Ampco-Pittsburgh Corporation · NYSE:AP
Ampco-Pittsburgh — Southwest IDEAS Investor Conference 2016
50 slides from Ampco-Pittsburgh's conference presentation, Nov 17, 2016
Slide 1: Ampco-Pittsburgh Corporation
Ampco-Pittsburgh Corporation November 17, 2016 Southwest IDEAS Investor Conference
Slide 2: Forward-looking statements safe harbor
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward- looking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statem
Slide 3: Agenda
Agenda Introduction to Ampco-Pittsburgh Strategies to improve Ampco-Pittsburgh’s Financial Performance Åkers Acquisition ASW Steel Acquisition 3
Slide 4: Who is Ampco-Pittsburgh Corporation?
Who is Ampco-Pittsburgh Corporation? Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the world. Two segments are reported: 1. Forged and Cast Engineered Products (Union Electric
Slide 5: Ampco-Pittsburgh
Ampco-Pittsburgh • Headquarters – Carnegie, PA, U.S. • Traded on NYSE (Symbol – AP) • 2015 Revenue -- $238.5M • ~ 1,900 employees • Forged and Cast Engineered Products (approx. 66% of sales pre-acquisition; approx. 80% post-acquisition) • A world leader in the manufacture of steel rolls (cast and fo
Slide 6: Ampco-Pittsburgh (cont'd)
Ampco-Pittsburgh (cont’d) Two Segments reported: 2015 Revenue • Forged and Cast Engineered Products $152.3M • Forged and Cast Rolls • Open Die Forged Products • Air and Liquid Processing $86.2M • Aerofin - Heat Exchangers • Buffalo Air Handling - Custom Air Handling Systems • Buffalo Pumps - Special
Slide 7: Union Electric Åkers
Union Electric Åkers Forged and Cast Rolls
Slide 8: Manufacturing Process for Strip
(— > C(1) Manufacturing Process for Strip <i Roughing mill — =— - BBEBBE - © Continuous reheating . furnace Scale breaker Finishing mill Coiler Hot rolled coil Electrolytic cleaning line -@ | - en | Cold rolled coil Backup Roll Batch annealing = Tempering mill furnace a Ret: “Tetsu ga Dekirumade* JI
Slide 9: Rolls Staged in Hot Strip Mill (HSM)
Rolls Staged in Hot Strip Mill (HSM) 9
Slide 10: Cast Rolls Manufacturing Facilities
Cast Rolls Manufacturing Facilities 10
Slide 11: Forged Rolls Manufacturing Facilities
Forged Rolls Manufacturing Facilities 11
Slide 12: Key Customers
\ Key Customers ArcelorMittal ALCOA ADITYA BIRLA y +4 AK Steel KP SMS @ group ® thyssenkrupp qo United States Steel nee Kap) te et AN Ternium| & Ampco: Pittsburgh Mov ving forward.
Slide 13: 2014 Global Roll Market
2014 Global Roll Market • Cast Rolls $1.4B/yr. • Forged Rolls $0.7B/yr. • Total $2.1B/yr. • U.S. Roll Market $0.3B/yr. 13
Slide 14: Competing Companies in Roll Industry
Competing Companies in Roll Industry Cast Rolls Forged Rolls *Ampco-Pittsburgh completed acquisition of Åkers in Q1 2016. 14
Slide 15: Air and Liquid Processing Segment (A&LP)
Air and Liquid Processing Segment (A&LP) 15
Slide 16: Aerofin Products
Aerofin Products Split-Fit® Steam heating coils Copper spiral finned nuclear stamped coil 16
Slide 17: Aerofin Serves Four Markets
Aerofin Serves Four Markets • Fossil fuel power generation 15.2% • Industrial 48.8% 20.8% • Nuclear power generation • OEM/Commercial 15.2% Fossil Industrial Nuclear OEM/Commercial 17
Slide 18: Buffalo Air Handling Custom Air Handling Systems
Buffalo Air Handling Custom Air Handling Systems Rooftop unit at a pharmaceutical manufacturing facility Air handling unit in our manufacturing plant for a medical center in New York Triple stacked units being installed at a 18 research facility in Illinois
Slide 19: Buffalo Air Handling Serves Four Markets
Buffalo Air Handling Serves Four Markets 17.5% • Pharmaceutical 19.0% • Hospital • University 29.0% 34.5% • General Industries Pharmaceutical Hospital University General Industry 19
Slide 20: Buffalo Pumps Products
Buffalo Pumps Products Specialized Centrifugal Pumps Seal-less pump Vertical double suction Vertical submerged pump for a United States lube oil pump Navy surface vessel 20
Slide 21: Buffalo Pumps Serves Three Markets
Buffalo Pumps Serves Three Markets 10.9% Fossil Fuel 23.6% 65.5% Military Use Industrial Refrigeration 21
Slide 22: Ampco-Pittsburgh Recent Performance
Ampco-Pittsburgh Recent Performance 22
Slide 23: Ampco's financial performance has deteriorated in recent years
Ampco’s financial performance has deteriorated in recent years primarily due to UES performance Global steel market depressed since 2011 UES sales, margins, and profits have declined as customers reduce production and costs Air and Liquid Processing profitable, consistent performer, but lacks
Slide 24: Ampco-Pittsburgh Corporation Operating Income
Ampco-Pittsburgh Corporation Operating Income 24
Slide 25: Key Factors Impacting 2016 Profitability
Key Factors Impacting 2016 Profitability Cast Roll Plants – Volume/ Unfavorable Pricing Purchase Accounting (Åkers Acquisition) Åkers Transaction Deal Costs Åkers Integration Costs 25
Slide 26: Reasons to Expect Improved Performance
Reasons to Expect Improved Performance Åkers acquisition synergy impact July 1, 2016 forged and cast roll product price increase Avonmore roll plant idling (January 2017) New negotiations of legacy negative margin contracts Industry diversification Renewed activity in oil field services
Slide 27: Strategies to Improve Ampco Performance
Strategies to Improve Ampco Performance 27
Slide 28: Reasons For UES Diversification
Reasons For UES Diversification Cyclicality of steel and aluminum industries drove decision to strategically diversify the company Lack of market size growth Manufacturing requirements for open die forge market are strong match for our manufacturing assets 3-1/2 year successful record in pen
Slide 29: Strategies to Diversify UES Product Portfolio for Growth
Strategies to Diversify UES Product Portfolio for Growth Utilize flexible manufacturing assets to diversify and offset roll/steel industry cyclicality Optimize market pull into oil field services industry and others Capitalize on opportunity to diversify into broader markets beyond oil field s
Slide 30: Diversification through Open Die Forged Engineered Products (FEP)
Diversification through Open Die Forged Engineered Products (FEP) Fluid end Fracking pump unit Mud Pump Multiple fracking pump units on-site 30
Slide 31: North America Open Die Forging Market Size
North America Open Die Forging Market Size (2013-2015 sales $M) 2015 Total Open Die Sales = $1.77B 1084 $1B Market requires advanced Melt source mAccessible # LF Required 200.0 oo | l i BEE ome Oil & Gas Defense Metal Aerospace Industrial Off-Highway PowerGen Mining Metals Ship&Boat Gears Processing
Slide 32: Union Electric Steel Revenue Trend
Union Electric Steel Revenue Trend 17.0% CAGR 2015 2016 2017 2018 2019 *Forecast 2016 includes Mar-Dec for the Åkers Group and full-year for the UES group 32
Slide 33: Key Strategies to Improve A&LP Performance
Key Strategies to Improve A&LP Performance Grow revenue (market share) Reduce costs, increase margins Strengthen engineering and manufacturing capabilities Revise sales and marketing approach 33
Slide 34: Air and Liquid Systems Revenue Trend
Air and Liquid Systems Revenue Trend 7.5% CAGR 2015 2016 2017 2018 2019 34
Slide 35: Ampco-Pittsburgh Corporation Revenue Trend
Ampco-Pittsburgh Corporation Revenue Trend 9.1% CAGR 2015 2016 2017 2018 2019 35
Slide 36: Åkers Acquisition
Akers Acquisition i) Ampco: Pittsburgh Moving fo: a,
Slide 37: Why Acquire Åkers?
Why Acquire Åkers? Combines the two top competitors in the roll industry, both recognized for product performance, technology, and customer service Manufacturing • Adds four roll production facilities, including two low-cost producers • Adds cast roll production in U.S. • Adds forged roll supply
Slide 38: Why Acquire Åkers? (cont'd)
Why Acquire Åkers? (cont’d) Sales/Marketing Joins complementary product lines (Ampco’s strength in forged rolls; Åkers’ strength in cast rolls) Creates complete product line Fills gaps in UES product portfolio Increases potential customer base to include all steel and aluminum mills Prov
Slide 39: Global Footprint – Pre-Transaction
Global Footprint – Pre-Transaction UES Locations Manufacturing 39 Sales Office
Slide 40: Global Footprint – Post-Transaction
Global Footprint – Post-Transaction UES Locations Åkers Locations Manufacturing Manufacturing 40 Sales Office Sales Office
Slide 41: Financial Benefits of Åkers Acquisition
Financial Benefits of Åkers Acquisition Should contribute to stabilizing UES and improving performance of Ampco Revenue from roll business growing substantially Cost reduction and other synergies estimated to be $15M or greater Synergies estimated to be fully realized in the next 5-8 months
Slide 42: Terms of Definitive Agreement to Purchase Åkers AB
Terms of Definitive Agreement to Purchase Åkers AB Purchase price $74.2M $29.4M cash paid at closing 1.78M shares of Ampco-Pittsburgh stock Fair value of $22.1M $22.6M notes – payable March 2019 42
Slide 43: ASW Steel Inc. Acquisition
ASW Steel Inc. Acquisition 43
Slide 44: ASW Steel Inc.
ASW Steel Inc. Located in Welland, Ontario, Canada Premier specialty steel-making facility Offers a unique combination of carbon, stainless, and other specialty steelmaking capabilities Flexible steel refining methods include: argon oxygen decarburization vacuum oxygen decarburization
Slide 45: Why Acquire ASW Steel?
Why Acquire ASW Steel? ASW’s broad expertise in flexible steel refining methods provide us with the capabilities to manufacture the additional chemistries needed to expand our reach into the open-die forging market Enhances our ability to grow and add new markets for customers in the following m
Slide 46: What Do ASW's Customers Make?
What Do ASW’s Customers Make? 46
Slide 47: Equipment
Equipment • Argon Oxygen Decarburizer (AOD) • Electric Arc Furnace (EAF) • Ladle Furnace (LF) • Vacuum Oxygen Decarburizer (VOD) • Vacuum Degasser (VDG) • Vacuum Equipment – Servicing VOD and VDG • Billet Caster 47
Slide 48: Acquisition of ASW Steel
Acquisition of ASW Steel Acquisition completed November 1, 2016 Total Purchase Price approximately $13.1 million $3.5 million cash $9.6 million outstanding debt “Bolt-on” acquisition Indirect subsidiary of UES 48
Slide 49: Industry Recovery Appears To Be Beginning
Industry Recovery Appears To Be Beginning Price for steel across the world increasing US trade protection in place EU trade protection “Trickle down” impact on roll manufacturers However, fragile global economy restricting steel demand Expect customer roll inventories to be low due to co
Slide 50: Thank you
Ampco-Pittsburgh Corporation Thank you Questions
Ampco-Pittsburgh — Southwest IDEAS Investor Conference 2016 on 6ix