Ampco-Pittsburgh Corporation · NYSE:AP
Ampco-Pittsburgh — Sidoti & Company Spring Convention (March 2017)
36 slides from Ampco-Pittsburgh's conference presentation, Mar 29, 2017
Slide 1: Ampco-Pittsburgh Corporation
Ampco-Pittsburgh Corporation March 29, 2017 Sidoti & Company Spring Convention New York, NY
Slide 2: Forward-looking statements safe harbor
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward- looking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statem
Slide 3: Agenda
Agenda Introduction to Ampco-Pittsburgh Acquisitions Performance and 2016 Challenges Restructuring/Strategic Direction Looking Ahead 3
Slide 4: Ampco-Pittsburgh Corporation
Ampco-Pittsburgh Corporation Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the world. • Headquarters: Carnegie, PA, U.S. • Traded on NYSE (Symbol – AP) • 2016 Revenue: $331.9M
Slide 5: Ampco-Pittsburgh Corporation (cont'd)
Ampco-Pittsburgh Corporation (cont’d) • In July 2015, acquired Alloys Unlimited and Processing (Ohio) • Supplier of specialty tool, alloy, and carbon steel round bar • Forged and cast product distribution center for quick turnaround requests • In March 2016, acquired Åkers AB and certain of its affi
Slide 6: Ampco-Pittsburgh Global Footprint
Ampco-Pittsburgh Global Footprint Locations Manufacturing 6 Sales Office
Slide 7: Ampco-Pittsburgh Corporation (cont'd)
Ampco-Pittsburgh Corporation (cont’d) Two Segments Reported: 2015 Revenue 2016 Revenue Forged and Cast Engineered Products $152.3M $247.7M* • Forged and Cast Rolls • Open Die Forged Products Air and Liquid Processing $86.2M $84.2M • Aerofin- Heat Exchangers • Buffalo Air Handling - Custom Air Handli
Slide 8: Forged and Cast Engineered Products Segment
Forged and Cast Engineered Products Segment 8
Slide 9: Manufacturing Process for Strip
(— > C(1) Manufacturing Process for Strip <i Roughing mill — =— - BBEBBE - © Continuous reheating . furnace Scale breaker Finishing mill Coiler Hot rolled coil Electrolytic cleaning line -@ | - en | Cold rolled coil Backup Roll Batch annealing = Tempering mill furnace a Ret: “Tetsu ga Dekirumade* JI
Slide 10: Rolls Staged in Hot Strip Mill (HSM)
Rolls Staged in Hot Strip Mill (HSM) 10
Slide 11: 2016 Global Roll Market
2016 Global Roll Market • Cast Rolls $1.3B/yr. • Forged Rolls $0.8B/yr. • Total $2.1B/yr. • U.S. Roll Market $0.3B/yr. 11
Slide 12: Key Customers
\ Key Customers ArcelorMittal ALCOA ADITYA BIRLA y +4 AK Steel KP SMS @ group ® thyssenkrupp qo United States Steel nee Kap) te et AN Ternium| & Ampco: Pittsburgh Mov ving forward.
Slide 13: Competing Companies in Global Roll Industry
Competing Companies in Global Roll Industry Cast Rolls Forged Rolls *Ampco-Pittsburgh completed acquisition of Åkers in Q1 2016. 13
Slide 14: Air and Liquid Processing Segment (A&LP)
Air and Liquid Processing Segment (A&LP) 14
Slide 15: Aerofin Products
Aerofin Products 15
Slide 16: Buffalo Air Handling Custom Air Handling Systems
Buffalo Air Handling Custom Air Handling Systems 16
Slide 17: Buffalo Pumps Products
Buffalo Pumps Products Specialized Centrifugal Pumps 17
Slide 18: Åkers and ASW Steel Inc. Acquisitions
Åkers and ASW Steel Inc. Acquisitions 18
Slide 19: Benefits of Åkers Acquisition
Benefits of Åkers Acquisition Acquired March 3, 2016 for $74.2M Should contribute to stabilizing UES and improving performance of Ampco Revenue from roll business should grow substantially Cost reduction and other synergies estimated to be $15M or greater Synergies estimated to be fully re
Slide 20: ASW Steel Inc.
ASW Steel Inc. Acquired November 1, 2016 for $13.1M Located in Welland, Ontario, Canada Premier specialty steel-making facility Offers a unique combination of carbon, stainless, and other specialty steelmaking capabilities Flexible steel refining methods include: argon oxygen decarburiza
Slide 21: Benefits of ASW Acquisition
Benefits of ASW Acquisition ASW’s broad expertise in flexible steel refining methods provide us with the capabilities to manufacture the additional chemistries needed to expand our reach into the open-die forging market Enhances our ability to grow and add new markets for customers in the follow
Slide 22: Restructuring of Chinese Joint Venture
Restructuring of Chinese Joint Venture Union Electric Steel MG Roll Co., Ltd. historical poor performance Restructuring completed November 2016 Added third partner, Gongchang Also roll manufacturer Taken over day-to-day operations Before the restructuring After the restructuring • Masteel
Slide 23: Ampco-Pittsburgh Recent Performance and 2016 Challenges
Ampco-Pittsburgh Recent Performance and 2016 Challenges 23
Slide 24: Financial performance has deteriorated primarily due to UES performance
Ampco’s financial performance has deteriorated in recent years primarily due to UES performance Global steel market depressed since 2011 UES sales, margins, and profits have declined as customers reduced production and costs Air and Liquid Processing profitable, consistent performer, but lacks
Slide 25: 2016 Summary Financials
2016 Summary Financials ($ Millions USD) 2016 2015 Net sales $331.9 $238.5 Cost of products sold $276.5 $196.1 Selling and administrative $58.2 $39.5 Depreciation and amortization $20.5 $11.8 Charge (credit) for asbestos litigation $4.6 ($14.3) Charges for impairment $26.7 - (Loss) income from opera
Slide 26: Key Factors Impacting 2016 Profitability
Key Factors Impacting 2016 Profitability Low roll product volume demand ($13.0M) Unfavorable pricing Manufacturing capacity utilization not adequate Non-recurring M&A related costs ($12.8M) Impairment charge (Goodwill) ($26.7M) Asbestos charge, net ($4.6M) Tax Valuation Allowance Reser
Slide 27: Strategies to Improve Ampco Performance
Strategies to Improve Ampco Performance 27
Slide 28: Strategies to Improve Performance are in Process
Strategies to Improve Performance are in Process Diversify UES into open die market (in addition to rolls and frac blocks) Bifurcate roll pricing model: commodity vs. high-performance Launch new products (rolls and open die) Pricing strategy Increase plant efficiency, utilization, and cost
Slide 29: Reasons For UES Diversification
Reasons For UES Diversification Cyclicality of steel and aluminum industries drove decision to strategically diversify the company Lack of market size growth Manufacturing requirements for open die forge market are strong match for our manufacturing assets Four year successful record in pene
Slide 30: North America Open Die Forging Market Size
North America Open Die Forging Market Size (2013-2015 sales $M) 2015 Total Open Die Sales = $1.77B 1084 $1B Market requires advanced Melt source mAccessible # LF Required 200.0 oo | l i BEE ome Oil & Gas Defense Metal Aerospace Industrial Off-Highway PowerGen Mining Metals Ship&Boat Gears Processing
Slide 31: North America Open Die Forging Market Size (Roll Market)
North America Open Die Forging Market Size (2013-2015 sales $M) 2015 Total Open Die Sales = $1.77B 1084 $1B Market requires advanced Roll Wa Melt source 400.0 mAccessible # LF Required 300.0 200.0 0.0 | ll HTL | {| ann Oil & Gas Defense Metal Aerospace Industrial Off-Highway PowerGen Mining Metals S
Slide 32: Strategies to Diversify UES Product Portfolio for Growth
Strategies to Diversify UES Product Portfolio for Growth Utilize flexible manufacturing assets to diversify and offset roll/steel industry cyclicality Capitalize on opportunity to diversify into broader markets beyond oil field services in open die industry Optimize ASW/UES “go to market” stra
Slide 33: Ampco-Pittsburgh Corporation Revenue Trend
Ampco-Pittsburgh Corporation Revenue Trend 7.7% CAGR 33
Slide 34: Reasons to Expect Improved Performance Beginning in 2017
Reasons to Expect Improved Performance Beginning in 2017 Steel industry increased profitability (tariffs, pricing) Åkers acquisition synergy impact Forged and cast roll product price increases Low cost plants acquired for non-differentiated rolls Avonmore roll plant idling (April 2017) – u
Slide 35: Short-term Focus
Short-term Focus Drive price Reduce plant costs and increase efficiency Gain profitability in 2017 Strengthen engineering and manufacturing capabilities Replace fossil fuel power generation market for heat exchangers (Aerofin) Develop strategy and implement for open die market 35
Slide 36: Thank you
Ampco-Pittsburgh Corporation Thank you Questions
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