CONSTRUCTION POWER GENERATION PHARMACEUTICAL SOLAR
Slide 26: Geographic coverage
26 Geographic coverage 2021 sales by region ETS key facts: ETS volume mix by region • Over 1,500 colleagues Chromalox & Thermocoax • Over 165 direct sales & service engineers volume by region • Direct sales presence in 19 countries • Serving customers in 98 countries • Greater presence in the Americ
Slide 27: Strategic sector focus
29 Strategic sector focus Four strategic sectors with ten subsectors Advanced Health and Sector Energy Transition Materials Technology Nutrition Building & Pharmaceutical Sustainable Energy Semiconductor & Biotechnology Construction Aerospace Subsectors Nuclear Engineered Chemicals & Defence Food &
Slide 28: Implementing our strategy
28 Implementing our strategy Shift in sales by sector and channel Increased focus on Increased focus on strategic sectors direct sales Sales by sector Sales by channel 25% 21% Distributors Distributors 30% 28% Other Sectors OEMs, End Users and Specifiers 26% Strategic Sectors 31% 2022 70% 72% Furthe
Slide 29: Market dynamics
29 Market dynamics Global addressable market for ETS is £3.4 billion Sector Energy Transition Materials Advanced Technology Health and Nutrition Four Sectors Represent 58% of our Total Addressable Market 22% 16% 10% 10% APAC
Slide 30: Fragmented competitive landscape
30 Fragmented competitive landscape Our competitive advantages Product Markets Global Competitors Regional Competitors Our Position Our Advantages Typically focused on Lower investment in Uniquely positioned one product market products and capabilities across all three markets • 100 years of experie
Slide 31: Leveraging the strength of our Group
31 Leveraging the strength of our Group Accelerating ETS from a strong foundation OUR VISION OUR MISSION
Slide 32: Delivering through our strategy and people
32 Delivering through our strategy and people Engineering Premium Solutions Our Vision Our Mission To be our customers’ first choice for To participate in our customers’ success with premium engineered electric thermal superior performance, expertise, and partnership solutions in sustainable applica
Slide 33: Why ETS is differentiated
3 3 Why ETS is differentiated Our unique capabilities. Christopher Molnar VP, Business Development, ETS
Slide 34: A history of meeting customers' changing needs
34 A history of meeting customers’ changing needs Through a culture of innovation and problem solving CORE COMPETENCIES: A deep understanding of our customers’ challenges Very broad knowledge about our customers' processes Unparalleled engineering expertise in our industry Recognised as the
Slide 35: Technology spotlight: DirectConnect
35 Technology spotlight: DirectConnect TM Patented Medium Voltage technology 69,000V 345,000V 30,000V Standard low voltage electric Chromalox DirectConnectTM heating systems require eliminates need to step- stepping down the voltage down voltage through transformers Our system can operate DIRECTLY f
Slide 36: Technology spotlight: DirectConnect
36 Technology spotlight: DirectConnect TM A 2.5MW system delivers cost and efficiency benefits Significantly lower capex costs and increased energy efficiency through MV Step-down transformers are a significant initial capex costs and generate significant power loss Capex, installation labour, and l
Slide 37: A focus on solving our customers' problems
37 A focus on solving our customers’ problems Through our Customer Value Propositions (CVPs) Specifying & Influencing End Channel OEMs Delivering Customers Users Partners Customers TIERED SUSTAINABILITY MAINTAIN, TECHNOLOGY PRIME MACHINE GREENFIELD & PROCESS ENGINEERING & EQUIPMENT & ENERGY REFURBIS
Slide 38: Delivering against customer objectives
38 Delivering against customer objectives Enabling OEM Prime Machine Builders to deliver world-class capabilities PRIME MACHINE BUILDERS Wafer Vacuum Heaters Maxizone Elements MI Cable Thruster Coil Unmatched two-dimensional thermal Precise thermal profiles and temperature Unparalleled reliability t
Slide 39: Delivering against customer objectives
39 Delivering against customer objectives Maximum productivity and performance for Mission Critical End User applications PROCESS PRODUCTIVITY Neutron Flux Detector Pressuriser Heaters Nitrogen Purge Systems Ability to perform at peak performance Consistent, dependable operation over a 40 Trusted to
Slide 40: Delivering against customer objectives
40 Delivering against customer objectives Improving energy efficiency and reducing the carbon footprint for End Users SUSTAINABILITY & ENERGY EFFICIENCY Defrost & Regen Heaters Hot Water Network Solutions Electric Steam Increased energy efficiency in LNG Decarbonisation of district heating through L
Slide 41: The ETS opportunity for sustainability
41 The ETS opportunity for sustainability Significant addressable market creation Delivery mechanism of heat into industrial processes 30% 5% 65% Electric Fuel Fired Steam Boilers Direct Fired Heaters and Heat Exchangers Renewable Power Fossil Fuels > 95% Conversion Mechanism of Energy into Heat
Slide 42: TargetZero – solutions for steam decarbonisation
42 TargetZero – solutions for steam decarbonisation Customer value propositions and general ‘go to market’ approach Technology and Support Market Continued growth Demand for Demand for Boiler OEM Drivers in global Industrial energy efficiency decarbonisation Partners Production (IP) solutions soluti
Slide 43: TargetZero
43 TargetZero Steam decarbonisation solutions by Spirax-Sarco Engineering 1 2 3 SteamVolt ElectroFit Steam Battery LV & MV First Fit Boiler Solution LV & MV Retro Fit Boiler Solution Thermal storage capable of generating OEM Boiler electric heat and control Conversion of fossil fuel fired boilers to
Slide 44: SteamVolt
44 SteamVolt Electrification of steam – replacing fuel-fired steam generation with zero emission MV technology Energy efficient, large capacity electric steam generation for industrial applications. • The solution for first fit installation or replacement of retired fleet • Average order size £200-3
Slide 45: SteamVolt – case study
45 SteamVolt – case study Electrification of steam – replacing fuel-fired steam generation with zero emission MV technology Public University in Canada to become carbon-neutral by 2040. Replace 20MW of campus’ gas-fired steam system with DirectConnectTM MV technology and renewable power. Will reduce
Slide 46: ElectroFit
46 ElectroFit Electrification of steam – in-situ retrofit of existing fuel fired boilers Decarbonises steam generation while retaining existing infrastructure and minimising disruption. • Suitable for retrofit of installed base • Most suited to fleet aged <20 years (~90% of existing fleet) • Average
Slide 47: ElectroFit – case study
47 ElectroFit – case study Electrification of steam – in-situ replacement of existing fuel fired boilers Beverage producer in Turkey to use 100% renewable power by 2030. Leverage existing 2.3MW of power for steam generation in existing boiler and infrastructure. Maximise return on decarbonisation in
Slide 48: Steam Battery
48 Steam Battery Electrification of steam – maximising efficiency A flexible approach to storing and utilising renewable electrical energy. • Estimated opportunity of one Steam Battery for every seven electric boilers • Average order size £200-300k
Slide 49: Steam Battery – case study
49 Steam Battery – case study Electrification of steam – maximising efficiency Steam training centre in UK drives towards net carbon zero goals. Utilisation of on-site solar and off-peak power to generate low/no carbon steam. Lower energy demand and higher efficiency through thermal energy storage.
Slide 50: Project Clear Sky
50 Project Clear Sky Decarbonisation of UK manufacturing site – all three technologies in play Steam Battery Conversion Technology Centre DirectConnectTM MV Hot Well Heater 5 tonnes/hr 60barg Steam Hot water feed 3.5MW @ 4160V 0.5MW @ 4160V SteamVolt 5.2 tonnes/hr 10barg Steam 3.6MW @ 4160V DirectCo
Slide 51: Drivers of growth
5 1 Drivers of growth Investment in Capacity and Operational Excellence. Armando Pazos President, ETS
Slide 52: Global manufacturing footprint
52 Global manufacturing footprint Ogden, Nuevo Laredo, Normandy, Heidelberg, Wujiang, Utah, USA Mexico France Germany China La Vergne, Alpharetta, Soissons, Tennessee, USA Georgia, USA France
Slide 53: Manufacturing facility transformation activities
53 Manufacturing facility transformation activities Investing in our future Normandy, France Nuevo Laredo, Mexico Ogden, Utah- USA Manufacturing of highly engineered, Specialises in Component Technologies Vertically integrated manufacturing of customised, premium mineral insulated and standardised,
Slide 54: Manufacturing transformation
54 Manufacturing transformation Thermocoax Normandy transformation completed in 2021 SAINT-GEORGES PLANQUIVON DES GROSEILLERS 4,200 m2 Aerospace & Defence 3,600 m Nuclear 2 Thermocoax - 12,000 m2 • Capacity expanded by 13% with room for further capacity expansion • Investment in state-of-the-art equ
Slide 55: Manufacturing transformation
55 Manufacturing transformation Chromalox Nuevo Laredo transformation completed in 2020 • Capacity expanded by 30% enabling transfer of some product manufacturing from Ogden to relieve some of the constraints there • Room for further capacity expansion as demand increases Plant Expansion • Investmen
Slide 56: Ogden transformation plan
56 Ogden transformation plan Matching the standards of Normandy and Nuevo Laredo Current State: Future state: • Ogden specialises in the manufacture of our leading Medium Voltage • Use LEAN principles to eliminate waste and create flow to increase solutions, utilised in the decarbonisation of indust
Slide 57: Becoming the benchmark for sustainable manufacturing
57 Becoming the benchmark for sustainable manufacturing Our key investments and plans to decarbonise our facilities Energy savings equivalent to: Investment in onsite Renewable Energy (solar panels) in Nuevo Laredo, Heidelberg and Normandy 187 2,156,357 103 1,986 Passenger Miles driven by an Homes’
Slide 58: Transformation roadmap
58 Transformation roadmap Our journey to 2030 ETS manufacturing facilities Le Vergne Nuevo Laredo Wujiang Ogden Normandy Heidelberg Alpharetta By 2022 2030 Operations in 2030 will be: Completed • Using LEAN principles to drive flow within the plant • More automated with modern equipment In progress
Slide 59: ETS in summary
65 ETS in summary Our strategy is delivering • Group synergies creating value and driving growth • Deep customer knowledge and engagement supports increased margins • Unmatched breadth of products and solutions deployed through strategic sector focus • Committed to operational excellence, manufactur
Slide 60: What ETS will deliver
6 0 What ETS will deliver Our plan for sales and margin growth. William Croyle VP, Finance, ETS
Slide 61: Foundations for future growth
61 Foundations for future growth Investing in innovation, people and sustainable operations • Lab expansions and increased testing capability New product • Medium Voltage technology development development capability • 3D printer upgrade to support rapid prototyping • R&D incorporated into business
Slide 62: Margin evolution
62 Margin evolution Pathway to Group level margins Adjusted Operating Profit Margin (%) • EMEA • Ogden expansion • Operating leverage • APAC • Soissons • Ogden volume • Ogden efficiency
Slide 63: Outlook
63 Outlook Strong sales and growth; margin improvement 2023 onwards Sales Growth Margin Capex Cash Conversion • Demand Growth above rate • Conclusion of loss-making • Investments related to • Broadly flat in near- of Steam Specialties activity safety and sustainability medium term as • Increased sal
Slide 64: Re-cap
6 4 Re-cap
Slide 65: Re-cap: our key messages
71 Re-cap Our key messages • We are a resilient Group with attractive long term growth prospects • ETS is fundamentally a growing and high margin business • Near term focus on delivering operational improvements and driving increased capacity • Continued investment in the organisation and operations
Slide 66: Thank you
6 6 Thank you