Metair Investments Limited · JSE:MTA
Metair Investments — Avior Digital Summit 2020
65 slides from Metair Investments's conference presentation, 2020
Slide 1: Avior Digital Summit 2020
METAI eetoewere AVIOR DIGITAL SUMMIT 2020
Slide 2: Metair Investments Limited
Mi ETA! R INVESTMENTS LIMITED
Slide 3: Welcome and opening observations
Welcome and opening observations Metair image 2019 Salient features 2019 ESG and business design Metair Covid-19 response strategy Strategic review Financial and operational review Q&A 3
Slide 4: Welcome and opening observations
Welcome and opening observations 4
Slide 5: Integrated annual reports – the journey
Integrated annual reports – the journey Metair’s integrated annual reports are always presented against the backdrop of a theme that aims to reflect significant circumstances, or the position the company finds itself in at the time 5
Slide 6: 14 year integrated annual report themes
14 year integrated annual report themes 2006 Growth, gain, enrichment 2007 Transformation 2008 Transparency 2009 Crossroads – back to basics 2010 Balance 2011 Human focus, measurement and adjustment 2012 Reflection – the road ahead 2013 Growing our international footprint 2014 Brand wall 2015 Creati
Slide 7: Metair image 2019
Mi ETA! R INVESTMENTS LIMITED Metair image 2019
Slide 8: Metair image 2019
Metair image 2019 8
Slide 9: Metair image 2019 theme
Metair image 2019 theme The image on the cover of Metair’s integrated annual reports sets the theme for the year and encapsulates the company’s current focus and direction. The theme and cover image are introduced to Metair’s leaders at the annual managing directors’ conference in November. They sha
Slide 10: Salient features 2019
Mi ETA! R INVESTMENTS LIMITED Salient features 2019 10
Slide 11: Salient features: Integrated annual report
Salient features: Integrated annual report “Navigating the new world of mega trends, shifts, demands and markets complicated by major tensions in trade, political power, economic systems equity and life balance requires a special kind of business. It must be fully-connected, responsive, agile, princ
Slide 12: Salient features at group level
Salient features at group level DIVIDEND PER REVENUE EBITDA HEPS SHARE OF FREE CASH FLOW increased 9.4% to improved increased 2.7% to 120 R11.2bn 4.7% 336 cents declared in 2020 in respect of the 2019 R544m per share financial year Cash generated FIRST Achieved a consolidated group Strategic from op
Slide 13: Salient features: Metair group
Salient features: Metair group Share buyback of 3.97% concluded in May 2019 R45m share buyback 74% of PAT Bigger capital allocation R199m dividends 35% of EBITDA to shareholders Total R244m Capital expenditure limited to depreciation, with the exception of initial investment into Li-ion Net asset va
Slide 14: Salient features: Li-ion advancement
Salient features: Li-ion advancement First investment into Li-ion business and technology • 35% shareholding in Prime • Talent pool created in Li-ion • Moved from pre sales to first Motors technology acquired customers • Delivered a small profit in 2018 • Developed low temperature • Received first R
Slide 15: Salient features: Industry and international trade developments
Salient features: Industry and international trade developments Energy Automotive storage vertical components vertical Lead acid remains relevant: Lithium-ion technology ready Expansion and growth opportunity • FNB continues recovery • Resilient local market performance from Mutlu in Turkey • Struct
Slide 16: ESG and business design
Mi ETA! R INVESTMENTS LIMITED ESG and business design 16
Slide 17: Environment
Environment WATER USAGE ENERGY USAGE RECYCLING ACCREDITATIONS • Water consumption per • Group scope 1 and 2 • 64% of non-hazardous waste • ISO 50001 accreditation in person hour worked (PHW) carbon emissions per PHW recycled progress decreased 5.7% increased to 11.7 kg CO2e • ± 67 300 tonnes of lead
Slide 18: Safety
Safety Employees with blood lead levels >40µg 2019 2018 ZERO lost-time injuries at ZERO our largest employer, As at 1 January 13 30 FATALITIES HESTO, for the 3rd consecutive year New cases 71 88 Cases returned below 40µg (74) (115) As at 31 December 10 13 The group Designed template based on the ISO
Slide 19: Governance: Metair's definition
Governance: Metair’s definition Governance: Speaks to the system we designed to direct, grow and control our business; We continuously challenge our approach, design and application in this area; Requires balanced focus on performance and conformance, keeping all stakeholders’ interests in mind. 19
Slide 20: Business design: An institutionalised system bigger than any one person
Business design: An institutionalised system bigger than any one person KPIs All MDs GROUP GROUP MARKETING FINANCE CONFERENCE CONFERENCE Interpretation of Financial and the Market AUTONOMOUS Metair Commercial Drivers Budgets ANNUAL MD and Marketing SUBSIDIARIES Board CONFERENCE Excellence GROUP GROU
Slide 21: Business design
Business design METAIR BOARD OF DIRECTORS Corporate Governance Subsidiary and Divisional Boards Board Audit and Risk Committee The board provides effective leadership based on a In line with the decentralised nature of the group’s The committee has an independent role with foundation of high e
Slide 22: Business design
Business design Defensive / Differentiated Products Key Market Segments • Product specification varies according to the model Automotive ENERGY STORAGE VERTICAL • Parts sold to OEMs used in the assembly of new vehicles choice Customer choice Components • Key market is South Africa • Customer retains
Slide 23: Key businesses: Energy storage vertical
Key businesses: Energy storage vertical 23
Slide 24: Key businesses: Automotive components vertical
Key businesses: Automotive components vertical IP IN MANUFAC- PRODUCT TURING KEY BUSINESS AREA DEVELOP- PARTNER- KEY OE COMPANY OWNERSHIP AND PRODUCTS MENT SHIPS RELATIONSHIPS 24
Slide 25: Metair Covid-19 response strategy
Metair Covid-19 response strategy 25
Slide 26: Response strategy: approach and principles
Response strategy: approach and principles Immediately Impact of Covid-19 considered potential taken very seriously duration of the crisis, from the onset up to 18 months until there is a vaccine Fine-tune for each APPROACH Covid-19 required a region and vertical, AND well-structured agility of the
Slide 27: Structured 6 pillar Covid-19 response strategy
Metair Covid-19 response strategy Medium to long-term sustainability and Vision 2022 Structured 6 pillar Covid-19 response strategy welfare and communication Governance and leadership Employee health, safety, Government interaction Covid-19 recovery plan Solvency and liquidity Covid-19 exit plan Res
Slide 28: Employee health, safety, welfare and communication
Employee health, safety, welfare and communication The welfare, health and safety of our employees is both a priority and a key concern Following the announcement of the lockdown we ensured that: › Our factories were locked down safely That, combined with government support, aimed to 50%-90% › Our e
Slide 29: Employee health, safety, welfare and communication cont.
Employee health, safety, welfare and communication cont. In line with our view that the lockdown could last All Metair subsidiaries have policies in place to potentially for 3 months last wefor informed 3 months salaried we informed employees ensure a safe working environment and to salaried that ou
Slide 30: Employee health, safety, welfare and communication cont.
Employee health, safety, welfare and communication cont. In South Africa, support is at 38% of pay up to a In Germany government support is at 100% but maximum of R17 000 per month limiting the maximum businesses are already dealing with the market effect SA support for any individual employees at a
Slide 31: Solvency and liquidity
Solvency and liquidity Our business design proved to be robust since The board also reviewed the projected and we own all our major factories and have no financial model for our outlook position, taking rental obligations into consideration: › our current market view › the deteriorating exchange rat
Slide 32: Increased government interaction and economic participation level
Increased government interaction and economic participation level It is very important to structurally achieve the best possible economic participation approval level, if one takes the view that the Covid-19 challenge could be with us for a long time, with potential oscillation between various risk
Slide 33: Operational status review
Operational status review Lockdown level 5 : 27 March – 30 April (no production) The UK continued to operate as an essential Lockdown level 4: 1 May – 31 May (up to 50%) SA UK service but also had to adjust to market Lockdown level 3: 1 June – TBC (up to 100%) demand But operations still linked to m
Slide 34: Covid-19 exit and return to work plan
Covid-19 exit and return to work plan From the onset very early on that we will need a well-structured Covid-19 exit plan, and set out to design best practice return to work standard operating manuals and training programs We approved standard operating manuals to begin manufacturing › concluded int
Slide 35: Governance and leadership
Governance and leadership A special thank you to Brand, our Chairman, We believe it is important to lead and set the for always being available during this period example from the front during this period and for his positive encouragement and support I would like to thank the Metair team, subsidiar
Slide 36: COVID-19 recovery plan and Vision 2022
COVID-19 recovery plan and Vision 2022 In addition to executing all the activities required now to manage the Covid-19 risks, we also wanted to create our future vision: Vision 2022, which will shape our designed recovery Our focus is to design a multi-stepped U-shaped The Energy Vertical recovery i
Slide 37: Covid-19 scenario planning
Covid-19 scenario planning Three scenarios appear possible for the automotive industry The “U” shape is currently considered as the most probable development The V-Shape: Quick Recovery What it means: V What you believe: • Firm reaction across countries leads to • Short-term business disturbance wit
Slide 38: Forecasted global automotive sales
Forecasted global automotive sales (indexed, base year 2019 = 100% volume) We forecast a significant decline of vehicle sales from -16% down to -33%, driven by severity and duration of crisis impact V U L The V-Shape: Quick Recovery The U-Shape: 2020 is gone, The L-Shape: but it will be fine Lasting
Slide 39: The U-Shape: Expected light vehicle volumes by region
The U-Shape: Expected light vehicle volumes by region (mn) Longer period of downturn results in market decline of up to -29% in North America and -24% in Europe in 2020 – volume decline vs. 2019 expected for 2021 as well EUROPE NORTH AMERICA CHINA -16% -3% -24% -16% -29% -18% 20 20.1 25.3 24.5 16.8
Slide 40: Key priorities in the automotive industry recovery
Key priorities in the automotive industry recovery Ensuring health, ramping-up operations and demand acceleration are key priorities in the automotive industry recovery Ensure health protection Ramp-up production Promote vehicle sales and logistics Support exemptions Facilitate contactless car for p
Slide 41: Deep-dive 1: Objectives of supply side readiness task force
Deep-dive 1: Objectives of supply side readiness task force Temporary and lasting supply risks induced by Covid-19 need to be identified and mitigated systematically MITIGATION PLAN SOURCE MAKE STRATEGIES Increase supplier transparency including primary, Default risk of material and component suppli
Slide 42: Deep-dive 2: Assessment of vehicle purchasing stimulus schemes
Deep-dive 2: Assessment of vehicle purchasing stimulus schemes Various stimulus schemes are discussed between governmental and automotive decision makers – individual measures per country likely Assessment Scheme Description Vehicle Economic Climate Cost1 sales growth protection 2-component bonus Lu
Slide 43: Stimulation measures example: China
Stimulation measures example: China (not exhaustive) Government and industry associations are trying to limit the negative impact of Covid-19 with stimulation measures Stimulation of car sales: PRC Stimulus leading to a V-shape 6.5 -57% To keep the economy running, we need to stabilise private 15.02
Slide 44: Energy Vertical: Potential U-shaped recovery
Energy Vertical: Potential U-shaped recovery A full recovery for the Automotive Components Vertical is anticipated to be achieved step-by-step by 2022 110% - 130% Traditional market and customer return 100% to normality 95% Increased aftermarket share, industrial demand, standby, Li-ion trade 70% Tu
Slide 45: Automotive Components Vertical: Potential U-shaped recovery
Automotive Components Vertical: Potential U-shaped recovery A full recovery for the Energy Vertical is anticipated to be achieved step-by-step by 2022/23 160% - 180% New projects and vehicle launches: 100% Ford T6, Isuzu, C-SUV, VW, C Class, Nissan 85% Current models and markets return to some level
Slide 46: New Ford contracts: Investment and production planning
New Ford contracts: Investment and production planning Metair companies have been awarded new Ford contracts, with production planned to start in June 2022 The investment will be the largest to date, in a single customer, with total funding requirements estimated at c. R1.3bn Model life revenue is e
Slide 47: Strategic review
Mi ETA! R INVESTMENTS LIMITED Strategic review a7
Slide 48: Strategic review: Current strategy
Strategic review: Current strategy Metair’s strategy has always been customer, market and technology driven. • Strategy can be challenging but it doesn’t need to be complicated In line with the automotive • It should connect the dots between how we define winning, the tough industry principle of cho
Slide 49: Strategic review: Current strategy
Strategic review: Current strategy The Integrated Cascade of Strategic Choices Going through a process that integrated these 5 strategic choices within a single system led to a higher level of intellectual integrity among the leaders of Procter & Gamble in the 2000s. What is our winning We use the “
Slide 50: Strategic review: Current strategy – External Trends
Strategic review: Current strategy Redefine the game Redefine the playground fast Pressure is high, but we lack The market is rapidly changing? resources and capabilities: For us, that’s a crest of act fast and radical. Stop the opportunity! bleeding and reinvent our External Trends core The strateg
Slide 51: Strategic review: Automotive components vertical
Strategic review: Automotive components vertical Redefine the game Redefine the playground fast Pressure is high, but we lack The market is changing rapidly? resources and capabilities: For us, that’s a crest of act fast and radical. Stop the opportunity! bleeding and reinvent our Leverage our stren
Slide 52: Strategic review: Energy storage vertical
Strategic review: Energy storage vertical Redefine the game Redefine the playground fast Pressure is high, but we lack The market is changing rapidly? resources and capabilities: For us, that’s a crest of act fast and radical. Stop the opportunity! bleeding and reinvent our Leverage our strengths to
Slide 53: Strategic review
Strategic review Energy Automotive storage vertical components vertical Move towards redefining the playground Move towards redefining the operating model Our aspiration is to become a significant player in the Li-ion Our aspiration is to become the preferred OEM partner in market Africa and to grow
Slide 54: Strategic review: Winning aspirations
Strategic review: Winning aspirations Operating at the Being an ethical, highest value-driven standards when and responsible it comes to organisation people, health Our winning and safety aspirations for the group can be classified into four major themes Delivering Sustaining above-average, relevanc
Slide 55: How to achieve our winning aspirations
How to achieve our winning aspirations • Investigate separating the two verticals • Shareholder presentation, decision and choice • 6 stage valuation process: Stage 1 Market teaser testing interest (Stage-Gate) Completed Stage 2 Information Memorandum (IM) In progress Stage 3 Vendor due diligence In
Slide 56: Strategic review
Strategic review The project is still in progress TIMING INTEREST BUSINESS MODEL We have moved out our internal Covid-19 has affected the approach The challenge with the IM is how to timing for the completion of the and the attention of interested parties model the Covid-19 effect into the Informati
Slide 57: Financial and operational review
Financial and operational review 57
Slide 58: Vertical performance at a glance
Vertical performance at a glance Energy Automotive Storage vertical Components vertical 2018 2019 2018 2019 2018 2019 Revenue R6,4bn R6,9bn R5,1bn R5,6bn R10,3bn R11,2bn 56% 55% 44% 45% contribution 7% contribution contribution 11% contribution 9% Operating profit R692m R666m R509m R538m R1 009m R1
Slide 59: 2019 results at a glance
2019 results at a glance Vertical EBITDA PBIT HEPS AC: R669m (+ 8%) + 1% + 3% ES: R846m (+ 1%) R1 018m 336cps Free cash flow PBIT % ROIC AC: R400 (+ R68m) - 0.7ppt 0ppt ES: R167m (-R34m) Group: R544m (+ R66m) 9.1% 13.0% • Group turnover increase of 9% to R11.2bn, supported by • Free cash flow genera
Slide 60: Financial highlights: Balance sheet
Financial highlights: Balance sheet 2018 2019 Item • Non-current assets overall increase mainly due to R'million R'million combination of: Non-current assets 3 929 4 061 Property, pl a nt a nd equi pment 2 538 2 707 › Capital investments by Rombat (lithium-ion) and Inta ngi bl e a s s ets 707 605 Lu
Slide 61: Financial highlights: Balance sheet
Financial highlights: Balance sheet 2018 2019 Item • Total borrowings up due to: R'million R'million Total equity 4 288 4 311 › Ongoing investment into new projects for auto Non-current liabilities 1 587 1 843 components Borrowi ngs 984 1 299 › Rombat lithium-ion line for Euro 11m Pos t empl oyment
Slide 62: Financial highlights: Balance sheet
Financial highlights: Balance sheet 2018 2019 Item • Spot working capital decreased by c. R143m due to: R'million R'million Inventory 1 849 1 736 › Lower inventory levels at Mutlu, net working capital at Tra de a nd other recei va bl es 1 668 1 700 26% of sales Tra de a nd other pa ya bl es (1 444)
Slide 63: Financial highlights: Capital and debt structure
Financial highlights: Capital and debt structure Item 2018 2019 • Our debt levels not to exceed 2 or 2.5 X EBITDA Debt* : Equi ty 44% 52% • Comfortable headroom in covenants Net debt** : Equi ty 30% 31% • Our net debt levels are consistent at 0.9 times EBITDA Item 2018 2019 • Debt levels slightly up
Slide 64: Metair Investments Limited
Mi ETA! R INVESTMENTS LIMITED
Slide 65: Disclaimer
Disclaimer The information supplied herewith is believed to be correct but the accuracy thereof at the time of going to print is not guaranteed. The company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does