Adient Plc · NYSE:ADNT
Adient — Investor Day (November 2017)
45 slides from Adient's investor day presentation, Nov 13, 2017
Slide 1: Adient Investor Meeting November 2017
Adient Investor Meeting November 2017 Improving the experience of a world in motion
Slide 2: Important information
Important information Adient has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward-looking statements” within
Slide 3: Meeting agenda
Meeting agenda ˃ Company & business overview ˃ China Review ˃ Financial overview ˃ Appendix Investor meeting: November 2017 3 Adient – Improving the experience of a world in motion
Slide 4: Adient's vision and mission bring focus to our success
Adient’s vision and mission bring focus to our success VISION Improving the experience of a world in motion MISSION We will be the world-class automotive seating supplier through leadership in cost, quality, launch execution, and customer satisfaction. We will leverage our capabilities to drive grow
Slide 5: Adient today
Adient today Adient is the largest global automotive seating supplier, #1 supporting all major automakers in the differentiation of their vehicles through superior quality, technology and performance FY 2017 Global market Revenue by share* geography* ~$16.2B We supply one Consolidated revenue Americ
Slide 6: Broadest and most complete range of seating and interior products
Adient delivers the broadest and most complete range of seating and interior products > Complete seat / Just-In-Time manufacturing > Front and rear seat structures > Track, recliner, manual height adjuster and lock mechanisms > Foam cushions and backs > Head restraints and armrests > Trim covers and
Slide 7: We are located right where our customers need us most
We are located right where our customers need us most Global locations 250+ facilities 37 Europe countries North America 106 Asia* 76 52 Global employees Africa 86,000 South America 8 8 *Does not include China JVs 7
Slide 8: Customer portfolio mirrors customers' global market share
Our customer portfolio closely mirrors our customer’s global market share Others JLR 5% Ford 2% 12% > Industry leading diversification BMW 5% We work with the Volvo > By customer 5% GM Largest customer accounts for 12% 8% world’s largest Renault of total consolidated sales 4% N. American OEM’s autom
Slide 9: Focused on advancing Adient's investment thesis
Focused on advancing Adient’s investment thesis… Earnings growth: > On track towards goal of 200 bps improvement in the mid-term > SG&A leading the charge, contribution from metals expected in FY19 and FY20 Cash generation: > De-risking the balance sheet (prepayment of debt) > Supporting Adient’s pr
Slide 10: Margin progression on track
Margin progression on track Adj. EBIT and Adj. EBITDA Margin (excluding equity income)1 —(50 – 150) bps +100—200 bps 7.7% 7.2% 7.47% 7.47% Plan FY17-FY20 7.10% 7.29% 6.7% FY19-FY20 6.83% +200 bps 6.2% 6.44% term +150 bps 5.7% 5.10% 5.23% 5.24% —5.2% 4.72% 4.94% Mid FY17-FY18 4.7% 4.48% 4.2% SG&A Ben
Slide 11: Adient JV equity income and cash dividend summary
Adient JV equity income and cash dividend summaryRobust growth continues in equity income EquityCash% and cash dividendsSources income dividends Conversion >In FY17, equity income (fx adjusted) (as adjusted) 1 paid increased 12% y-o-y outpacing 2015$286M$193M67.5% unconsolidated sales growth of 11%
Slide 12: Cash generation
Cash generation > Earnings growth and margin expansion driving strong cash generation > Balanced approach to cash usage / capital allocation: —De-risking the balance sheet with prepayment of debt; Adient’s net leverage ratio at September 30, 2017 at 1.73X, down about 12% compared to 1.97X at Septemb
Slide 13: Market position – strengthening through growth
Market position – strengthening through growth Backlog growth continues to accelerate — further strengthening $’s Billions Seating backlog [VALUE] our market position [VALUE] > Three-year seating backlog increased ~22% y-o-y to about $3.0B $2.1 > Adient’s consolidated backlog accounts for 51% of the
Slide 14: Global industry trends ask for new design solutions in seating
Global industry trends ask for new design solutions in seating Global Industry trends Implications for seating • Safety • Changes in vehicle architecture & • Electrification power managment • Slim & lightweight • Light-weight • Low block height • Connectivity • Smart, individualized heating & coolin
Slide 15: Meeting agenda
Meeting agenda ˃ Company & business overview ˃ China Review ˃ Financial overview ˃ Appendix Investor meeting: November 2017 15 Adient – Improving the experience of a world in motion
Slide 16: Adient is the largest automotive seating supplier in China
Adient is the largest automotive seating supplier in China We enjoy a clear leadership position in China We generated We employ $8.1B 33,000 sales revenue in FY2017 highly engaged employees including >1,300 engineers We have We have 19 45% seating joint ventures PV market share Note: excluding YFAI
Slide 17: Adient China Footprint
Adient China Footprint 19 Joint ventures, 73 manufacturing plants and 4 global tech centers YFAS SJA CQADNT BJA CFAA HQ & Plant FAA HQ & Plant CFAA GAAS Daqing Employees: 7,210 Employees: 1,075 FAA Harbin AYM Engineers: 247 Engineers: 10 Fabrics Jilin Changchun SJA HQ & Plant Tech Center (Global) Ca
Slide 18: Joint venture structure
Joint venture structure Tailored Strategy for Each JVEquity Share Strategic PlanJoint Venture Chinese Group Partner OEM partnered with Chinese Auto Group Adient Partner Components for China & SAICAsia Pacific Sub-partners Regional growthYFAS49.99% 50.01% Low cost engineering andChang’An Dongfenginno
Slide 19: Adient China's current seating market share in each big auto group
Adient China’s current seating market share in each big auto group % Adient’s JIT market share in each big auto group, based on 2016 production volume (PV) Where competitors have alliance with the auto group PV seating market share per each major auto group 4816K 3495K 3057K 2037K 1999K 1734K 100% 7
Slide 20: Leading position with western OEMs with opportunities with Asian and local OEMs
Leading position with western OEMs with opportunities with Asian and Local OEMs Seating* market share among each OEM Group European OEM 70% LEAR FSA Sitech Adient Share at In-House N.A. OEM 77% LEAR FSA Global OEM 6.5% 23.5% C OEM Japanese OEM 31% Toyota Boshoku TS-Tech Tachi –S FSA JV Others 56% KR
Slide 21: Unparalleled customer diversity and relationships in China
Unparalleled customer diversity and relationships in China Customer Mix by Volume Asian OEMs (w/o China) 19% European OEMs 40% Chinese OEMs 19% North American OEMs 22% Investor meeting: November 2017 21 Adient – Improving the experience of a world in motion
Slide 22: SUV trends are beneficial to Adient's growth
SUV trends are beneficial to Adient’s growth China SUV Development Trend % share based on production volume Seating content per vehicle: ~$1000-$1,100 Share of SUV of total market (Left) Gobal OEM’s share in SUV (Right) ~$500-$600 ~$550-$650 60.0% 60.0% 45% 47% 44% 40% 40.0% 33% Average SUV SUV Loca
Slide 23: Premium market will continue to outpace the volume market in China
Premium market will continue to outpace the volume market in China China PV Production YoY Growth ( Average market vs. Premium) Segment share 2016 vs. 2021e PV Avg.YoY Growth % Premium YoY Growth % 28.1% 29,6 28.2% 26,7 29,3 65.0% 62.3% 6.8% 9.6% 21,1 18,6 19,0 ˃ We expect the premium 17,6 13,9 201
Slide 24: Market trends are strengthening our leading position
Market trends are strengthening our leading position Shift to SUV / MPV Premium segment China technology Ability to offset “price segment remains robust roadmap 2025 downs” > New business wins with > Strong and growing > Lightweight materials > Scale advantage both domestic and global position with
Slide 25: Importance of Chinese market will continue to increase
Importance of Chinese market will continue to increase Evolution of the Global Platforms Chinese OEM Technology roadmap 2025: Leading Market New OEMs World’s biggest electric Of Electrification vehicle market with aggressive growth plans Investor meeting: November 2017 25 Adient – Improving the expe
Slide 26: China's unconsolidated financial strength FY2013 – FY2017
China’s unconsolidated financial strength 1 FY2013 – FY2017 Industry CNY in billions Adient Results Sales Net Cash 3 55.4 > Top-line growth 8.2 > Well capitalized Units, Millions in excess of balance sheets China Light Vehicle 34.6 industry growth across the Production 2 expected to various joint co
Slide 27: Dissecting Adient's 2018E earnings
Dissecting Adient’s 2018E earnings ($ in millions) Base Business 2018E Consolidated Business EBITDA (Including Equity Income) $1,725 (-) 2018E Equity Income (435) 2018E Base Business EBITDA $1,290 Valued at Industry EV / EBITDA Multiple China Joint Ventures Valued at Industry 2018E Equity Income 435
Slide 28: Meeting agenda
Meeting agenda ˃ Company & business overview ˃ China Review ˃ Financial overview ˃ Appendix Investor meeting: November 2017 28 Adient – Improving the experience of a world in motion
Slide 29: FY 2017 full year key financials
FY 2017 full year key financials As Reported As Adjusted 1 $ millions, except per share data FY17 FY16 FY17 FY16 B/(W) Revenue $ 16,213 $ 16,790 $ 16,213 $ 16,790 -3% EBIT $ 1,193 $ 399 $ 1,244 $ 1,156 +8% Margin 7.4% 2.4% 7.7% 6.9% EBITDA N/A N/A $ 1,605 $ 1,511 +6% Margin 9.9% 9.0% Memo: Equity In
Slide 30: Managing through seat structures & mechanisms near-term headwinds
Managing through seat structures & mechanisms near-term headwinds > Significant launch challenges impacting seat structures and mechanisms: Late design changes, engineering / manufacturing issues, supply chain interruptions and labor challenges creating launch inefficiencies Launch headwinds expecte
Slide 31: Drivers of future earnings growth
Drivers of future earnings growth > Accelerating backlog growth Increased Profitability > Well positioned to capture growth in China through equity income from market leading JV > Improved operational efficiencies driven by: SG&A reduction Seat Structures and Mechanisms improvement (FY19 / FY20) Inc
Slide 32: FCF Growth Key Takeaways
FCF Growth Key Takeaways > FY18 expected results include: A heightened level of cash restructuring Millions) (~$170M core business + ~$20M Futuris) “Becoming Adient” costs re-calendarized in into FY18 (~$45M) ( $ FCF > Expected increase in FCF driven by: Lower cash restructuring Run-off of “Becoming
Slide 33: Value drivers for Adient stock
Value drivers for Adient stock ~55% VALUE DRIVERS ˃ Margin improvement of 200 bps vs. LTM June 2016 results net earnings ˃ Strong backlog growth, expected to drive top line growth in 2019 and beyond ˃ Proven ability to generate substantial cash flow Consolidated ˃ Largest market share with most
Slide 34: Unconsolidated results = higher quality earnings
Unconsolidated results = higher quality earnings ADNT’s UNCONSOLIDATED RESULTS = HIGHER QUALITY EARNINGS equity income ~25% of Adient’s EBITDA generated through equity income ~25% – Shown as EBITDA for accounting purposes, should be treated as net EBITDA income for valuation purposes (already reflec
Slide 35: Framework for valuing Adient
Framework for valuing Adient Primary—P/E Multiple Methodology Secondary—Blended Multiple Methodology Base Business EBITDA Multiple EBITDA Overview Adient EPS P/E Multiple JV Equity P/E Multiple Income Provides full value for JV equity income (key contributor Common method currently used by Wall Stre
Slide 36: POLOLLOLILELLOLELLOLELEOLELLOLELLOLELEOLELLEL ADIENT
POLOLLOLILELLOLELLOLELEOLELLOLELLOLELEOLELLEL ADIENT
Slide 37: POLOLLOLILELLOLELLOLELEOLELLOLELLOLELEOLELLEL ADIENT
POLOLLOLILELLOLELLOLELEOLELLOLELLOLELEOLELLEL ADIENT
Slide 38: Non-GAAP financial measurements
Non-GAAP financial measurements > Adjusted EBIT, Adjusted EBIT margin, Pro-forma adjusted EBIT, Pro-forma adjusted EBIT margin, Pro-forma adjusted EBITDA, Adjusted effective tax rate, Adjusted net income attributable to Adient, Pro-forma adjusted net income attributable to Adient, Adjusted earnings
Slide 39: Non-GAAP reconciliations: EBIT, Adjusted EBIT, Adjusted EBITDA
Non-GAAP reconciliations EBIT, Pro-forma Adjusted EBIT, Pro-forma Adjusted EBITDA FY16 Actual FY17 Actual Last Twelve Months Ended Actual Actual Actual Actual Actual Actual (in $ millions) Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Jun ‘16 Sep ‘16 Dec ‘16 Mar ‘17 Jun ‘17
Slide 40: Non-GAAP reconciliations: Adjusted Net Income
Non-GAAP reconciliations Adjusted Net Income Adjusted Net Income Adjusted Diluted EPS Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended September 30 September 30 September 30 September 30 (in $ millions) 2017 2016 2017 2016 2017 2016 2017 2016 Net income attributable to A
Slide 41: Non-GAAP reconciliations: Free Cash Flow
Non-GAAP reconciliations Free Cash Flow Free Cash Flow Adjusted EBITDA to Free Cash Flow Three Months Ended Twelve Months Ended Three Months September 30 September 30 Ended September 30 (in $ millions) 2017 2016 2017 2016 (in $ millions) 2017 Operating cash flow $ 446 $ (1,478) $ 746 $ (1,034) Adjus
Slide 42: Non-GAAP reconciliations: Net Debt and Adjusted Equity Income
Non-GAAP reconciliations Net Debt and Adjusted Equity Income Net Debt and Net Leverage Adjusted Equity Income Three Months Ended Twelve Months Ended September 30 September 30 September 30 September 30 (in $ millions) 2017 2016 (in $ millions) 2017 2016 2017 2016 2015 (1) Equity income as reported $
Slide 43: Non-GAAP reconciliations: Adjusted Income before Income Taxes, Segment Adjusted EBIT
Non-GAAP reconciliations Adjusted Income before Income Taxes, Financing Charges, and Segment Adjusted EBIT Adjusted Income before Income Taxes Three Months Ended September 30 Twelve Months Ended September 30 (in $ millions) 2017 2016 2017 2016 Income before Effective Income before Effective Income b
Slide 44: Non-GAAP reconciliations: Reported to Adjusted SG&A
Non-GAAP reconciliations Reported to Adjusted SG&A FY16 Actual FY17 Actual Last Twelve Months Ended Actual Actual Actual Actual Actual Actual Actual (in $ millions) Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Jun ‘16 Sep ‘16 Dec ‘17 Mar ‘17 Jun ‘17 Sep ‘17 Selling, genera
Slide 45: Prior Period Results
Prior Period Results FY16 ActualFY17 ActualLast Twelve Months Ended ActualActualActualActualActualActualActual Q4 FY15Q1 FY16Q2 FY16Q3 FY16Q4 FY16Q1 FY17Q2 FY17Q3 FY17Q4 FY17Jun ‘16Sep ‘16Dec ‘16Mar ‘17Jun ‘17Sep ‘17 Sales ($Mils.)$ 4,150$ 4,220$ 4,290$ 4,348$ 3,932$ 4,026$ 4,201$ 4,007$ 3,979$ 17,0