Latest Investor Presentation
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Latest Investor Presentation
Fast Forward Deutsche Bank 2015 Global Auto Industry Conference January 14, 2015 2015 Guidance—Highlights Sales growth of 2% to 6% compared with 2014 sales 9.5% to 12% sales growth, excluding currency EPS guidance range of $3.35 to $3.55 per diluted share $3.60 to $3.75 excluding currency 11% to 14% increase over 2014 EPS guidance of $3.23 to $3.28 per diluted share, excluding non-recurring items Operating margin above 13% Up for the sixth straight year As of January 14, 2015 Copyright © 2014 BorgWarner Inc. 2 A Portfolio of Leading Powertrain Technology Engine 67% / SALES Drivetrain 33% / SALES Turbo Systems Morse TEC Transmission Systems TorqTransfer Systems • Wastegate • Engine Valve Timing Systems • AWD Couplings • Variable Turbine Geometry (VTG) • Regulated 2-stage (R2S™) • Actuators -Timing Chain • Variable Cam Timing -Oil Pressure Actuated -Torsional Assist - Cam Torque Actuated • HY-VO® Transmission Chain -Transmission/Transfer case chain • DualTronic® Systems for Dual Clutch Transmissions • ECO-LaunchTM Stop/Start Accumulator Solenoid Valves Thermal Systems • Thermal Management Components and Systems • Visctronic® Systems • eGearDrive® Electric Drive Transmissions • One-way Clutches and Modules • eAWD Torque Vectoring • Friction and Steel Plates • AWD Electronic Controls and Systems Integration Morse TEC Thermal Systems • Fans/Fan Drives • Exhaust Gas Recirculation (EGR) Valves • EGR Coolers & EGR tubes • Integrated EGR Modules • Secondary Air Systems • Thermostats Copyright © 2014 BorgWarner Inc. Transmission Systems TorqTransfer Systems Emissions Systems • Glow Plugs • Instant Start System • Pressure Sensor Glow Plugs • Gasoline Ignition Technology • Sensor Technology • PTC Cabin Heaters • Transfer Cases Turbo Systems BERU Systems Emissions Systems 3 The BorgWarner Strategic Difference Technology Leadership Customer and Geographic Diversity Financial Strength and Discipline Copyright © 2014 BorgWarner Inc. 4 Global Macro Trends Pace of Innovation Connected Living Autonomous and Connected Vehicles Improved Efficiency Big Data Resource Scarcity & Environment Copyright © 2014 BorgWarner Inc. Global Rebalancing of Economic Power Demographic Shifts Urbanization Increased Vehicle Population 5 Stringent Regulations—A Resilient Secular Trend Korea Proposed MPG Equivalent (CAFE/Local Test Cycle) for Passenger Cars 60 E.U. Enacted U.S. Enacted 55 China Proposed 50 45 Korea Enacted 40 35 China Enacted 30 25 20 2005 2010 2015 Year 2020 2025 Source: International Council on Clean Transportation, November 2014 Copyright © 2014 BorgWarner Inc. 6 Fuel Economy Drives Growth for BorgWarner LV Transmissions LV Turbocharged Systems 103.2 103.2 86.6 86.6 Manual Transmissions 9.4 4.6 31.1 30.1 1.0 9.7 1.0 2014E Non-Turbocharged DCT (15%)* Step ATs (1%)* CVT (8%)* AMTs and Other (0%)* 21.5 (13%)* Gasoline (4%)*Diesel 13.9 2019E 11.6 17.8 21.5 2014E 2019E LV VCT Systems LV EGR Systems 103.2 103.2 86.6 86.6 Fuel Economy Non-EGR Non-VCT (6%)* VCT Systems 9.6 2.8 16.6 21.3 2014E 2019E Gasoline (28%)* Diesel (5%)* 64.4 47.4 2014E 2019E Global light vehicle industry volumes; units in millions (January 2014) * CAGRs are shown in parentheses Copyright © 2014 BorgWarner Inc. 7 Powertrain Trends Electrification Downspeeding Stop/Start Light-weighting Copyright © 2014 BorgWarner Inc. 48 Volts Cost Reduction Thermal Management Downsizing and boosting Fuel Diversification Emissions Reduction 8 Expanding Our Reach Across the Powertrain Variable valvetrain VCT ePhaser Timing system Timing chain EGR cooler Fans/fan drive Solenoid Friction Transfer case Exhaust heat recovery system Eco-LaunchTM solenoid valve Control module Wet clutch for manual transmissions Clutch module AWD coupling Permanently Engaged Starter FXD Turbocharger eBOOSTER® turbocharger R2S turbocharger Diesel cold start Gasoline ignition coils Copyright © 2014 BorgWarner Inc. Cabin heater for EVs EcoFlash® high frequency ignition 9 Customer and Geographic Diversity 2014 Sales Outlook* VW/Audi 12% Daimler 6% Hyundai/Kia 4% Toyota 4% Nissan 1% Honda 1% China 10% Ford 5% Other 7% Renault 3% 3% BMW 1% Fiat 1% PSA 1% GM Commercial Vehicles 3% Other 10% * ** NSK-Warner included NSK-Warner excluded Copyright © 2014 BorgWarner Inc. Ford Chrysler GM Asian OEMs 7% 5% 4% 2% Commercial Vehicles 5% Other 5% Americas Asia Europe ~28%* 30%** ~26%* 22%** ~46%* 48%** 10 10% to 12% Organic* CAGR thru 2017 $2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017 Americas**: ~30% Europe: ~15% Asia***: ~55% Domestic OEMs (Chrysler, Ford, GM) • All-wheel drive • Engine timing and VCT • EGR coolers and valves • Transmission solenoids • Turbochargers Domestic OEMs (Fiat, JLR, PSA, Renault/Nissan, VW/Audi) •All-wheel drive •EGR coolers and valves •Engine timing •Ignition systems •Turbochargers China (BYD, Chang’an, Chery, CNHDTC, Cummins, FAW, Ford, Geely, Great Wall, Honda, JAC, Navistar, PSA, SAIC, S-GM, S-VW, Volvo, Weichai) •All-wheel drive •DCT components •EGR coolers and valves •Engine timing and VCT •Ignition systems •Thermal systems •Thermostats •Transmission solenoids •Turbochargers Commercial Vehicles (Cummins, Daimler) • EGR valves • Turbochargers Non-Domestic OEMs (Fiat, Renault/Nissan, Subaru, VW/Audi) • Engine timing • EGR coolers • Turbochargers Non-Domestic OEMs (Tata Motors, Great Wall) •Engine timing and VCT •Turbochargers Commercial Vehicles (Deutz, MAN) •Thermal systems •Turbochargers * Organic growth includes the change in sales due to net new business and excludes the impact of base business growth or shrink, changes in product pricing, acquisitions, divestitures and foreign currencies ** Net new business with GM, Ford and Chrysler in North America is 25% of total net new business *** Net new business in China and Korea is ~38% and ~14% of total net new business, respectively Copyright © 2014 BorgWarner Inc. Korea (Hyundai/Kia, Ford, GM, Renault/Nissan, SsangYong) •All-wheel drive •Engine timing and VCT •Transmission components •Turbochargers India •EGR coolers and valves 11 10% to 12% Organic* CAGR thru 2017 $2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017 Engine Drivetrain Ignition Systems 1% Thermal Systems And Thermostats 5% Traditional Transmission Components 7% All-Wheel Drive 14% Emissions Systems 10% DCT Modules 8% Engine Timing and VCT 16% Diesel Turbochargers 15% Gas Turbochargers 23% * Organic growth includes the change in sales due to net new business and excludes the impact of base business growth or shrink, changes in product pricing, acquisitions, divestitures and foreign currencies Copyright © 2014 BorgWarner Inc. 12 Growth in Asia Leading to Geographic Balance 2015E 2014E 48% 22% 46% 30% 26% 28% 2019E ~40% Americas Asia Europe Copyright © 2014 BorgWarner Inc. ~30% ~30% 13 2015 Expectations BorgWarner Outlook Sales Growth 2% - 6% Sales Growth—Excluding Currency 9.5% - 12% EPS Guidance $3.35 - $3.55 EPS Guidance—Excluding Currency $3.60 - $3.75 Free Cash Flow $350-$400 million R&D Spending > 4.0% of sales Tax Rate ~ 29% Return on Invested Capital > 20% $ / Euro Exchange Rate ~ 1.20 at midpoint As of January 14, 2015 Copyright © 2014 BorgWarner Inc. 14 2015 Guidance—Sales Guidance Range Low End High End Net new business 10.3% 11.5% Changes in product pricing -2.0% -2.0% 1.2% 2.6% -7.5% -6.0% 2.0% 6.0% Base business growth Foreign currencies Total As of January 14, 2015 Copyright © 2014 BorgWarner Inc. 15 $15 Billion in Revenue by 2020 $ in Billions ~15 8.8 7.1 7.2 7.4 2011 2012 2013 8.3 8.5 2014E 2015E 5.7 2010 2020E Net New Business implies double digit organic growth in 2016 and 2017 M&A would provide incremental growth On pace to $15 billion by 2020 Copyright © 2014 BorgWarner Inc. 16 Operating Income Margins* On the Rise Mid‐Teens 11.1% 11.7% 12.4% 2011 2012 2013 <13% >13% 2014E 2015E 9.3% 2010 2020E Expect operating income margins to improve in 2015 Would be the sixth straight year-over-year improvement Expect mid-teens incremental margins for the forseeable future * Excludes special items. Copyright © 2014 BorgWarner Inc. 17 Attractive Business Model, Difficult to Replicate New Entrant New Entrant New Entrant New Entrant Copyright © 2014 BorgWarner Inc. 18 Strong Capital Structure A Strong Balance Sheet = The Flexibility to Take Advantage of Strategic Opportunities As of September 30, 2014 $ in millions Cash Total debt Net debt $783 1,312 529 Total equity Total net capital 3,800 4,329 Net debt to net capital Net debt to TTM EBITDA Copyright © 2014 BorgWarner Inc. 12.2% 0.4x 19 Putting Our Cash Flow to Work $ in millions ~140 ~106 296 226 ~116 204 56 51 57 165 ~525 370 8 14 394 407 418 2011* 2012 2013 277 172 2008 2009 2010* * $358 million and $326 million was spent on share repurchases in 2010 and 2011, respectively, primarily to settle obligations related to convertible debt that matured in April 2012. Copyright © 2014 BorgWarner Inc. 2014E Dividends M&A Activity Share Repurchases Capital Expenditures 20 Thank You for Your Attention Our Vision A Clean, Energy-Efficient World Our Mission Deliver Innovative Powertrain Solutions that Improve Fuel Economy, Emissions & Performance Fuel Economy Copyright © 2014 BorgWarner Inc. Emissions Performance 21 Forward-Looking Statements Statements contained in this presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," “continues,” “could,” “designed,” “effect,” "estimates”, “evaluates,” “expects,” “forecasts,” “goal,” “initiative,” "intends," “outlook,” "plans," “potential,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “would,” variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forwardlooking statements. Such risks and uncertainties include: fluctuations in domestic or foreign vehicle production, the continued use by original equipment manufacturers of outside suppliers, fluctuations in demand for vehicles containing our products, changes in general economic conditions, as well as other risks noted reports that we file with the Securities and Exchange Commission, including the Risk Factors identified in our most recently filed Annual Report on Form 10-K. We do not undertake any obligation to update or announce publicly any updates to or revision to any of the forward-looking statements. Copyright © 2014 BorgWarner Inc. 22