Adient Plc · NYSE:ADNT
Adient — Deutsche Bank Global Auto Industry Conference 2018
31 slides from Adient's conference presentation, January 2018
Slide 1: Deutsche Bank Global Auto Industry Conference
Deutsche Bank Global Auto Industry Conference January 2018 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: Today's presenters and meeting agenda
Today’s presenters and meeting agenda Bruce McDonald Chairman & CEO, Adient > Advancing our strategy Jeffrey Stafeil EVP & CFO, Adient > Seat Structures & Mechanisms update > Financial update 2018 Deutsche Bank Global Auto Industry Conference 3 Adient – Improving the experience of a world in motion
Slide 4: Advancing Adient's strategy
Advancing Adient’s strategy Current business developments > Headwinds impacting Seat Structures & Mechanisms (SS&M) have intensified > Formation of Adient Aerospace 2018 Deutsche Bank Global Auto Industry Conference 4 Adient – Improving the experience of a world in motion
Slide 5: SS&M headwinds
SS&M headwinds > Despite many successes in FY17 (SG&A progression, strength of China operations, reigniting ADNT’s growth engine) near-term results are being significantly impacted by SS&M > Previously identified headwinds impacting SS&M have intensified since Adient’s fourth quarter earnings call,
Slide 6: 2018 best characterized as a "transition" year
2018 best characterized as a “transition” year > First quarter fiscal 2018 results are expected to be significantly impacted by SS&M: ‒ SS&M primary contributor to Q1 operating results being down by an estimated $120M year-on-year ‒ Review underway to determine impact to FY18 outlook and mid-term pl
Slide 7: Adient Aerospace – executive summary
Adient Aerospace – executive summary > Signed a joint venture agreement with Boeing to form Adient Aerospace (Adient has a majority stake in the company at 50.01%) > Adient Aerospace will develop, manufacture, and sell a portfolio Kaiserslautern Technical Center of seating products to airlines and a
Slide 8: Adient Aerospace - strategic rationale
Adient Aerospace - strategic rationale > Forming Adient Aerospace is consistent with Adient’s five year marker to expand revenue beyond the automotive industry > The total addressable market for commercial airline We will leverage seating is approximately $4.5 billion today, and is our world class c
Slide 9: Adient Aerospace - financial highlights
Adient Aerospace - financial highlights > Total investment and cash contribution of ~$100M, split proportionally between Adient and Boeing (expected to cover capital needs through 2019) ‒ Initial investment of $28M from each partner ‒ Remainder of funding contingent on specific program milestones ‒
Slide 10: Meeting agenda
Meeting agenda >Advancing our strategy >Seat structures & mechanisms update >Financial update 2018 Deutsche Bank Global Auto Industry Conference 10 Adient – Improving the experience of a world in motion
Slide 11: Seat Structures & Mechanisms (SS&M) - Adient value proposition
Seat Structures & Mechanisms (SS&M) - Adient value proposition > SS&M drives strategic discussions at highest customer mgt. levels to support future needs. Ensures early involvement in pre-development activities > Supports key customer complete seat system sourcing model: (Toyota, Nissan, Honda) > S
Slide 12: SS&M – Global business overview
SS&M – Global business overview 28 FY2017 Global plants 8 ~$2.8B 17 Tech Centers Consolidated revenue (SS&M) Europe & RSA ~$0.9B* 9 18,500 Unconsolidated revenue (SS&M) North America Employees 2 * Includes $0.7B China and $0.2B ROW China JV’s 2018 Deutsche Bank Global Auto Industry Conference 12 Adi
Slide 13: Mechanisms
Market Competitive Product Portfolio Market Leader in all 6 product segments Front Seat Market Leader: Proven market leader in lightweight steel design for 10 Market share years (>25% reduction) (by volume) 1 Seat Structures Structures ~30% Synergy Structure Modular mechanisms integration Stro
Slide 14: SS&M improvement plan
SS&M improvement plan SS&M turnaround strategy is based on a combination of the following: > Launching next generation mechanisms – Development and related capital and launch is a huge drag on earnings short term, but these programs will drive profitability through 2025 and beyond > Replacing uncomp
Slide 15: SS&M current state
SS&M current state Identified headwinds are deep and more severe vs previous guidance > Commodity prices / availability > Launch inefficiencies − Launch complexity − Demand outpacing supply (resulting in outsourcing / additional tooling) − Automated equipment supplier capacity and lead times − Steel
Slide 16: Commodity impact
Commodity impact > Steel prices continue to escalate beyond original expectations ‒ Steel prices have continued to escalate vs our expectations resulting in approximately $35M in additional expense expected for the year ‒ Potential of further escalation in 2018 could result in additional risk > Euro
Slide 17: Launch inefficiencies driven by plant challenges - Example 1
Launch inefficiencies driven by plant challenges - Example 1 Key Drivers Ramos SS&M Plant What happened? What did this force How are we mitigating? us to do? Ramos Adjusted EBIT Trendline • Ramos press-room • Premium freight to • Eliminate excessive tool June 16 LTM FY17 Q3 FY17 Q4 FY18 Q1 FCST FY18
Slide 18: Launch inefficiencies driven by plant challenges - Example 2
Launch inefficiencies driven by plant challenges - Example 2 Clanton SS&M Plant Key Drivers What happened? What did this force How are we mitigating? Clanton Adjusted EBIT Trendline us to do? June 16 LTM FY17 Q3 FY17 Q4 FY18 Q1 FCST FY18 Q2 FCST • Equipment capability • Cost of poor quality and • Eq
Slide 19: Mechanisms
Standardization & replacing uncompetitive products in process % Next Generation Share vs Legacy Market Share Product group ROS evolution (by product line) Next Gen Product Share Legacy Product Share 25% 94% Recliners 28% Taumel/Lever 3000 23% 94% 34% Height Adjusters Mechanisms Height Adjuster 3000
Slide 20: China unconsolidated SS&M performance
China unconsolidated SS&M performance SS&M operations in China are extremely profitable with strong growth. The results demonstrate the post-turnaround potential for the consolidated business Equity Year Revenue income 1 2014 $352M $11M 2015 $584M $22M 2016 $662M $29M 2017 $743M $36M FY14A-FY17 CAGR
Slide 21: SS&M summary
SS&M summary > Seat Structures & Mechanisms are highly engineered and provide a competitive advantage to Adient > Additional recovery plans to help mitigate headwinds under review > Despite severe headwinds in early FY18, we still believe this business will be profitable after the turnaround is comp
Slide 22: Meeting agenda
Meeting agenda >Advancing our strategy >Seat structures & mechanisms update >Financial update 2018 Deutsche Bank Global Auto Industry Conference 22 Adient – Improving the experience of a world in motion
Slide 23: Expected impact of U.S. tax legislation
Expected impact of U.S. tax legislation Positive influences Negative influences ˃ Rate reduction to 21% ˃ Full phase in expected in FY19 will be − Benefit of phase in of reduced rate in FY18 slightly detrimental without structural changes ˃ One time repatriation tax is immaterial, no cash outflow ˃
Slide 24: Early read: Q1 fiscal 2018
Early read: Q1 fiscal 2018 (excludes impact of aircraft seating business) > Positive contribution from unconsolidated seating remains strong The intensified > Headwinds associated with SS&M more severe vs. original challenges impacting expectations, primarily related to: Q1 (primarily SS&M) ‒ Launch
Slide 25: Communication timeline
Communication timeline Headwinds & Challenges in Investor Meetings Q2 Earnings SS&M Developed • Initial communication of • Mid-term plan • Launch inefficiencies deepening challenge update • Commodity pricing & availability Mid Jan Late Summer / Fall Q4 FY17 Q1 FY18 February March Jan 29th April 2018
Slide 26: Questions
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Slide 27: Appendix
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Slide 28: 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 29: Non-GAAP reconciliations
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 30: Non-GAAP reconciliations
Non-GAAP reconciliations Adjusted Equity Income Adjusted Equity Income Three Months Ended Twelve Months Ended September 30 September 30 (in $ millions) 2017 2016 2017 2016 2015 Equity income as reported $ 248 $ 93 $ 522 $ 344 $ 281 (1) Purchase accounting amortization 6 5 22 20 5 (2) Gain on previou
Slide 31: Prior Period Results
Prior Period Results FY16 Actual FY17 Actual Last Twelve Months Ended Actual Actual Actual Actual Actual Actual Actual 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 Sep '17 Sales ($Mils.) $ 4,150 $ 4,220 $ 4,290 $ 4,348 $ 3,932 $ 4,02
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