Metair Investments Limited · JSE:MTA
Metair Investments — H1 2014 Earnings Presentation
43 slides from Metair Investments's earnings presentation, Aug 18, 2014
Slide 1: Growing our International Footprint
Growing our International Footprint INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014 18TH AUGUST 2014
Slide 2: Agenda
AGENDA • Commentary and results overview Part 1 • Mutlu acquisition • Vision and strategy • Financial overview Part 2 • Mutlu Financial overview • Refinancing • Operational review Part 3 • Start/Stop battery development • Prospects 2
Slide 3: Commentary & Results Overview
COMMENTARY & RESULTS OVERVIEW 3
Slide 4: Commentary and Results Overview
COMMENTARY AND RESULTS OVERVIEW • Pleased and grateful • First results that include Mutlu Akü for a full period • Complicated result - Mutlu Akü being a second half Observations company • An additional 46.4 million shares in HEPS calculation • PPA additional depreciation of R17.9 million • Debt brin
Slide 5: Commentary and Results Overview
COMMENTARY AND RESULTS OVERVIEW • Mutlu Akü acquisition done: 50% equity and 50% debt • Bridge facility from ABSA R1,350 million • Refinancing process post acquisition Refinancing • Restructuring required for preference share scheme • Preference share with 5 years maturity for R1,400 million at 69%
Slide 6: Strike Effects-Generic
STRIKE EFFECTS-GENERIC • Always negative • Loss of sales and profit Short term • Stress on labour relations • Stress on industry relations (During Strike) • Disruptive • Contingency plans need to be put in action • Catchback programs to mitigate negative effect • Mitigating strategies have to be des
Slide 7: Strike Effects-Specifics
STRIKE EFFECTS-SPECIFICS • Numsa-Seifsa strike 4.5 week period • Some component manufacturer’s affected 1st/2nd and 3rd tier • Margin pressure on OE sector Dispute • 3 year agreement, 10% increase level per year • Not accepted by smaller industry employer grouping • Watered down peace clause • Some
Slide 8: Why Are We Pleased and Grateful
WHY ARE WE PLEASED AND GRATEFUL • Number of shares in issue increased by 30% from 152,5 million to 198,9 million • Increase in interest bearing debt to R1 400 million Structural • Additional interest and depreciation charges of R60 million challenges • Acquisition related charges increase represents
Slide 9: Vision & Strategy
VISION & STRATEGY 9
Slide 10: Vision and Strategy
VISION AND STRATEGY • “To generate value for all our stakeholders by managing and controlling businesses that through manufacturing and/or Vision logistical excellence, deliver quality, cost-competitive products to our customers in a sustainable manner” • Continue to target balance in the business •
Slide 11: Performance Against Strategy
PERFORMANCE AGAINST STRATEGY Jun-13 Jun-14 61% OE market OE 49% 0% 10% 20% 30% 40% 50% 60% 70% Aftermarket 39% & AF* 51% Non-automotive 0% 10% 20% 30% 40% 50% 60% 70% 39% Batteries Batteries 55% 0% 10% 20% 30% 40% 50% 60% 70% 11
Slide 12: Financial Review
FINANCIAL REVIEW 12
Slide 13: Financial Highlights
FINANCIAL HIGHLIGHTS ITEM June 2014 June 2013 R’000 R’000 Revenue 3 235 218 2 459 831 EBITDA 484 599 375 087 Income statement Operating profit 318 737 274 164 Operating income margin 9.9% 11.1% Profit after tax 250 936 229 102 ITEM June 2014 June 2013 R’000 R’000 Attributable profit 234 809 209 457
Slide 14: Operating Profit
OPERATING PROFIT 330 20% 319 18% 320 16% 310 14% 11,10% 300 12% Operating profit 290 9,90% 10% 280 8% 274 6% 270 4% 260 2% 250 0% June 2013 June 2014 OPERATING PROFIT OPERATING INCOME MARGIN Three main contributors • Mutlu Akü effectively reported operating profit of R73 million, at a 8,3% margin (t
Slide 15: Headline Earnings Per Share (HEPS)
HEADLINE EARNINGS PER SHARE(HEPS) 250 235 202 209 181 200 126 150 R’million Headline earnings 100 50 0 June 2010 June 2011 June 2012 June 2013 June 2014 160 128 143 143 140 120 120 HEPS 89 R’million 100 80 60 40 20 0 June 2010 June 2011 June 2012 June 2013 June 2014 Trends • Although headline earnin
Slide 16: Balance Sheet-Assets
BALANCE SHEET-ASSETS Dec 2013 June June ITEMS R’million 2013 2014 R’million R’million Non-Current assets 4 299 1 520 4 402 Non-current assets Property, plant and equipment 2 844 1 234 2 886 Intangible assets 1 244 84 1 263 Other non-current assets 211 202 253 Dec 2013 June 2013 June 2014 ITEMS R’mil
Slide 17: Balance Sheet-Equity and Liabilities
BALANCE SHEET-EQUITY AND LIABILITIES Dec 2013 June 2013 June 2014 ITEMS R’million R’million R’million Total equity 3 789 3964 Non-current liabilities 1 655 291 869 Equity & non-current Borrowings 1 022 164 214 liabilities Post employment benefits 108 29 104 Deferred taxation 379 62 383 Deferred gran
Slide 18: Income Statement
INCOME STATEMENT ITEMS 30 June 2013 30 June 2014 R'million R'million Revenue 2 460 3 235 Gross Profit 520 722 Operating profit Other operating income 24 68 Distribution, Administrative & other expenses (270) (471) Operating profit 274 319 30 June 2013 30 June 2014 ITEMS R'million R'million Net inter
Slide 19: Segmental Analysis
SEGMENTAL ANALYSIS Jun-13 Jun-14 Margin % 2 000 1 692 1 738 1 500 R’million Local revenue 1 000 986 596 500 308 233 0 Original Equipment Aftermarket Non-auto 180 20% 156 18% 160 140 16% 15,5% 118 14% 120 110 13,3% R’million 12% 9,2% Local PBIT 100 9,2% 92 11,2% 10% 11,2% 80 6,8% 8% 6,8% 60 6% 41 5,5
Slide 20: Segmental Analysis: Local PBIT and Margins
SEGMENTAL ANALYSIS 180 20% 156 18% 160 140 15,5% 16% 118 14% 120 110 13,3% 12% R’million 100 92 Local PBIT 9,2% 11,2% 10% 80 8% and Margins 60 6,8% 6% 41 40 5,5% 4% 20 13 2% - 0% ORIGINAL EQUIPMENT AFTERMARKET NON-AUTO Jun-14 Jun-13 Margin % Local OE margin contraction • Labour disruptions result in
Slide 21: Segmental Analysis: Export
SEGMENTAL ANALYSIS 600 544 500 400 R’million Export revenue 300 283 200 100 54 55 18 28 0 ORIGINAL EQUIPMENT AFTERMARKET NON-AUTO Jun-13 Jun-14 Margin 45 20% 41 40 18% 35 16% 14,1% 8,7% 14% R’million 30 12,7% 25 8,7% 12% Export PBIT 25 7,6% 10% 20 8,7% 8% 15 7,6% 6% 10 7 8 6 4% 5 2 2% 0 0% ORIGINAL
Slide 22: Mutlu Volumes
MUTLU VOLUMES FULL-YEAR Automotive Units YTD 2013 YTD 2014 2013 Original market Original Equipment - Local 710 469 367 925 290 711 FULL-YEAR Automotive Units YTD 2013 YTD 2014 2013 Aftermarket Aftermarket - Local 1 350 898 451 766 442 115 - Export 1 371 493 360 287 486 430 Total Volume 3 432 860 1 1
Slide 23: Mutlu Income Statement
MUTLU INCOME STATEMENT 30-Jun-13 30-Jun-14 YTD ITEMS R'million R'million 2014 vs 2013 R'million EBITDA Sales revenue 770.4 878.0 14.0% Cost of sales (557.1) (614.2) 10.2% Gross margin 213.3 263.8 23.7% Gross margin % 27.7% 31.0% Operating expenses (152.1) (150.5) -1.1% Other operating income (Incl.
Slide 24: Mutlu Income Statement
MUTLU INCOME STATEMENT 30-Jun-13 30-Jun-14 YTD ITEMS R'million R'million 2014 vs 2013 R'million EBITDA 68.3 127.8 87.1% Depreciation and amortisation (37.0) (37.8) 2.0% Profit after tax EBIT 15.0 90.0 500.0% Operating profit % 2.0% 10.4% Net finance cost (6.0) (6.0) Profit before tax 9.0 84.0 833.3%
Slide 25: Mutlu Forex & Interest Charges
MUTLU FOREX & INTEREST CHARGES ZAR (millions) 1 Jan - 30 June 2013 1 Jan - 30 June 2014 Net Foreign exchange (losses)/gains (21.3) 0,3 (Incl. operating profit) FOREX Net USD debt @ BoP (stated in ZAR) 299.0 109.1 Net USD debt @ EoP (stated in ZAR) 330.0 68.2 TL:USD rate @ BoP 1.78 2.13 TL:USD rate @
Slide 26: Refinancing
REFINANCING Bridge facility Bridging facility Acquisition phase 1 ZAR in m illions Margin to JIBAR ABSA 1 350 150bps (Bridge facility) Cleared 1 350 150bps Refinance outcome Preference share allocation ZAR in m illions Rate of prime SBSA 1 400 Acquisition phase 2 Cleared 1 400 69% (Refinancing) RCF
Slide 27: Refinancing – Abbreviated Group Structure (After)
REFINANCING – Abbreviated Group Structure (After) Metair Investments Limited 100% Inalex (Pty) Ltd 100% New funding entities Nikisize (Pty) Ltd Metair subsidiaries Redeemable preference share issuer Original RCF borrower 27
Slide 28: Operational Review
OPERATIONAL REVIEW 28
Slide 29: Automotive Manufacturing Efficiency and Competitiveness
AUTOMOTIVE MANUFACTURING EFFICIENCY AND COMPETETIVENESS Manufacturing Manufacturing Vehicle Market Input Output Stocks Demand Materials STABLE Labour (Pull) Facilities Manufacturing Manufacturing Vehicle Market Input Output Stocks Demand UNSTABLE (Chaos) Detecting any structural volume changes is ve
Slide 30: Working Capital
WORKING CAPITAL R’million June June ITEM Dec 2013 2014 2013 Inventory 1 385 846 1 264 Trade & receivables 1 149 718 1 274 Trade & payables (688) (653) (860) Total 1 846 911 1 678 DAYS June June Dec 2013 2014 2013 Inventory 78 63 65 53 Trade & receivables 65 65 Trade & payables (42) (48) (44) Total 1
Slide 31: Vehicle Production per OEM in South Africa (NAAMSA)
VEHICLE PRODUCTION PER OEM IN SOUTH AFRICA (NAAMSA) 2013 2014 OEM 2010 2011 2012 2013 Actual Actual Notes (6-months) (6-months) BMW 49 243 52 908 44 229 66 087 37 340 36 851 MBSA 53 646 50 939 61 439 47 189 25 692 3 682 1. FMCSA 34 822 28 716 51 006 56 923 27 572 32 991 GM 27 234 32 530 38 199 40 01
Slide 32: Vehicle Production per OEM in Turkey
VEHICLE PRODUCTION PER OEM IN IN TURKEY 2010 2011 2012 2013 H1 2013 H1 2014 OYAK RENAULT 307 083 330 994 310 602 331 694 166 646 153 990 FORD 242 070 295 850 272 097 281 287 191 041 109 588 TOFAŞ 312 245 307 788 256 428 244 614 120 443 106 974 HYUNDAI 77 000 90 231 86 976 102 020 32 929 98 300 TOYOT
Slide 33: 2014 Capital Expenditure Commitments
2014 CAPITAL EXPENDITURE COMMITMENTS* GROUP - Approved Sector Expansion Maintenance Total R’000 Efficiency OE 31.6 112.7 144.3 Aftermarket/Non-auto 59.4 9.4 68.8 Property 4.1 4.1 Total 95.1 122.1 217.2 * Includes authorised and committed capex 33
Slide 34: 2014 Capital Expenditure Commitments
2014 CAPITAL EXPENDITURE COMMITMENTS* ROMBAT - Approved Sector Expansion Maintenance Total R’000 Efficiency OE Aftermarket/Non-auto 21 21 Total 21 21 MUTLU - Approved Sector Expansion Maintenance Total R’000 Efficiency OE Aftermarket/Non-auto 23,7 23,7 Total 23,7 23,7 * Includes authorised and commi
Slide 35: Acquisition Integration
ACQUISITION INTEGRATION • According to plan • Start/Stop facility installed and commissioned • Opening of Start/Stop facility by Romanian Prime Minister – ROMBAT 28 September 2013 • First test batteries produced • Investment assistance support claim received • Start/Stop focus increasing • According
Slide 36: Acquisition Health Check
ACQUISITION HEALTH CHECK • Transfer of Associates Complete • Transfer of Technology In progress • Integration Complete • Change Management Complete ROMBAT • Start/Stop facility Complete • Secure subsidy for Start/Stop facility Complete • Expansion of aftermarket footprint Europe In progress • Availa
Slide 37: Start/Stop Battery Development
START/STOP BATTERY DEVELOPMENT 37
Slide 38: Start/Stop Battery Development
START/STOP BATTERY DEVELOPEMENT • Carbon footprint reduction focus still very strong • Fuel efficiency improvement focus increasing • Start/Stop systems remain the most cost effective way Structural • Legislative environment affecting change continue to be in place • Mutlu acquisition refocusing and
Slide 39: Prospects
PROSPECTS 39
Slide 40: Prospects Depend On …
PROSPECTS DEPEND ON … • Strike effects of 4,5 weeks SEIFSA – NUMSA strike • Catch back program run by OEM’s Original Equipment (OE) • Effectiveness of cost saving progress to contain destabilization effect • Stablistation of labour environment • Europe and other export market vehicle demand • Exchan
Slide 41: Prospects Depend On …
PROSPECTS DEPEND ON … • Integration progress • Minority squeeze out • Synergy extraction Mutlu Akü Performance • Commodity price movement • Exchange rate movements and volatility • OE and Aftermarket and export demand • Geopolitical environment • Staying true to its second half performance nature •
Slide 42: Q&A
METAIR INVESTMENTS LIMITED automotive | industrial | retail Q&A WWW.METAIR.CO.ZA 42
Slide 43: Disclaimer
DISCLAIMER The information supplied herewith is believed to be correct but the accuracy thereof at the time of going to print is not guaranteed. The company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does