Enerpac Tool Group Corp. · NYSE:EPAC
Enerpac Tool — Actuant — Investor Day (October 2017)
58 slides from Enerpac Tool's investor day presentation, Oct 5, 2017
Slide 1: Actuant Corporation 2017 Investor Day
Actuant Corporation 2017 Investor Day October 5, 2017 Hilton New York
Slide 2: Safe Harbor
Safe Harbor Statements in this presentation that are not historical are considered “forward-looking statements” and are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations. Those factors are contained in Actuant’s Secur
Slide 3: Agenda
Agenda Time Activity Participants Detail 10:00am Kick-Off Bauer Welcome/Agenda/Format Introductions 10:15-11:30 Various Topics Baker Vision / Strategy Updates Dillon Business Model / Capital Allocation 11:30-Noon Break / Buffet Lunch All 12:00-12:30 Table 1 Rotation All Q&A 12:35-1:05 Table 2 Rotati
Slide 4: Actuant Q&A Room Attendees
Actuant Q&A Room Attendees Rotational Room Assignments Provided to Each Attendee (back of name badge) Industrial (Murray Hill A) Energy (Murray Hill B) Jim McTaggart Randy Baker Art Donaldson Matt Baisley Chris Kolbe Syed Taqvi Karen Bauer Engineered Solutions Corporate/M&A (Gramercy A) (Gramercy B
Slide 5: Strategy Overview and Progress Report
Strategy Overview and Progress Report Randy Baker 5
Slide 6: Key Takeaways for Today
Key Takeaways for Today • We are in the second inning of a long game – we are proud of what has been accomplished, but recognize there is much work to do • We are reinvigorating organic growth - becoming more commercially focused • We are creating a more efficient company by improving our execution
Slide 7: Vision / Values / Business Model
Vision / Values / Business Model 7
Slide 8: Our Pathways to Growth Remain Unchanged
Our Pathways to Growth Remain Unchanged Expand industries and regions Commercial effectiveness and share Organic Growth capture Product innovation Drive Lean principles Operational Excellence Goal Zero safety Optimized cost position Expand product lines Strategic Acquisitions Increase global coverag
Slide 9: Actuant 5 Year Growth Plan - Status
Actuant 5 Year Growth Plan - Status Core growth above market 10% Total Sales CAGR • Expand industries and regions with Core Sales Growth > Market • Commercial effectiveness & share capture • Product innovation $600+ Million FCF = Driving world-class operations and service Acquisition Capital • Full
Slide 10: Journey to a High Performance Enterprise
Journey to a High Performance Enterprise Engineered Engineered Industrial Energy Industrial Energy Solutions Solutions +5% 5% 6% 4-6% Core Growth 0-3% -- 2017 2018 -5% 23% Commercial performance • Engrain commercial effectiveness Regional / market coverage expansion • New product introductions
Slide 11: Leadership Structure Realignment
Leadership Structure Realignment • Leadership consolidation to enhance speed/decision making and leverage segment Baker - CEO infrastructure • Streamline organizational effectiveness • Mix of new and existing talent TBD Energy/Industrial Dillon - CFO with fresh perspectives to drive results Roundhou
Slide 12: Organization and Talent
Organization and Talent Progress Update Future Actions • Vision/Values/Leadership • Leverage and upgrade leadership - expectations launched consolidation of segments • Sales trackers across all • 2018 formal engagement survey (18 month businesses assessment of change) • Engineering talent rebuild •
Slide 13: Top Priority – Invest in Ourselves
Top Priority – Invest in Ourselves Expand industries and regions Commercial effectiveness and share Organic Growth capture Product innovation 13
Slide 14: Economic Back Drop – Slow Growth
Economic Back Drop – Slow Growth Energy On & Off-Highway Infrastructure Global construction equipment Global infrastructure – Oxford Economics - $94T Investment • Broad based long term • Long term positive drivers • General industrial activity demand growth • Global population • Oil growth • Globali
Slide 15: Fiscal 2017 Core Growth Above Market - Metrics
Fiscal 2017 Core Growth Above Market - Metrics Primary End Market ATU Core “Market” “Market” Estimate (1) Sales Growth Rate(1) Industrial Tools ~6% ~2-3% Cleveland Research, GWW, KMT, PH, SWK, Atlas Copco Energy MRO (ex prior ~(9%) ~(15-20%) TISI Mech Svcs, Petrofac Eng & Prod Svcs year large projec
Slide 16: Energy Growth Plan - Snapshot
Energy Growth Plan - Snapshot Strategy Progress Update Product/Service Range Expansion • Integrity assurance and verification • Specialty services • Heavy lifting and testing services Regional Penetration • Focus on high growth energy regions (Middle East, Africa, Caspian, SE Asia, Mexico) • Op-ex s
Slide 17: Energy Growth Plan – Status Update
Energy Growth Plan – Status Update Progress Update Future Actions • Service / MRO growth plans by region – • Actions to limit the more both organic and acquisition based (next cyclical offshore/upstream slide) exposure • Service Center optimization project – • New product organization and optimize r
Slide 18: Hydratight Service Growth Initiatives
Hydratight Service Growth Initiatives • Service footprint and coverage • Technician and tool utilization – optimization and planning Europe – PPS China and Integrity Expand Integrity Americas – Integrity Assurance Assurance Assurance into offshore and Korea – Integrity downstream markets Kazakhstan
Slide 19: Hydratight Value Proposition
Hydratight Value Proposition Provider of product and service solutions that deliver unrivaled levels of safety, reliability, productivity, and performance Hydratight offerings cover product sales, product rentals, and field services 19
Slide 20: Product Development / Sales Growth
Product Development / Sales Growth Product Categories Engineering NPD Focus • New product launches in 2018 • Expansion of Mirage machines • Product rental growth • Vertical market focus – non oil & gas • Commercial effectiveness / distinct product branding 20
Slide 21: World Class Service Centers
World Class Service Centers Joint Integrity Bolting Services • 24 locations and growing – Acquisitions – Capital investment Training Center • Products sales • Rental • Service dispatch • Training 21
Slide 22: Industrial Growth Plan - Snapshot
Industrial Growth Plan - Snapshot Strategy Progress Update Product/Service Range Expansion • Expand tool and bolting portfolio • Second-tier brand to take share Regional Penetration • APAC & EMEA – strengthen our product and channel position including through acquisitions Improving Channel Effective
Slide 23: Industrial Growth Plan – Status Update
Industrial Growth Plan – Status Update Progress Update Future Actions • 2nd tier brand distributor adds • 2nd tier price elasticity “tweaks” for and sales traction optimization • Engineering staff expanded • Expand bolting center of excellence and creation of “Specials Group” • Product engineering c
Slide 24: Expand Industrial – Not Just “High Force Hydraulics”
Expand Industrial – Not Just “High Force Hydraulics” • Continued expansion of hydraulic Hydraulic Tools industrial tools – Enerpac and 2nd Tier • Build out Bolting as a line of business Bolting • Extend / acquire complementary industrial tool categories Other Industrial Tools • Electric • Pneumatic
Slide 25: Sales Effectiveness / 2nd Tier Brand Strategy
Sales Effectiveness / 2nd Tier Brand Strategy • Market opportunities in each territory • Commission structure enhancements • Increased sales to target ‘hot spots’ • End user plans / reporting / analytics • Customer contact Americas • Dual Distributor Program • Added: 33 Distributors / 3 OEMs EMEA •
Slide 26: Engineering / Product Innovation
Engineering / Product Innovation • Robust project funnel driven by changes in Columbus – Pumps & Morpeth - Bolting structure, process, and leadership Tools Hengelo-Heavy Lifting • New initiatives in bolting, tools, and custom Madrid –Lift China TX -Concrete products • Capacity (people) additions in
Slide 27: Product Innovation - Examples
Product Innovation - Examples Core: Small Pump Line Refresh Heavy Lifting : Jack-Up System Won ESTA 2017 most Innovative Manufacturer • 40% growth for the series • 200% growth on Jack-Up system • Replaces small, economy pump • Each tower can lift 750 tons, 20 meters Tools: Cutters Bolting: PowerGen
Slide 28: Custom Products – Key Differentiator
Custom Products – Key Differentiator Improved responsiveness to drive share capture Key Objectives: • Grow sales Done 2017 Done 2018 • Increase RFQ’s 2017 • Increase hit rate: >30% • Reduce lead time • Incubator for New Products • Improve quote times from 3 weeks to 1 day • Improve delivery from 3 m
Slide 29: Engineered Solutions Growth Plan - Snapshot
Engineered Solutions Growth Plan - Snapshot Strategy Progress Update Expanding Served Industries • Aerospace • Medical Regional Penetration • EMEA agriculture • NA off-highway human machine interface (HMI) displays • Truck emerging markets Commercial & Channel Effectiveness • Indispensable customer
Slide 30: Engineered Solutions Growth Plan – Status Update
Engineered Solutions Growth Plan – Status Update Progress Update Future Actions • Disciplined/Professionalized • Product Life Cycle Management geographic sales structure and SalesForce.com rollout • New platform wins • Product development • Engineering upgrade specialists by market • Channel managem
Slide 31: Global Customers
ES - Global Business Platforms Motion Actuation Control Global Products Global Customers System Critical Solutions 31
Slide 32: ES Transformation - Journey
ES Transformation - Journey Objectives Portfolio Focus By FY21 Product •Effective sales Management channel & product organizations Sales FY19 Reorganization •Deep product line •Active Portfolio and product Management New ES Strategy FY18 •Electrification management Launched processes •Product line •
Slide 33: Status of Recent Segment Key Wins
Status of Recent Segment Key Wins HD Truck Engine Hutchinson/GSI Scania JCB Engine Agbrain Intake Gearbox for Cab Tilt EGR Valves Displays Throttle Bin Sweeps Total Total Total Valve projected projected projected Total Total projected value: $40M value: $25M value: $12M projected value: $7M over 5 y
Slide 34: Technology & Portfolio Evolution
Technology & Portfolio Evolution Actuation Motion Control Expand Into Complementary Technologies 34
Slide 35: Acquisitions / Portfolio Management
Acquisitions / Portfolio Management Expand product lines Strategic Acquisitions Increase global coverage Acquire complementary services 35
Slide 36: Portfolio Repositioning - Two Categories
Portfolio Repositioning - Two Categories Highly cyclical Lacks scale/size Underperforming Cyclical No pathway to fix/improve Long term strategic fit uncertain No strategic fit Can be improved Viking divestiture Represents <$100 million in revenue Limit upstream / Opportunistic timing - offshore oil
Slide 37: Tuck-In Acquisitions to Enhance Offerings
Tuck-In Acquisitions to Enhance Offerings Mirage Machines Example: • $12 million revenue targeted tuck-in to Hydratight product/service offerings Mirage Video • Flange facing, hot tapping and other world class machine tools sold across geographies and end markets – Expansion of tool sales, rental an
Slide 38: Operational Excellence as an Enabler to Growth
Operational Excellence as an Enabler to Growth Drive Lean principles Operational Excellence Goal Zero safety Optimized cost position 38
Slide 39: Building a World-Class Operating Structure
Building a World-Class Operating Structure Key Goals: • Earn right to grow with customers – superior quality, delivery, cost and safety • Leverage growing volume through optimized facilities • Right-size manufacturing and service footprint FY’17 FY’18 FY’19 AND LATER 39
Slide 40: Lean Revitalization – Status Update
Lean Revitalization – Status Update Progress Update Future Actions • Lighthouse Transformations • Service Center Excellence • West Bend 90% • 24 global service/repair centers • Hengelo 60% • Manpower and rental utilization • Lean training / capability • Tool breadth/cost/repair enhancements • Supply
Slide 41: Facility Revitalization Metrics / Timeline
Facility Revitalization Metrics / Timeline • Key metrics reviewed monthly with R/Y/G status • From original 3 sites, now 7 solidly within “green” results • Roadmap of sites – big/vertical to smaller assembly • All sites to “green” by end of calendar 2018 Scorecard Example 41
Slide 42: Weasler – West Bend, Wisconsin “Lighthouse”
Weasler – West Bend, Wisconsin “Lighthouse” • Lighthouse – showcase what “good” looks like as a benchmark to other facilities Weasler • Utilized Porsche Consulting to Video accelerate learning and adoption • Significant transformation in flow, 5S, quality and inventory levels John Deere raised Weasl
Slide 43: Financial Summary
Financial Summary Rick Dillon 43
Slide 44: Driving Shareholder Value Creation
Driving Shareholder Value Creation Reliable growth Delivery of Results Meet commitments Superior shareholder returns 44
Slide 45: Actuant Business Model
Actuant Business Model Business Model Core Sales FCF= Acquisition +100% FCF Long-Term Growth > Market Capital Base Margin Expansion Conversion Metrics Grow organic Annual deployment Expanding EBITDA Consistently revenue above of free cash flow in % - investment in delivering free cash rate of end st
Slide 46: 17th Consecutive Year of 100%+ Conversion
17th Consecutive Year of 100%+ Conversion Free Cash Flow Conversion Trend 300% 298% 254% 186% 140% 155% 137% 132% 137% 120% 123% 127% 126% 127% 122% 121% 116% 114% 110% 100% 100% 80% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Despite Difficult Results, Cash
Slide 47: Fiscal 2018 Core Sales Expectations
Fiscal 2018 Core Sales Expectations Core Growth 2017 2018 (guide) 2018 1H 2018 2H Industrial 5% 4% - 6% +MSD +LSD Energy (23)% (5)% - Flat -DD +LSD Engineered Solutions 6% Flat to +3% +MSD -LSD Consolidated (4)% Flat to +2% Flat +LSD • Industrial Continued growth in tools but more difficult comparis
Slide 48: Fiscal 2018 Guidance Summary
Fiscal 2018 Guidance Summary (US$ in millions except EPS) Assumptions - Full Year: Full Year • Full year core sales flat to +2% 2017 2018E • Viking excluded after Q1, Mirage Sales $1,096 $1,100 - 1,130 included Q2-4 EBITDA $122 $140 - 150 • Key FX rates – approximately $1.15- Diluted EPS $0.83 $1.05
Slide 49: Capital Allocation
Capital Allocation Capital deployment strategies Capital allocation priorities ‒ Deploy substantially all free 1. Top priority remains cash flow (after organic growth spend) in strategic, tuck-in 1. Organic – invest in acquisitions ourselves ‒ Net debt/EBITDA leverage 2. Acquisitions – tuck-ins comf
Slide 50: Capital Structure / Debt
Capital Structure / Debt Net Debt ($ in millions) 8/31/2017 8/31/2016 • Leverage trending to comfort zone with debt Revolver $ - $ - reduction and increase Term Loan 273 292 in EBITDA (Viking / 2018 5 5/8% Notes 288 288 improved performance) Total Debt $ 561 $ 580 Cash (229) (180) • Incremental borr
Slide 51: Actuant 2021 Vision – The Components
Actuant 2021 Vision – The Components 10% Total Sales CAGR • Roughly Half Core / Half M&A with Core Sales Growth > Market • Core Sales CAGR = Industrial & Energy ~ 5-7%; ES ~3-5% • FCF plus revolver availability $600+ Million FCF = Acquisition Capital • Weighted to Industrial and Energy MRO • Target
Slide 52: Strategic Plan Goals – In Summary
Strategic Plan Goals – In Summary Goals Outcome • Organic growth above • Total sales growth CAGR market ~10% • Annual margin expansion • EBITDA margin target of ~20% • Free cash flow > net earnings • Robust free cash flow growth and conversion • 1.5-2.5X net debt/EBITDA • 15-20% annual EPS • Double
Slide 53: Wrap-Up
Wrap-Up Randy Baker —Aictuant
Slide 54: Actuant 2021 Vision
Actuant 2021 Vision Core growth above market 10% Total Sales CAGR with Core Sales • Expand industries and regions Growth > Market • Commercial effectiveness & share capture • Product innovation $600+ Million FCF = Acquisition Capital Driving world-class operations and service • Full deployment of Ac
Slide 55: Actuant Investment Case
Actuant Investment Case Diversified industrial growth company with a portfolio of market-leading brands providing mission critical customer solutions LEAD is the foundation of Actuant’s culture and will drive operational excellence and enable growth Effective deployment of industry leading cash gene
Slide 56: Appendix
Appendix —Aictuant
Slide 57: Free Cash Flow / Cash Flow Conversion
Free Cash Flow / Cash Flow Conversion (US$ in millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total EBITDA (1) $87 $84 $90 $106 $145 $181 $228 $260 $171 $185 $244 $283 $267 $246 $191 $152 $122 Cash Interest (47) (30) (20) (12) (15) (23) (28) (35) (36) (
Slide 58: GAAP/Non-GAAP Reconciliations
GAAP/Non-GAAP Reconciliations (US$ in millions) EBITDA EPS 2017 2016 2017 2016 Net (Loss) Earnings ($66) ($105) Net (Loss) Earnings Per Share ($1.11) ($1.78) Net Financing Costs $30 $29 Impairment & Divestiture Charges $1.82 $2.83 Income Tax (Benefit) Expense ($17) ($25) Restructuring Charges $0.09