Investor Presentation - September 2014

Transcription

Wajax Corporation
Investor Update - Q2 2014
September 2014
Forward Looking Statements
This presentation contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively,
“forward-looking statements”). These forward-looking statements relate to future events or the Corporation’s future performance. All statements other
than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words
such as “plans”, “anticipates”, “intends”, “predicts”, “expects”, “is expected”, “scheduled”, “believes”, “estimates”, “projects” or “forecasts”, or variations of,
or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken,
occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation’s ability to
predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward
looking statements. There can be no assurance that any forward looking statement will materialize. Accordingly, readers should not place undue reliance
on forward looking statements. The forward looking statements in this presentation reflect management’s current beliefs and are based on information
currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable,
there is no assurance that such expectations will prove to be correct. Specifically, this presentation includes forward looking statements regarding, among
other things, our plans for revenue and earnings growth, including planned business and strategic growth initiatives and their intended outcomes, our
investment in our business and strategic growth initiatives, our outlook for the remainder of 2014, including with respect to the planned restructuring of our
Industrial Components segment and the expected benefits and cost savings therefrom, the expected benefits from the transfer of our rotating products
group from our Equipment segment to our Industrial Components segment and the expansion of such group into other Canadian mining markets, our
commitment to and plans for the growth of our Industrial Components segment, our outlook for several of our key end markets, such as oil and gas and
the oil sands, our full year financial performance, our planned focus on costs and efficiencies, and our objective with respect to the future payment of
dividends. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding
general business and economic conditions, the supply and demand for, and the level and volatility of prices for, commodities, financial market conditions,
including interest rates, the future financial performance of the Corporation, our costs, market competition, our ability to attract and retain skilled staff, our
ability to procure quality products and inventory and our ongoing relations with suppliers, employees and customers. The foregoing list of assumptions is
not exhaustive. Factors that may cause actual results to vary materially include, but are not limited to, a deterioration in general business and economic
conditions, volatility in the supply and demand for, and the level of prices for, commodities, fluctuations in financial market conditions, including interest
rates, the level of demand for, and prices of, the products and services we offer, market acceptance of the products we offer, termination of distribution or
original equipment manufacturer agreements, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalation, unavailability of quality products or inventory, supply disruptions, job action and
unanticipated events related to health, safety and environmental matters), our ability to attract and retain skilled staff and our ability to maintain our
relationships with suppliers, employees and customers. The foregoing list of factors is not exhaustive. Further information concerning the risks and
uncertainties associated with these forward looking statements and the Corporation’s business may be found in the company’s MD&A under the heading
“Risk Management and Uncertainties” and in our Annual Information Form for the year ended December 31, 2013, filed on SEDAR. The forward-looking
statements contained in this presentation are expressly qualified in their entirety by this cautionary statement. The Corporation does not undertake any
obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable
securities laws.
Wajax Corporation – Investor Presentation ▪ 2
Wajax Corporation - Lines of Business
Major Vendors
Major Vendors
Major Vendors
Hitachi, Hyster, Tigercat,
JCB, Telelect/Terex,
Palfinger and Bell
MTU, DDC, Allison and
Reliabuilt
Eaton, SKF, Schaeffler, Timken,
ABB, Moyno and 3M
2013
Revenue
2013
Segment Earnings(1)
26%
53%
21%
(1)
Revenue
2013
2012
Equipment
53%
53%
Power Systems
21%
23%
Industrial Components
26%
24%
See the Non-GAAP and Additional GAAP measures section of the 2013 MD&A
19%
21%
60%
Segment Earnings(1)
2013
2012
Equipment
60%
54%
Power Systems
21%
25%
Industrial Components
19%
21%
Wajax Corporation - 2013 Revenue by Region
National network of 121
branches well-positioned
to support major resource
and industrial markets.
Equipment (32 branches)
Power Systems (27 branches)
Industrial Components (62 branches)
Wajax Corporation - 2013 Revenue by Market
2013 Revenue
Other
Government
and Utilities
Construction
6%
Mining
5%
18%
7%
Metal
Processing
8%
17%
Oil and Gas
8%
9%
Forestry
10%
Industrial/
Commercial
12%
Transportation
Oil Sands
2013
2012
Construction
18%
17%
Industrial/Commercial
17%
15%
Transportation
12%
11%
Oil Sands
10%
10%
Forestry
9%
8%
Oil and Gas
8%
10%
Metal Processing
8%
8%
Mining
7%
11%
Government and Utilities
6%
6%
Other
5%
4%
Wajax Corporation – 5-Year Revenue and EBT
Earnings Before Income Taxes (EBT)(1)
($M)
Consolidated Revenue
($M)
1,377.1
1,466.0 1,428.5
87.5
89.7
1,110.9
64.7
1,007.2
53.9
32.2
2009 * 2010
2011
2012
YOY 2013 Growth: -3%
2013
2009*
2010
2011
2012
2013
2013 Revenue results satisfactory given market conditions.
Lower mining and oil and gas sales hurt margins.
(1)
*
Additional GAAP measure, see 2013 MD&A
2009 reported under previous Canadian GAAP
Wajax Corporation - 2014 Outlook
•
We are very confident in our growth initiatives and will continue to invest with
a view to long-term growth while respecting current challenges
•
Q2 earnings showed an improved trend compared to the first quarter of this
year:
– Equipment and Power Systems each posted improved earnings versus
last year
– Industrial Components trends improved from Q1
– 42% sequential increase in consolidated backlog
•
We are committed to growth in Industrial Components:
– Restructuring and simplification of sales force is expected to result in
improved sales team effectiveness and lower costs. Expect to take a
restructuring provision in Q3 of $3.0 - $3.6M resulting in annual pre-tax
cost savings of approximately $5.0M.
– Transfer of rotating products group (from Equipment segment) provides
stronger foundation for oil sands operations and a platform for future
expansion into other Canadian mining markets.
Wajax Corporation - 2014 Outlook
•
The outlook for our end markets and results for the full year, excluding the
impact of the expected restructuring provision, remains substantially
unchanged from our view at the end of Q1. While we continue to expect 2014
to be a challenging year, we are beginning to see encouraging signs of
increased capital spending from oil and gas customers and we are pleased
with our oil sands activity.
•
Our monthly dividend has been maintained at $0.20 per share for the months
of August, September and October.
– Based on our current outlook, the current rate of annual dividend is
consistent with our objective of paying a minimum 75% of expected full
year net earnings
•
Our focus is to continue to invest in strategic initiatives while managing total
costs, our asset base and leverage.
Wajax Corporation
Q2 2014 Consolidated Revenue and Net Earnings
Revenue
($M)
400
Net Earnings
($ Per Share)
362.0
374.4
2013
2014
300
200
100
0
YOY 2014 Growth: 3%
…driven primarily by 18%
increase in Power Systems
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.81
0.73
2013
2014
…driven primarily by increased
finance costs
Wajax Corporation
Q2 YTD 2014 Consolidated Revenue and Net Earnings
Revenue
($M)
800
Net Earnings
($ Per Share)
1.43
698.3
705.8
1.40
1.20
600
1.13
1.00
0.80
400
0.60
0.40
200
0.20
0.00
0
2013
2014
YOY 2014 Growth: 1%
…driven primarily by 7% increase
in Power Systems
2013
2014
…Q1/2014 weakness accounts for
73% of YOY EPS decline
Wajax Corporation
Q2 2014 Segment Earnings(1)
($M)
Power
Systems
Equipment
14
13.0
Industrial
Components
7
7
6
6
5
5
13.6
12
10
5.7
4.6
4.2
4
8
4
3.3
3
3
4
2
2
2
1
1
6
0
0
2013
2014
YOY 2014 Growth:
Revenue: ~ flat
Segment Earnings: 4%
0
2013
2014
YOY 2014 Growth:
Revenue: 18%
before finance costs and income taxes. The rotating products group’s results for 2014 and
comparative figures have been reclassified from the Equipment segment to the Industrial Components segment.
2013
2014
YOY 2014 Growth:
Revenue: ~ flat
Segment Earnings: -19%
(1) Earnings
Wajax Corporation
Q2 YTD 2014 Segment Earnings(1)
($M)
Power
Systems
Equipment
Industrial
Components
30
24.3
25
14
14
12
12
10
10
11.6
20.8
20
8
15
7.4
7.7
8
6
6
4
4
2
2
5.8
10
5
0
0
2013
2014
YOY 2014 Growth:
Revenue: 1%
0
2013
2014
YOY 2014 Growth:
Revenue: 7%
before finance costs and income taxes. The rotating products group’s results for 2014 and
comparative figures have been reclassified from the Equipment segment to the Industrial Components segment.
2013
2014
YOY 2014 Growth:
Revenue: -2%
Segment Earnings: -50%
(1) Earnings
Wajax Corporation - Operating Costs
Wajax S&A(1)
% of Revenue
25%
20%
15%
14.5%
14.2%
14.8%
10%
2011
(1)
2012
Selling and administrative expenses
2013
Wajax is a very cost competitive operator:
• Strong historical cost focus
• Broad focus on costs and efficiencies:
 Industrial Components
• Restructuring and simplification
of sales team expected to result
in annual pre-tax cost savings of
approximately $5M
 Power Systems
• Improving cost recoveries and
labour efficiency
 All Divisions
• Tactical SGA reductions
• Occupancy and freight
reductions plans
Maintaining prudent investment plan:
• Sustainable earnings improvement will result
from investment in growth initiatives
Growth Strategy
Wajax Corporation – Strategic Priorities
Leading
Vendors with
Strong
Aftermarket
Potential
Focus on
End Markets
with Highest
Growth
Opportunity
Continue to
Develop New
Products and
Services
Wajax is committed to maintaining strong investment and growing our
business in the oil sands, oil and gas and mining end markets.
Current Growth Initiatives
Mining Expansion
Our strategy is to continue to be a leader in the sales and service of hydraulic
mining shovels and to become a new force in the truck market (>140MT) using
Hitachi’s proprietary electric drive technology.
Based on the equity of one of the world’s
leading hydraulic mining shovels:
• WJX/Hitachi CDN market share
33%(1)
– >40% in the oil sands
• $53M in oil sands related orders in
Q2/2014
(1)
For new unit sales from 2009 to 2013
Enter the >140MT haul truck market
• Core aspect of Hitachi global strategy
• Oil sands pilot of 4 EH5000s continues
Haul truck market is expected to be an
important driver of future product
support revenue.
Oil and Gas
Our strategy is to maintain strong market share in the new equipment market
and to drive a higher proportion of revenue from an expanded range of
aftermarket services for equipment in the field (frac, rigs and support).
Strong Installed Base and New Products
Leading transmission in
North America’s Top 20
frac fleets. New HHP
products.
A leading engine in North
America’s Top 20 frac
fleets and with strong
share in CDN rigs. New
Tier 4 HHP products.
Added Services
Power Systems and
Industrial Components are
expanding our range of
aftermarket services for
equipment in the field.
Expanding oil and gas related aftermarket services in Power Systems and Industrial
Components helps to mitigate the effect of negative new equipment cycles.
Electrical Power Generation (EPG)
Our strategy is to grow from our current position as #3 in the estimated $880M
market by leveraging strong vendor relationships and the industry’s best team of
EPG professionals.
In partnership with
vendors such as MTU,
Wajax offers a broad
range of engine options
for both diesel and
natural gas applications.
EPG rental offers excellent
national growth. Custom
rental units are being
designed and built in our
68,000 s/f Drummondville
integration centre.
Our project capabilities
cover small commercial
standby systems to very
large prime power
resource applications.
We are focusing on a broad range of end markets including data centres,
telecom, water treatment, health care and resource markets.
Rotating Products / Engineering and Repair Services
Rotating products and engineering and repair services present an excellent organic and tuck-under
acquisition growth opportunity. In Q2/2014, we transferred accountability for the oil sands based rotating
products group from the Equipment segment to the Industrial Components segment. The change will allow
for a stronger foundation for operations in the oil sands by exploiting the engineering and repair services
capabilities in Industrial Components and provides a platform for growth into other major Canadian mining
markets.
Estimated Rotating Products Oil Sands Market (1)
$1.8B
Products,
Parts and
Services
Shop and
Field
Services
Estimated ERS Market Size(1)
$1.4B
Instrumentation
Hydraulics
22%
25%
29%
71%
Pumps
28%
Bearings
and Power
Transmission
25%
Rotating products refers primarily to
product sales and service of process
pumps and related equipment and
general shop and field repair and
maintenance services for oil sands
customers.
(1)
Wajax Addressable Products/Services
ERS refers to engineering, design,
testing, fabrication and assembly
services for hydraulic, bearing/power
transmission, pumping and
instrumentation systems.
Rotating Products / Engineering and Repair Services
Our primary focus for RP/ERS is on developing our oil sands market and extending those products and
services to major Canadian mining markets. RP/ERS can also be extended to oil and gas markets and
general manufacturing and industrial customers
Field maintenance project on
site at oil sands customer site.
Mining equipment repair in
Bathurst, New Brunswick branch.
Ft. McMurray
Edmonton
Bathurst
Sudbury
Primary service location
Secondary service location
Gear box repair in Fort McMurray
Rotating Equipment branch.
Bombardier C Series hydraulic booms
project on site in Montreal, Quebec.
Appendices
Appendix 1
Wajax Equipment - 2013 Revenue Mix
Segment Earnings (1)
Revenue
Crane and Utility
56.1
60
7%
Forestry
15%
Construction
38%
50.2
49.0
50
39.0
40
30.5
30
16%
20
Material
Handling
10
24%
0
2009
Mining/Oil Sands
2010
2011
2012
2013
YOY 2013 Growth:
Revenue: -1.9%
Segment Earnings: -12.6%
(1)
Earnings before finance costs and income taxes
Exposure to mining equipment market hurt 2014 segment earnings.
Effect partially mitigated by excellent mining aftermarket performance.
Appendix 2
Wajax Equipment - Equipment, Parts and Service Sales
Revenue ($Millions)
800
700
778.5
600
500
763.5
Total Revenue
5-Year CAGR: 3.7%
685.8
502.9
555.8
Equipment
5-Year CAGR: 1.9%
400
300
200
212.8
223.4
257.8
264.4
2010
2011
2012
291.2
Aftermarket
5-Year CAGR: 7.3%
100
0
2009
Total
2013
Aftermarket
Appendix 3
Wajax Power Systems - 2013 Revenue Mix
Revenue
32.9
35
Off-Highway
Mechanical
Drive Systems
Electrical
Power
Generation
27%
30
26.1
25
19.2
20
40%
17.1
15
10
8.8
5
33%
0
2009
On-Highway
2010
2011
2012
2013
YOY 2013 Growth:
Revenue: -8.5%
(1)
Significant exposure to oil and gas equipment markets hurt segment
earnings in 2013. Expect improved conditions beyond 2014.
Appendix 4
Wajax Industrial Components - 2013 Revenue Mix
Revenue
25
Other
Process
Equipment
15%
3%
Bearings
and Power
Transmissions
23.1
22.1
20
15.0
15
12.0
55%
27%
10
5
4.7
0
Hydraulics
2009
2010
2011
2012
2013
YOY 2013 Growth:
Revenue: 1.3%
(1)
Exposure to mining and oil and gas hurt high margin process and
hydraulics business negatively affecting segment earnings.
Growth in other areas maintained revenue.

Investor Presentation - September 2014

Transcription

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