Smiths Group Plc · LSE:SMIN
Smiths — Investor Day (June 2009)
66 slides from Smiths's investor day presentation, Jun 9, 2009
Slide 1: John Crane Investor Day: Opportunities to create value
John Crane Investor Day Lutín, Czech Republic, 9 June 2009 Opportunities to create value Investor visit to Lutin | 1 www.smiths.com © 2009©by2009 John Crane: by John Proprietary Crane: ProprietaryData Data
Slide 2: Forward-looking statements
This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from tho
Slide 3: Philip Bowman, Chief Executive
Philip Bowman, Chief Executive Investor visit to Lutin | 3 © 2009 by John Crane: Proprietary Data
Slide 4: Observations on John Crane - An Attractive Business Model
Observations on John Crane - An Attractive Business Model Market leading brand with strong technology and customer relationships Resilient business with high aftermarket exposure in diverse markets Strong global network of sales and service centres Opportunity to leverage this network through additi
Slide 5: Key Themes for Today
Key Themes for Today 1 Outline the business strategy 2 Examine the market place and John Crane’s position 3 Explore the strengths of John Crane’s technology and business model 4 Describe the major restructuring programme and benefits – a key value driver 5 Develop a greater understanding of the afte
Slide 6: Paul Cox, President, John Crane
Paul Cox, President, John Crane Investor visit to Lutin | 6 © 2009 by John Crane: Proprietary Data
Slide 7: Welcome to John Crane Sigma a.s, Lutín
Welcome to John Crane Sigma a.s, Lutín Activities: HQ for John Crane Eastern Europe, assembly of standard cartridge seals, couplings and machining of adaptive hardware Investor visit to Lutin | 7 © 2009 by John Crane: Proprietary Data
Slide 8: Investor Day Agenda
Investor Day Agenda 12:00 Welcome and Introduction: Philip Bowman 12:15 John Crane Presentation: Paul Cox, GMD 13:15 Lunch 13:45 John Crane Presentation: Bob Wasson, VP Finance & IT 14:15 John Crane Presentation: Dave Hill, VP Product Line Management 14:45 Q&As 15:15 Tour of facility 16:45 Refreshme
Slide 9: Today's Goals
Today’s Goals 1 Outline the business strategy 2 Explore the key drivers of future growth 3 Demonstrate how we are managing the growth challenges 4 Recent developments in R&D 5 Visit our manufacturing facility and product demonstrations 6 Opportunity to meet the management team 7 Why we are different
Slide 10: John Crane - An Attractive Investment Case
John Crane - An Attractive Investment Case Market leader in growth markets with high barriers to entry Resilient business with high aftermarket exposure in diverse markets Unrivalled geographical coverage to leverage expanded products Business underpinned by leading edge technology services Producti
Slide 11: John Crane Historical Overview
John Crane Historical Overview Financial performance 2008 Sales growth since 2005 (£m) Sales £645m CAGR (organic growth) 2005 to 2008 = 6.5% Organic Growth 7.6% Headline Op. Profit £108m Organic Growth 7.2% Margin 16.8% John Crane is: • The acknowledged world leader and largest developer, manufactur
Slide 12: A Portfolio of Product & Services
A Portfolio of Product & Services 88%* 12%* Mechanical Couplings Seal Support Bearings Filtration Condition Production Seals Systems Systems Based Solutions Monitoring * % of 2008 sales Investor visit to Lutin | 12 © 2009 by John Crane: Proprietary Data
Slide 13: Key Strategies
Key Strategies Going Global “One John Crane” • Clear Communication / One Direction • World Class performance Leveraging the Footprint • Existing (organic growth) • Acquisitions (bearings / filtration) Building John Crane Production Solutions • Upstream focus • Builds on global footprint Investor vis
Slide 14: John Crane Fact File
John Crane Fact File 2008 Sales Sales Profile - by region Sales by sector % £645m 7.6% organic growth Europe/ME/Africa Oil & Gas North America OEM Asia-Pacific General Industry • 21 manufacturing sites in 15 countries covering ~120,000 SQM South America Chemical Processing of manufacturing space. Po
Slide 15: Where John Crane Sits
Where John Crane Sits Expanding addressable market Worldwide process equipment market £4.1bn ~£50.2bn Artificial Lift 3% of market Condition Based MARKETS Monitoring Oil & Gas Chemical & Pharma. Filters Power General Industry Bearings EQUIPMENT Seal Support Pumps Systems 28% Compressors of market £2
Slide 16: Business Model: From Concept to Installation to Lifetime Support
Business Model: From Concept to Installation to Lifetime Support Customer Concept Front End Engineering Commissioning Business Engineering Procurement Operation Start Up Case Design Construction John Crane R&D Engineer Operations Aftermarket First Fit: 1/3 of business Aftermarket: 2/3 of business In
Slide 17: John Crane Serves a Wide Range of Blue Chip Customers
John Crane Serves a Wide Range of Blue Chip Customers First-Fit Supply to Original Aftermarket Supply and Value-Added Equipment Manufacturers Services to Operating Facilities SBW Investor visit to Lutin | 17 © 2009 by John Crane: Proprietary Data
Slide 18: John Crane – Unique Global Reach
John Crane – Unique Global Reach • Over 230 sales & service facilities in 59 countries • 17 facilities opened in last 3 years: - 11 in Asia Pacific - Four in Middle East - Two in Europe Investor visit to Lutin | 18 © 2009 by John Crane: Proprietary Data
Slide 19: Global Infrastructure Investments - Key Drivers
Global Infrastructure Investments - Key Drivers Energy Independence Regulatory Requirements Ageing Infrastructure • Efficiency • Upgrades Demographics • Industrialisation • Population growth Economic Growth Investor visit to Lutin | 19 © 2009 by John Crane: Proprietary Data
Slide 20: Market Update: Addressable Market
Market Update: Addressable Market Worldwide process equipment market ~£50.2bn Artificial Lift OEM Oil & Gas Chemical Processing Condition Based Power MARKETS Monitoring Oil & Gas General Industry Chemical & Pharma. Filters Power General Industry Bearings EQUIPMENT Seal Support Pumps Systems Compress
Slide 21: Market Update: Oil & Gas Industry
Market Update: Oil & Gas Industry £4.1bn Oil Industry World liquid production 1990-2030* • Additional 28 million barrels / day required by 2030 • Demand showing decline in 2009 with a recovery in 2010 • Non-OPEC production in 2030 projected to increase to 13 million barrels / day • Optimisation of p
Slide 22: Market Update: Oil & Gas Industry - Oil price impact
Market Update: Oil & Gas Industry £4.1bn John Crane: Oil price has limited impact % of petroleum/ Upstream 25% Midstream 15% Downstream 60% chem/pharma sales* High High feed costs Increased investment Limited Margin pressure Maintain / increase output impact Oil price Reduce investment Low feed cost
Slide 23: Market Update: Oil & Gas Industry - Gas
Market Update: Oil & Gas Industry £4.1bn Gas Industry World natural gas consumption 1980-2030 • Production increases in the non-OECD region • Natural gas replaces oil wherever possible • LNG to double capacity by 2012 • Middle East will remain net exporters • Driven by power generation, climate chan
Slide 24: Market Update: Chemical Processing Industry
Market Update: Chemical Processing Industry £4.1bn • Directly linked to GDP and consumer John Crane Opportunities activity growth • Sales and Service network to • Capacity is not being reduced globally maximise aftermarket opportunities in developing regions • Chemical market end users posting large
Slide 25: Market Update: Power Industry
Market Update: Power Industry £4.1bn • Total energy consumption and World Electricity generation by fuel 2005-2030* generation is expected to double 20 liquids nuclear renewables natural gas coal from 2005 through 2030 Trillion Kilowatthours • Resilient to economic downturn 15 • Major expansion - As
Slide 26: Market Update: General Industry
Market Update: General Industry £4.1bn Water • Directly linked to population growth • Water infrastructure require $56bn investments in next seven years Pulp & Paper • Major expansion in Asia Pacific • Limited replacement of ageing western assets • Increasing environmental pressures • Drive for incr
Slide 27: John Crane has a Broad Range of Technologies
John Crane has a Broad Range of Technologies Technologies Mechanical Couplings Seal Support Bearings Filtration Equipment Production & Services Seals Systems Systems Management Solutions & Process Improvement Markets Oil and Gas 9 9 9 9 9 9 9 Power 9 9 9 9 9 Chemical 9 9 9 9 9 Gen. Industry 9 9 9 In
Slide 28: John Crane has a Strong Competitive Position
John Crane has a Strong Competitive Position Mechanical Couplings Seal Support Bearings Filtration Equipment Production Seals Systems Systems management & Solutions process improvement Investor visit to Lutin | 28 © 2009 by John Crane: Proprietary Data
Slide 29: John Crane Key Differentiators: Customer Intimacy
John Crane Key Differentiators: Customer Intimacy Global Spread Products & Technology End User Coverage Opportunities to grow share in expanded market Investor visit to Lutin | 29 © 2009 by John Crane: Proprietary Data
Slide 30: Key Strategies
Key Strategies Going Global “One John Crane” • Clear Communication / One Direction • World Class performance Leveraging the Footprint • Existing (organic growth) • Acquisitions (bearings / filtration) Building John Crane Production Solutions • Upstream focus • Builds on global footprint Investor vis
Slide 31: John Crane - Lunch
John Crane - Lunch Investor visit to Lutin | 31 © 2009 by John Crane: Proprietary Data
Slide 32: Robert Wasson, VP Finance & IT
Robert Wasson VP Finance & IT, John Crane 1 John Crane Restructuring 2 ERP Implementation 3 Acquisitions 4 Business Priorities Investor visit to Lutin | 32 © 2009 by John Crane: Proprietary Data
Slide 33: John Crane Restructuring is Delivering Margin Benefits
John Crane Restructuring is Delivering Margin Benefits Restructuring for better customer service and lower costs • Merge two John Crane businesses: Americas and Europe / Asia / Africa • Leverage global talent • Established global coordination of various activities / functions • Customer account mana
Slide 34: Restructuring for Better Customer Service and Lower Costs
Restructuring for Better Customer Service and Lower Costs • Restructured into one global organisation - August 2008 • Regional Sales & Service organisations supporting local customer needs (Americas / Europe, Middle East, Africa / Asia Pacific) • Focused business units to leverage recent acquisition
Slide 35: John Crane - ERP Implementation
John Crane - ERP Implementation Scope: • Total investment £24m • Completion June 2010 • 31 countries across – Europe / Middle East / Africa / Asia Pacific • Significant financial benefits – Headcount / Purchasing / W. C. • Profit & Loss benefits of £10 million per annum once complete • High level of
Slide 36: Building Through Acquisitions - Strategy
Building Through Acquisitions - Strategy Adding complementary technologies • Sartorius / Orion - engineered bearings • Indufil - filtration systems Building Production Solutions upstream energy services business • Fiberod - fibre-glass sucker rods Extending our geographic footprint • Japan JV - purc
Slide 37: Building Through Acquisitions - Timeline
Building Through Acquisitions - Timeline Investor visit to Lutin | 37 © 2009 by John Crane: Proprietary Data
Slide 38: John Crane: Business Priorities
John Crane: Business Priorities • Implement restructuring programme - Global John Crane • ERP implementation • Enhance customer service • Leverage manufacturing capability and global footprint • Build the business through acquisitions Sales growth* Operating profit margin* 2008: 8% 8% 22% * Range of
Slide 39: David Hill, VP Product Line Management
David Hill VP, Product Line Management, John Crane 1 Business model including a review of our principle routes to market 2 Products and Services and recent developments in R&D Investor visit to Lutin | 39 © 2009 by John Crane: Proprietary Data
Slide 40: Business Model: From Concept to Installation to Lifetime Support
Business Model: From Concept to Installation to Lifetime Support Customer Concept Front End Engineering Commissioning Business Engineering Procurement Operation Start Up Case Design Construction John Crane R&D Engineer Operations Aftermarket First Fit: 1/3 of business Aftermarket: 2/3 of business In
Slide 41: Routes to Market
Routes to Market Original Equipment Process Equipment Supply End User Specification Products Sales & Aftermarket Service ‘footprint’ Products and Aftermarket Services Investor visit to Lutin | 41 © 2009 by John Crane: Proprietary Data
Slide 42: Original Equipment Investment Projects
Original Equipment Investment Projects £4.1bn 1 6 Areas of Oil & Gas investment 1) Canada – Oil Sands, Pipeline, Refinery 2) Brazil – Offshore 3 (inc. $1m Indufil filter sets) 4 Colombia – Refinery 3) UAE & Saudi Arabia – 2 Petrochemical Complexs Bahrain – Lube Oil Refinery 5 4) Singapore – Ethylene
Slide 43: What we do - Invisible Contribution
What we do - Invisible Contribution Product Typical Equipment End Product 88%* 12%* * % of 2008 sales Investor visit to Lutin | 43 © 2009 by John Crane: Proprietary Data
Slide 44: What we do - Mechanical Seals for Pumps
What we do - Mechanical Seals for Pumps • Prevents leakage into the environment • Fluid handling equipment • Process industries and many commercial applications CASE STUDY: Dow Chemical OPPORTUNITIES • Leakage of toxic chemicals from 1000 pumps, • Growing global demand for power Freeport Texas compl
Slide 45: What we do - Dry Gas Seals for Compressors
What we do - Dry Gas Seals for Compressors • Prevents leakage of gas into the environment • Centrifugal compressors • Over 24,000 seals supplied with more than 750 million operating hours CASE STUDY: BP OPPORTUNITIES • Refinery in Bulwer Island, Brisbane, Australia • FPSO’s Pipeline • Competitor sea
Slide 46: What we do - Power Transmission Couplings
What we do - Power Transmission Couplings Powers machine drives • Turbo Compressors at 25000RPM • Turbo Generator at 70MW • Propulsion of 38 Navies • Over 1 million refinery and power installations worldwide CASE STUDY: Methanol Plant - Trinidad Future Opportunities • Torsional vibration problems •
Slide 47: What we do - Seal Support Systems
What we do - Seal Support Systems • Provide a safe, efficient, controlled operating environment • When the seal and/or equipment operating environment is unsuitable e.g. volatile, toxic, abrasive or polymerising CASE STUDY: Athabasca Oil Sands Project OPPORTUNITIES • 100,000 barrel per day expansion
Slide 48: What we do - Filtration Systems
What we do - Filtration Systems • Removes contaminants from fluid streams • Gas Turbines / steam turbines / compressors and generators • Used for oil and gas production / transmission / hydrocarbon processing / refining and the rapidly developing power generation industry across the globe OPPORTUNIT
Slide 49: What we do - Hydrodynamic Bearings
What we do - Hydrodynamic Bearings Supports radial and axial loads Future Opportunities of rotating shafts • Expansion of OEM installed base • High speed rotor applications • Large size bearings • Gas & Steam Turbines • Development of new materials • Pumps & Compressors • Aftermarket service strateg
Slide 50: John Crane Production Solutions (JCPS)
John Crane Production Solutions (JCPS) • Well design and analysis • Steel and fiberglass sucker rods and subsurface well pumps • “Fiberglass Sucker Rod” technology • Innovative product, lighter and stronger than the steel • Lowers lifting costs • Non-corrosive • More efficient oil production CASE ST
Slide 51: Equipment Management and Process Improvement
Equipment Management and Process Improvement Rotating Equipment Performance Management • Shared benefit agreements • Long term customer relations • Cross selling opportunities • Condition based maintenance contracts • Oil & Water Chemistry Consultancy CASE STUDY: Shell Stanlow Future Opportunities •
Slide 52: Product & Services
Product & Services 88%* 12%* Mechanical Couplings Seal Support Bearings Filtration Condition Production Seals Systems Systems Based Solutions Monitoring * % of 2008 sales Investor visit to Lutin | 52 © 2009 by John Crane: Proprietary Data
Slide 53: Focus on Aftermarket
Focus on Aftermarket Investor visit to Lutin | 53 © 2009 by John Crane: Proprietary Data
Slide 54: 1. End User Specifies Products
1. End User Specifies Products End Users Strong customer relationships • Applications critical to plant operation • Smiths product technology & integrity • Outstanding service • Value added solutions OEMs End User Specification Year 0 Investor visit to Lutin | 54 © 2009 by John Crane: Proprietary Da
Slide 55: 2. OEM Complies with Specification
2. OEM Complies with Specification End Users Year 1-2 First-fit OEMs End User Specification Year 0 Investor visit to Lutin | 55 © 2009 by John Crane: Proprietary Data
Slide 56: 3. OEM Fits Products and Supplies Equipment
3. OEM Fits Products and Supplies Equipment End Users Year 1-2 First-fit Equipment Supply Year OEMs 2-3 End User Specification Year 0 Investor visit to Lutin | 56 © 2009 by John Crane: Proprietary Data
Slide 57: 4. Commissioning Spares Supplied to Plant Start-Up
4. Commissioning Spares Supplied to Plant Start-Up End Users Year Commissioning Spares 3-4 Year 1-2 First-fit Equipment Supply Year OEMs 2-3 End User Specification Year 0 Investor visit to Lutin | 57 © 2009 by John Crane: Proprietary Data
Slide 58: 5. Operating Spares and Services for Life
5. Operating Spares and Services for Life End Users Year Commissioning Spares 3-4 Year 1-2 Year Operating Spares 4-30 First-fit Equipment Supply Year OEMs 2-3 End User Specification Year 0 Investor visit to Lutin | 58 © 2009 by John Crane: Proprietary Data
Slide 59: Aftermarket Services
Aftermarket Services Seals, couplings, systems, bearings, filters, condition monitoring, reliability programmes Applications • Pumps, compressors, reactors, mixers • 300 to 3000 per site with potential for six times John Crane products • Average seal life 24 months • Average filter life 3-12 months
Slide 60: Complete Responsibility
Complete Responsibility • There is a fundamental disconnect between the drivers in the capital side of clients business and the needs of their operating company • Invariably this disconnect adds total cost, reduces efficiency and lays blame at the door of the supplier • John Crane Project Management
Slide 61: Asset Management To Achieve Corporate Objectives
Asset Management To Achieve Corporate Objectives Concept to Installation to Lifetime Support Reduce Cost of Ownership Increase Asset Utilisation Equipment Management and Process Improvement Minimise Lost Profits Mechanical Couplings Seal Support Bearings Filtration Seals Systems Systems Investor vis
Slide 62: Aftermarket Summary
Aftermarket Summary Benefits to Client Benefits to John Crane • Reduction of total cost of ownership • Repairs and refurbishments • Reliability improvement of the • Upgrades rotating equipment • First fit on plant expansions • Improved safety performance • Competitor change out • Improved environmen
Slide 63: John Crane - An Attractive Investment Case
John Crane - An Attractive Investment Case Market leader in growth markets with high barriers to entry Resilient business with high aftermarket exposure in diverse markets Unrivalled geographical coverage to leverage expanded products Business underpinned by leading edge technology services Producti
Slide 64: John Crane - Questions and Answers
John Crane - Questions and Answers Investor visit to Lutin | 64 © 2009 by John Crane: Proprietary Data
Slide 65: Site Tour
Site Tour 3 groups colour coded on badges 3 zones to visit 1 Engineering & Commercial 2 Operations 3 Aftermarket (Role Play) Investor visit to Lutin | 65 © 2009 by John Crane: Proprietary Data
Slide 66: www.smiths.com
Investor visit to Lutin | 66 www.smiths.com © 2009 ©by2009 Johnby Crane: Proprietary John Crane: ProprietaryData Data