Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Arconic — Jefferies Conference 2017
27 slides from Howmet Aerospace's conference presentation, Aug 8, 2017
Slide 1: Jefferies Conference
Jefferies Conference David Hess – Interim Chief Executive Officer August 8, 2017
Slide 2: Important Information: Forward-Looking Statements
Important Information Forward – Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward - looking state ments within the meaning of the Private Securities Litigation Reform Act of 1995. Forward - looking statements include
Slide 3: Important Information (continued)
Important Information (continued) Non - GAAP Financial Measures Some of the information included in this presentation is derived from Arconic’s consolidated financial information but is not pr esented in Arconic’s financial statements prepared in accordance with accounting principles generally accep
Slide 4: Overview
Overview 4 2016 Revenue: $12.4B 3 2016 EBITDA: $1.7B 4 1) 2016 third party revenue by market excludes discontinued operations 2) Includes brazing and automotive sheet 3) Includes Tennessee Packaging revenues of ~$552M in 2016 4) Excludes $193M of separation costs See Appendix for Reconciliations 4%
Slide 5: Focused on our key priorities to drive EBITDA growth
Focused on our key priorities to drive EBITDA growth 5 Organic growth above market Capturing value through innovation Cost reduction Capital efficiency 2017 Outlook 1 Organic Revenue 2 +3% to +6% YoY EBITDA $ 3 +6% to +9% YoY EBITDA % 3 ~14.5% +~80 bps YoY Adjusted EPS 3 (~470M shares) $1.15 - $1.20
Slide 6: Aero & Defense growing in-line with the market in 2017
Aero & Defense growing in - line with the market in 2017 6 ~2 - 3% 2017E 5.4 to 5.5 2016 5.3 Global Aerospace Market Up 2 - 3% Commercial Aero Engine Defense Aero Commercial Airframe • Next - gen. engine growth • Incr. ARNC content on new engines • Destocking • Select wide - body declines • F - 35 •
Slide 7: Automotive business surpasses its market in 2017
Automotive business surpasses its market in 2017 7 Market ARNC +18% to +20% - 3% to +1%
Slide 8: Commercial Transportation growing above the market in 2017
Commercial Transportation growing above the market in 2017 8 0% to +3% ARNC +7% to +9% Market 1 1) North America and Europe
Slide 9: Engineered Products & Solutions (EP&S): Broad portfolio
Engineered Products & Solutions (EP&S): Broad portfolio 9 2016 Revenue: $5.7B 33% 13% Power and Propulsion 36% Fastening Systems and Rings 18% Forgings and Extrusions Titanium and Engineered Products ▪ ~70% of revenues from #1 or #2 market positions ▪ 75% of revenue in Aerospace
Slide 10: EP&S: Strong Aero Engine growth
EP&S: Strong Aero Engine growth 10 LeapX CFM 56 V2500 PW 1100G Trent 7000 Trent 700 CF6 GEnx 1B GE9X GE90 +82% +35% +72% +27% Indexed to Current Generation Current generation New generation +103% Aero Engine Shipset Revenues 1 New Aero Engine Introductions 1) Aero engines shown represent ~88% of tot
Slide 11: Global Rolled Products (GRP): Aligned with growing markets
Global Rolled Products (GRP): Aligned with growing markets 11 ▪ ~85% of revenues from #1 or #2 market positions ▪ #1 or #2 market positions in Aero, NA Auto, NA Brazing 11% Regional Specialty - Packaging and Other 21% Industrial 17% Commercial Transportation 7% Brazing 8% Automotive 17% Aerospace 19
Slide 12: GRP: Increasing aluminum penetration driving growth
GRP: Increasing aluminum penetration driving growth 12 Al Lbs. / Vehicle Source: “Aluminum Content in North American Light Vehicles 2016 to 2028,” published by Ducker Worldwid e, July 2017 ARNC Auto Sheet Revenues Aluminization 466 397 340 2015 2020 3% CAGR 2010 $ 648 M 2010 $ 1,300 M 2015 2018E 26%
Slide 13: Transportation and Construction Solutions (TCS): Strong brands
Transportation and Construction Solutions (TCS): Strong brands 13 Building and Construction Systems 56% Wheel and Transportation Products 38% 6% Latin America Extrusions ▪ ~80% of revenues from #1 or #2 market positions 2016 Revenue: $1.8B
Slide 14: TCS: Strong growth underpinnings
TCS: Strong growth underpinnings 14 Wheel and Transportation Products Building and Construction Systems Building and Construction Systems Global Al Wheel vs. Steel Wheel Market Share % ($ Value) 1 Source: (1) Internal projection – AWTP marketing; (2) United Nations (esa.un.org); (3) World Green Buil
Slide 15: Product, material, and process innovation
Product, material, and process innovation 15 ▪ Half the weight of nickel - based low - pressure turbine blades Ergo - Tech® and Ergo - Tech® 2 Fastening Systems ▪ One - sided installation reduces customer assembly costs ▪ Higher fatigue strength Titanium Aluminide Very Thick Plate Stretcher ▪ 17% -
Slide 16: Additive manufacturing: Unique capabilities
Additive manufacturing: Unique capabilities 16 New Material Discovery Direct Manufacturing Indirect and Hybrid Manufacturing Post Print Processing and Qualification ▪ Capabilities across all technologies ▪ Awarded contracts for Ti and Ni Aerospace parts Unique capabilities in: ▪ Thermal - mechanical
Slide 17: Cost savings: SG&A-to-Revenues below most peers
Cost savings: SG&A - to - Revenues below most peers 1 , work will continue 17 5.4% 35% 30% 25% 20% 15% 10% 5% 0% Peer 3 Peer 2 Peer 1 Peer 13 Peer 12 Peer 10 ARNC 2017E Peer 9 Peer 8 Peer 7 Peer 6 Peer 5 Peer 4 Peer 11 30% 25% 20% 15% 10% 5% 0% ~6% Peer 8 Peer 7 Peer 6 Peer 2 Peer 13 EP&S 2017E Peer
Slide 18: Cost Savings: Low-Cost Country Sourcing
Cost Savings: Low - Cost Country Sourcing 18 Mexico Hungary Morocco China Facility Expansion New Production Lines New Facility Facility Expansion 35% 2016 2020 E 19% % of sales with content from low - cost locations 1 EP&S business unit 18
Slide 19: Cost Savings: Manufacturing process improvements
Cost Savings: Manufacturing process improvements 19 2016 Gross Cost Reduction Savings Process Savings Procurement Savings Overhead Reduction $355M $284M $71M $710M Total Productivity ~45% Flow to Net Savings Examples ▪ $38M in annual savings from closed loop scrap processing at TCS ▪ $6M in annual s
Slide 20: Basis Point Improvement in Return on Net Assets
400 - 500 Basis Point Improvement in Return on Net Assets 1 20 1) Adjusted for special items 2) Impact from Alcoa Corp. retained interest monetization not included See Appendix for Reconciliations 2019 E 11% – 12% 2017 E 9 % 2016 7.1% 1 Targets 2 +400 – 500 bps +400 – 500 bps Action Plan ▪ Net Incom
Slide 21: Summary
Summary 21 EBITDA ($M) Revenue ($B) 12.4 Mid – single digit CAGR 1 2017E 2,3 2016A 12.3 - 12.7 2017E 2,4 1,810 – 1,860 2016A 1,702 Double - digit CAGR 2019E 5 as of 2016 Investor Day 2019E 5 as of 2016 Investor Day 1) 2016 through 2019 CAGR determined by applying the 7% - 8% 2017 through 2019 CAGR r
Slide 22: Arconic: Innovation, engineered.
ARCONIC Innovation, engineered.
Slide 23: Reconciliation of Arconic Adjusted EBITDA and Adjusted EBITDA Excluding Special Items
Reconciliation of Arconic Adjusted EBITDA and Adjusted EBITDA Excluding Special Items ($ in millions) 2016 Net loss attributable to Arconic $(941) Discontinued operations (1) (121) Loss from continuing operations after income taxes and noncontrolling interests (1,062) Add: Provision for income taxes
Slide 24: Reconciliation of Return on Net Assets (RONA)
Reconciliation of Return on Net Assets (RONA) (in millions) 2016 (1) Net loss attributable to Arconic $(941) Discontinued operations (1) (121) Special items (2) 1,567 Net income attributable to Arconic – as adjusted $505 Annualized net income attributable to Arconic - as adjusted Net Assets: Add: Re
Slide 25: Reconciliation of Adjusted Income
Reconciliation of Adjusted Income (in millions, except per - share amounts) Income Diluted EPS (6) Year ended Year ended December 31 , December 31, December 31, December 31 , 2015 2016 2015 2016 Net loss attributable to Arconic $(322) $(941) $(0.93) $(2.31) Discontinued operations (1) 165 (121) Spec
Slide 26: Reconciliation of Adjusted Income, continued
Reconciliation of Adjusted Income, continued (2) In the second quarter of 2016, management changed the manner in which special items are presented in Arconic’s reconciliation of Adjusted Income. This change resulted in special items being presented on a pretax basis and the related tax and noncontro
Slide 27: Reconciliation of Revenue Excluding Tennessee Packaging
Reconciliation of Revenue Excluding Tennessee Packaging ($ in millions) 2016 2017E Arconic Sales - Arconic $12,394 $12,300 - $12,700 Sales – Tennessee Packaging 552 ~ 150 Arconic Sales excluding Tennessee Packaging $11,842 $12,150 - $12,550 Year - over - year change 3% - 6% Third - party sales exclu