Morgan Advanced Materials Plc · LSE:MGAM
Morgan Advanced Materials — Investor Day (November 2013)
80 slides from Morgan Advanced Materials's investor day presentation, Nov 21, 2013
Slide 1: Morgan Advanced Materials Capital Markets Presentation
Morgan Advanced Materials Capital Markets Presentation 21st November 2013 www.morganadvancedmaterials.com 1
Slide 2: Key themes of today's presentation
Key themes of today’s presentation • Building sustainable competitive advantage in attractive markets … • … with truly differentiated products and services underpinned by world-leading technology • Implications for proactive portfolio re-shaping initiatives • Our goal is for all our businesses and t
Slide 3: Today's agenda and timings
Today’s agenda and timings Speaker Time Introduction and executive summary Mark Robertshaw 2.30 – 2.55pm Technology, innovation and differentiation Dr Mike Murray 2.55 – 3.30pm Delivering “One Morgan” and Europe: Dr Andrew Hosty 3.30 – 3.55pm driving increased returns Break 3.55 – 4.15pm Asia/Rest o
Slide 4: Introduction
Introduction • Context and background on where we have come from over the past several years • Overview of “One Morgan” business model and strategy going forward 4
Slide 5: Where we have come from: strategic priorities
Where we have come from: strategic priorities Strategic Priorities Implications • Focus on higher growth, higher • Positive mix shift margin non-economically cyclical markets • Sustainable competitive advantage predicated on world-leading • Be differentiated and high value- technological differentia
Slide 6: Margins now best in class …
Margins now best in class … Morgan Advanced Materials Quoted competitors 2003 H1 2013 2003 H1 2013 Quoted competitors are SGL Carbon, Mersen and Vesuvius 6
Slide 7: ... in a challenging competitive landscape over the past 12-18 months
... in a challenging competitive landscape over the past 12-18 months Quoted competitors are SGL Carbon, Mersen and Vesuvius 7
Slide 8: Positive mix shift has been a fundamental driver of our relative outperformance
Positive mix shift has been a fundamental driver of our relative outperformance • We have consciously come out of markets and businesses where we did not have sustainable competitive advantage… • ..and focussed our efforts on attractive markets where we can create real differentiation • As a result,
Slide 9: Market positioning and differentiation absolutely fundamental to continued positive pricing
Market positioning and differentiation absolutely fundamental to continued positive pricing 9
Slide 10: One Morgan: focusing the Group on a higher quality core of technologies
One Morgan: focusing the Group on a higher quality core of technologies with sustainable competitive advantage 2003 2010 2013 Thermal Ceramics Advanced Ceramics Ceramics Electro Ceramics Division (Regional) Electrical Carbon Further simplify to Morgan Advanced Auto Consumer bring to customers Materi
Slide 11: All our businesses sharing the same unifying characteristics
.. but with all our businesses sharing the same unifying characteristics • Leading edge material science • Sophisticated application engineering • Solving complex challenges in technically demanding applications • Providing real value-add to our customers, enabling their products and processes to pe
Slide 12: Implications for portfolio reshaping
Implications for portfolio reshaping • Electrical carbon • Seals and bearings • IFB/castables • C&DS advanced composites 60% 35% • Fibre • Piezo ceramics 5% • Brazed alloys and assemblies • Ceramic cores • C&DS – logistics support • Engineered ceramics • Lithium ion • MMS • Other small business/prod
Slide 13: Technology, innovation and differentiation
Technology, innovation and differentiation Dr Mike Murray Chief Technology Officer www.morganadvancedmaterials.com 13
Slide 14: What we do ....
What we do .... • Leading edge material science • Sophisticated application engineering • Solving complex challenges in technically demanding applications • Providing real value-add to our customers, enabling their products and processes to perform more efficiently, more reliably and for longer Driv
Slide 15: We have increased our R+D spend by 2.5 times since 2006
We have increased our R+D spend by 2.5 times since 2006 £m R+D Spend 2006-12 20 15 10 5 0 2006 2012 15
Slide 16: Understanding how and where we invest in R+D
Understanding how and where we invest in R+D is fundamental to our innovation and growth strategy Strong existing player Working with world-leading Selectively invest customers e.g. fibre e.g. technical ceramics Work with the world-leading Joint development with external organisations leading custom
Slide 17: Focusing on technically demanding, attractive growth markets
Focusing on technically demanding, attractive growth markets Energy Transportation Electronics Security and Defence Healthcare Industrial Petrochemical 17
Slide 18: Our technology families - leading positions in the markets we serve
Our technology families - leading positions in the markets we serve Insulating Electrical Composites Structural Fibre firebricks / carbon and and Defence ceramics castables rotary transfer Systems Assemblies Seals and Molten Metal Piezoelectric Ceramic cores and braze bearings Systems ceramics alloy
Slide 19: R+D Strategy
R+D Strategy • Our long term profitable strength depends on constantly refreshing our innovation pipeline to anticipate, or respond to, market needs • Morgan’s R+D strategy is governed by 3 underlying principles • Driving innovation and targeting our chosen markets through our New Business Developme
Slide 20: New Business Development Pipeline
Morgan Advanced Materials New Business Development Pipeline www.morganadvancedmaterials.com 20
Slide 21: A systematic process for managing new business development
A systematic process for managing new business development across the “One Morgan” structure Technology push (Investment in hunters) Stages 1-6 (Enquiry to sample approved) Stages 7-10 (Quoted to production) 4 –Revenue Samples Customer Ordered Network of intimacy Management process world experts and
Slide 22: Our technology families - leading positions in the markets we serve
Our technology families - leading positions in the markets we serve Insulating Electrical Composites Structural Fibre firebricks / carbon and and Defence ceramics castables rotary transfer Systems Assemblies Seals and Molten Metal Piezoelectric Ceramic cores and braze bearings Systems ceramics alloy
Slide 23: Insulating fibre innovation path
Insulating fibre innovation path °C Differentiation and margin generation 1750 Next generation Sol Gel low bio persistent Innovation path fibre 1400 Superwool® XT* RCF Superwool® Plus & HT* 750 New low bio- Traditional persistence alumina/silica (*patented) 23
Slide 24: Superwool Fibre offers up to 40% lower thermal conductivity
Superwool® Fibre offers up to 40% lower thermal conductivity than competitive insulation at 1000°C Competition RCF Competition RCF Superwool Plus Superwool Plus Superwool Plus Superwool Plus 98Kg/m3 128Kg/m3 98Kg/m3 128Kg/m3 Superwool® Plus™ and FireMaster® Marine Plus™ offer: • Superior insulation
Slide 25: Fire protection for off-shore platforms and floating production storage
Fire protection for off-shore platforms and floating production storage • FireMaster Marine Plus blanket product saves 20 tonnes of topside weight in living quarters allowing a further 40 tonnes of saving in the support structure • Also efficient sound insulation • Highly differentiated through comp
Slide 26: Protection for off-shore platforms, FPSO and LNG terminals
Protection for off-shore platforms, floating production storage and liquid natural gas terminals • Morgan’s superior insulation properties provide valuable time in the event of a fire • Custom engineered systems • Morgan is the only insulation producer producing the finished system • Differentiation
Slide 27: Each fibre innovation can be leveraged around the globe
Each fibre innovation can be leveraged around the globe with scale across chosen markets Power generation Aluminium Fire protection Transportation Cement/glass New developments Automotive Iron and steel Ceramic industry Chemical processing Metal working 27
Slide 28: Our technology families - leading positions in the markets we serve
Our technology families - leading positions in the markets we serve Insulating Electrical Composites Structural Fibre firebricks / carbon and and Defence ceramics castables rotary transfer Systems Assemblies Seals and Molten Metal Piezoelectric Ceramic cores and braze bearings Systems ceramics alloy
Slide 29: Step change improvement in performance
Step change improvement in performance 99.999% pure Silicon metal Precious metals Nuclear waste aluminium recycling processing treatment Higher New process with No detectable 100% longer temperature crucible metal pollution lifetime application technology 29
Slide 30: Continued innovation with energy efficient materials
Continued innovation with energy efficient materials Reduced customers’ cost of ownership thanks to lower energy consumption and longer lifetime 30
Slide 31: Our technology families - leading positions in the markets we serve
Our technology families - leading positions in the markets we serve Insulating Electrical Composites Structural Fibre firebricks / carbon and and Defence ceramics castables rotary transfer Systems Assemblies Seals and Molten Metal Piezoelectric Ceramic cores and braze bearings Systems ceramics alloy
Slide 32: World-leading light weight body armour solutions
World-leading light weight body armour solutions Standard Construction CMS Construction Conventional construction (No CMS) Crack Mitigation System (CMS) construction - severe damage across ceramic strike face - zone of damage reduced Shot 2 performance compromised by shot 1damage No damage seen in s
Slide 33: A step change in helmet technology
A step change in helmet technology Current technology Next generation helmet • Aramid construction • Morgan’s lightweight hybrid • Provides significant fragmentation construction protection • Maintained fragmentation protection • Offers class leading blunt trauma • Enhanced ability to stop 9mm round
Slide 34: Achieved through fundamental understanding of material science
Achieved through fundamental understanding of material science • Hundreds of iterations Flat panel 1.1g FSP V50 data • Significant weight savings achieved with monolithic PE 140 solutions (white lines) but reduced structural Morgan performance 130 hybrid(s) • Morgan hybrid enhances V50 relative to C
Slide 35: Leading the world in composite pod technology
Leading the world in composite pod technology Morgan has led the world in composite pod technology for the last 20 years Combination of the fundamentals of materials science and processing knowhow has created a unique capability First order won with a major Asian prime ($1M) and we are at various st
Slide 36: Primary Materials Centre of Excellence
Morgan Advanced Materials Primary Materials Centre of Excellence www.morganadvancedmaterials.com 36
Slide 37: Primary Materials Centre of Excellence
Primary Materials Centre of Excellence • Established for Fibre, Composites and Defence and MMS • Gives opportunity to increase the effectiveness of R&D spend in accelerating profitable growth • Provides critical mass for efforts, ideas and interaction • Ownership of all new formulations and processe
Slide 38: New horizons – university and customer collaboration
New horizons – university and customer collaboration • Working with the world’s leading universities • Imperial College - Centre for Advanced Structural Ceramics • Manchester - industrial supervisor on £3.5m grants on graphene research • University of South Carolina and Biomedical Engineering Societ
Slide 39: R+D strategy
R+D strategy • Continue to increase the Group’s R+D spend both in absolute terms and as a percentage of sales • Use our New Business Development Pipeline to identify the largest and most profitable growth opportunities • Strike the right balance between ‘customer pull’ and ‘technology push’ dependin
Slide 40: Delivering "One Morgan" and Europe: driving increased returns
Delivering “One Morgan” and Europe: driving increased returns Dr Andrew Hosty Chief Operating Officer www.morganadvancedmaterials.com 40
Slide 41: "One Morgan" being delivered to plan
“One Morgan” being delivered to plan • To deliver the Group strategy of focusing on higher growth, higher margin markets • Drive sales by offering world-leading customers performance advantages using Morgan’s technologies • Leveraging our global presence to deliver growth opportunities • Further del
Slide 42: "One Morgan" is going well
“One Morgan” is going well • Focus on differentiated products into chosen markets leveraging all our technologies • Further delayers the organisational structure to increase global connectivity and pace of change • On plan to deliver target annualised savings of £6-8m in 2014, close to half of which
Slide 43: "One Morgan": creating additional opportunities for growth
“One Morgan”: creating additional opportunities for growth • Bringing the full depth and breadth of our advanced material technology to our customers • “Synergy selling” - leveraging the full breadth and depth of the Morgan portfolio • Customer technology workshops • Cross-regional technology transf
Slide 44: Europe: Driving increased returns
Europe Driving increased returns Dr Andrew Hosty Chief Operating Officer www.morganadvancedmaterials.com 44
Slide 45: Europe: driving increased returns
Europe: driving increased returns • Our synergy selling has identified £12m of new sales opportunities • Consolidation of back offices • Introduction of Ceramics products to Hungary using the electrical carbon presence • Leveraging purchasing power of higher spend and sharing of Europe 2013 H1 suppl
Slide 46: Major improvement in electrical carbon profitability
Major improvement in electrical carbon profitability and further progress expected • Improving sales mix on back of new business wins and new product innovations e.g. rotary devices on ships • Closure of manufacturing operations in Netherlands, moved to Hungary • Continued overhead reductions throug
Slide 47: Composites and Defence Systems – leveraging world leading technology
Composites and Defence Systems – leveraging world leading technology in to new markets • Significant sales growth from in-theatre surge requirements for MoD (2007:£46m, 2009:£180m); some opportunistic sales emerged to meet urgent customer needs • Heart of the business remains advanced materials - ex
Slide 48: Europe lead the move from RCF to Superwool fibre
Europe lead the move from RCF to Superwool® fibre • 90% of our fibre production in Western Europe is now Superwool • 57% sales tonnage in Europe is Superwool (2013 YTD) • RCF likely to be an “authorised material” from 2015/2016 48
Slide 49: European priorities
European priorities • Accelerate reshaping of European portfolio focusing on differentiated businesses • Deliver growth opportunities • Capitalise on any market recovery 49
Slide 50: Asia/Rest of World: Differentiating for profitable growth
Asia/Rest of World Differentiating for profitable growth Ian Robb President, Asia/Rest of World www.morganadvancedmaterials.com 50
Slide 51: Asia/Rest of World – differentiating for profitable growth
Asia/Rest of World – differentiating for profitable growth • Building differentiation and competitive advantage in attractive markets • Accelerating under the “One Morgan” structure • Attractive growth prospects in the medium and long term • Customers and markets moving towards more sophisticated, d
Slide 52: Asia/Rest of World Key highlights
Asia/Rest of World Key highlights Market-leading materials and application engineering expertise Major capital investment Driving more technically differentiated products High cost footprint rationalised and margins enhanced 52
Slide 53: Quick win from "One Morgan": Australia managed as single business
Quick win from “One Morgan” e.g. Australia now managed as single business • Consolidate financial and admin functions • Closed fibre manufacturing, now trading • EBITA increased • Sell land, reduce footprint Submarine exhaust cover • Utilise Asian fibre capacity (Korea/China) • Reduced electrical ca
Slide 54: Reshaping the portfolio - flexibility, footprint, investment and divestment
Reshaping the portfolio - flexibility, footprint utilisation, strategic investment and divestment • Portfolio reshaping is faster and more decisive in 2013; continuing over the next 12-24 months • Energy and labour are major costs to our portfolio • Divest/close facilities where we cannot improve op
Slide 55: Capital investment continuing for Superwool fibre installations
Capital investment continuing for Superwool® fibre installations and expansion projects • Completed Superwool conversion and capacity investment in China, Korea, Brazil and India Jingmen, China • Current projects include new greenfield ceramics plant in Dalian, China • New projects include construct
Slide 56: Commanding price premium through differentiation and value selling
Commanding price premium versus competitor offerings, through differentiation and value selling • The world’s No.1 special shipbuilders in Korea choose Morgan’s FireMaster® Marine Plus™ • Morgan offers application engineering expertise and value propositions FireMaster Marine Plus used for bulk head
Slide 57: Emerging markets remain attractive to investment in differentiated products
Emerging markets remain attractive to investment in technically differentiated products and processes • Developing medical devices, advanced electronics, aerospace and piezo flow metering Medical feed-through devices • Customers and markets moving to more sophisticated, differentiated and higher- va
Slide 58: North America: Moving beyond mid-teen margins
North America Moving beyond mid-teen margins John Stang President, North America www.morganadvancedmaterials.com 58
Slide 59: Growing a mid teen margin business
Growing a mid teen margin business • Thermal EBITA margins now driven into high teens • Robust emission control market for converted fibre business • Continued growth of Superwool® • Electrical carbon margins improving through cost reductions and market share gains e.g. differentiated products in re
Slide 60: Key Priorities – driving the business forward
Key Priorities – driving the business forward • One Morgan model • Synergy selling • Expanding New Business Development Pipeline / new product technology • Focus on high value added growth markets (aerospace / energy) Moving beyond a mid-teen • Accelerate Superwool® roll out margin business and conv
Slide 61: "One Morgan" - synergy selling
“One Morgan” - synergy selling • Internal Morgan product tradeshow • Training workshops One Morgan • Introduction to Sales Forum synergy selling programme • 80 commercial leaders from around the world Salesman Business Salesman receives confirms as forward credit when new leads converted to opportun
Slide 62: Superwool - accelerating the impact
Superwool® - accelerating the impact • Superwool migration progressing well and accelerating • c.36% of total fibre sales in 2013 in the region will be Superwool • Conversion of fibre lines is significantly increasing our Superwool capacity • 2012 - 34% of fibre capacity Superwool capable • 2013 - 4
Slide 63: Growth opportunity in vehicle emission controls
Growth opportunity in vehicle emission controls, gaining share in a growing market (£30m) • Morgan well positioned to take advantage of strong market growth and more stringent emission control regulations • Continued investment in equipment that enhances the performance of our materials • New materi
Slide 64: Growth opportunity: increasing number of aerospace solutions
Growth opportunity: increasing number of aerospace solutions (£50m) Enabling improved safety, reliability, and performance of aircraft and aerospace systems for over 60 years. Thermal Material Sensor and Friction wear MRO and Investment management joining avionics and sealing repair casting Solution
Slide 65: Growth opportunity: energy/chemical processing industry
Growth opportunity: energy/chemical processing industry (£70m) • Fired heaters • Secondary ammonia reformers • Sulphur recovery unit • Fluid catalytic cracking unit • Cutters for deep hole drilling • Expanded gas exploration • Requirement for longer-life 65
Slide 66: Priorities: moving beyond mid-teen margins
Priorities: moving beyond mid-teen margins • Continue to leverage “One Morgan” opportunities for growth by driving new business pipeline • Focus on high value growth markets e.g. aerospace, healthcare, emission control • Accelerate new product developments • Execute capital plan on Superwool® expans
Slide 67: Financial transformation of the Group
Financial transformation of the Group Kevin Dangerfield Chief Financial Officer www.morganadvancedmaterials.com 67
Slide 68: The margin story continues to improve through industry cycle
The margin story continues to improve through industry cycle Quoted competitors are SGL Carbon, Mersen and Vesuvius 68
Slide 69: Far better operational leverage on growth
Far better operational leverage on growth Quoted competitors are SGL Carbon, Mersen and Vesuvius 69
Slide 70: Significantly improved resilience of profit margins in downcycles
Significantly improved resilience of profit margins in our industry downcycles Improving resilience to industry …… differentiates us from our downcycles …… quoted competitors Quoted competitors are SGL Carbon, Mersen and Vesuvius 70
Slide 71: Significant sales growth with minimal additional headcount
Significant sales growth with minimal additional headcount, with a highly flexible labour force • >40% increase in revenue with <3% increase in people • > 80% of headcount now in lower cost and/or flexible labour locations 71
Slide 72: ROCE – important measure of quality of business
ROCE – important measure of quality of business; key performance indicator, part of 3 year incentive plans Operating ROCE is defined as underlying operating profit divided by the sum of working capital (excluding pension liability and provisions) and the net book value of tangible assets. Goodwill a
Slide 73: Strong cash generation
Strong cash generation £237m c.50% more free cash flow produced in £165m last 4 years than in previous decade, with greater investment in our business *Free cash flow is operating cash flow less capital expenditure and interest and tax payments 73
Slide 74: Progressive dividend increases
Resilient operating results and strong cash generation support progressive dividend increases 74
Slide 75: Net Debt – low net debt and significant facility headroom
Net Debt – low net debt and significant facility head room via banks and US$/€ PP • Net debt to EBITDA ratio c. 1.2 times (consensus) 2013 year end • Free cash flow after paying dividends c.£25m • Generating cash for further investment/pay down debt/progressive dividend increases • Group no longer d
Slide 76: Summary
Summary • Continued focus on and improvement in resilience of margins through cycle • Improved operational flexibility of business, better leverage on revenue growth and resilience in downturns • ROCE and cash flow improving • Robust balance sheet – low net debt providing flexibility for investment
Slide 77: Conclusion and Q&A
Conclusion and Q&A Mark Robertshaw Chief Executive Officer www.morganadvancedmaterials.com 77
Slide 78: Summary - The quality of the Group continues to improve
Summary - The quality of the Group continues to improve • Much stronger competitive position and differentiation • Increasing investment in R&D and innovation creating world- leading technology position • Simplification and streamlining of organisation structure increasing global connectivity and pa
Slide 79: Summary – looking forward
Summary – looking forward • Our strategy remains to build sustainable competitive advantage in attractive markets … • … with truly differentiated products and services underpinned by world-leading technology • The continued simplification and streamlining of the Group’s structure to the “One Morgan”
Slide 80: Morgan Advanced Materials Capital Markets Presentation
Morgan Advanced Materials Capital Markets Presentation 21st November 2013 www.morganadvancedmaterials.com 80
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