Q3, 2013 - Hanon Systems

November 2013
Corporate Communications
Creation of #2 Global Climate Player, HVCC
1986
Established as Joint Venture between
Ford Motor Co. and Mando Machinery Corp.
1996
Listed on Korea Stock Exchange
1999
Visteon became the majority shareholder
2006
Ownership increase in Canada, Portugal, and Thailand
(from Visteon)
2007
Ownership increase in India, Beijing, and Alabama
(from Visteon)
2008
Acquired ownership in Slovakia (from Visteon)
Sept., 2012
Transaction outlined to acquire Visteon Climate business
(18 entities and Intellectual Property)
Jan., 2013
Majority of transaction complete
May, 2013
Remaining entities transfer complete
May, 2013 (Q1 Earnings Release)
 Significant customer/region diversification
 Strong revenue growth (+41% yoy)
Aug., 2013 (Q2 Earnings Release)
 Strong revenue growth across all regions
 QoQ margin improvement
 Materialization of synergy benefit
Nov., 2013 (Q3 Earnings Release)
2009
Obtained 100% controlling interests in HVCC Alabama
2013 – Creation of 2nd largest global Climate Supplier by integration of
two entities; HCC and Visteon Climate Control Unit
2
HVCC in Summary
2
Second largest automotive climate supplier
35
35 manufacturing sites, four global technical centers
19
Present in 19 countries across Europe, North America and Asia
14K
70
14,000 manufacturing, engineering and administrative employees
70 percent owned by Visteon Corporation
Headquartered in Korea
One of only two “full line” climate suppliers in the industry
Low-cost, Asian-centric manufacturing footprint
Listed on the Korea Stock Exchange
3
Global Operations
Beijing
Dalian
Jinan
Chongqing
Nanchang
Autopal(Nový Jičin/ Hluk)
Autopal Service
Czech Rep
Charleville
France
Kerpen
Germany
Togliatti
Russia
llava
Slovakia
Palmela
Algeruz
Portugal
Alba
Bhiwadi
Hungary
VASI(Pune/
Gebze Chennai)
Turkey
India
China
FVCC(Changchun/
Chengdu/Foshan)
Nanjing
Wuhu
Daejeon
Pyeongtaek,
Ulsan
Korea
Belleville
Canada
Van BurenTwp.U.S.
JCS(Hiroshima/Hofu)
Japan
Rayong
Thailand
Shorter, Ala.U.S.
Coclisa(3)
El Salto
Mexico
Sao Paulo
Brazil
Former Halla facilities
Technical Centers:
Acquired facilities from Visteon
-
Recently registered facilities
Daejeon, Korea
Van Buren Twp., Mich., U.S.
Kerpen, Germany
Novy Jicin, Czech Republic
JV (Unconsolidated)
35 Manufacturing Facilities and Four Technical Centers
Headquarter: Daejeon, Korea
4
Competitive Edge
Before Integration
Other
24.7%
Other
24.7%
Denso
24.0%
Visteon
4.0%
Sanden
5.2%
Calsonic
5.4%
Delphi
7.2%
After Integration
(Global #2)
Sanden
5.2%
Calsonic
5.4%
Delphi
7.2%
Valeo
12.5%
Behr
7.8%
HCC
9.1%
Denso
24.0%
HVCC
13.1%
Behr
7.8%
Valeo
12.5%
Source: IHS (2012)
Before Integration
# of Released Patents
After Integration
Intellectual Property
HVCC
Competitor A
Competitor B
Competitor C
400
300
200
IP
HVCC
Application
7,538
Registration
2,279
100
0
2005
2006
2007
2008
2009
Publication Year
Page 5
2010
2011
2012
(Source: Boston Consulting Group)
Product Portfolio
Climate Control Systems
- Key Control
Product Lines Climate
HVAC
ICE Thermal MGMT
Electrified Vehicle
Thermal MGMT System
Charge Air Cooler(CAC)
Hybrid/Electric Vehicle
Battery Thermal
Management
Compressor
(Fixed, Variable,
Electric)
Water-cooled Charge Air
Cooler (WCAC)
Charge Air Coolers (CAC)
EGR System
Integrated Climate
System Module
(ICSM)
Fluid Transport
Fuel Cell Vehicle
Exhaust Gas Recirculation (EGR)
High and Low Pressure
Control Head
Cathode Oxygen
Depletion Heater
Exhaust Heat
Recovery (EHR)
Ionizer
(Intelligent Air
Quality)
Metal Seal Fitting
Turbo Blower
Transmission Thermal MGMT
Cooling Module
Condenser
6
Auto Transmission
Warmer & Cooler
Brushless DC
Cooling Module
Vehicle Technology Drivers
Green  Electric and hybrid vehicle systems and components
 Alternative refrigerant systems, low global warming potential
 Renewable and recyclable materials, emission reduction
Efficiency  Fuel efficiency (engine downsizing)
 Components, systems
 Control strategies
Smaller and  Compact design
Lighter  Less material usage, new materials
 Pedestrian Protection oriented FEM (Hood height decrease)
Leading Cost  Global platforms and scale
 Growth market specifications
 Faster development cycles
Comfort  Time to comfort
 Cabin air quality
 Reduced Noise, Vibration and Harshness (NVH)
Market trends driving significant opportunities for advanced technology
From Climate Control to Thermal/Energy MGMT solution Provider
7
Robust Sales Growth
(Dollars in Millions)
$3,275
$2,981
$2,028
$2,511
$1,994
$1,406
2006
2007
2008
$1,788
2009
2010
2011
2012
2012
2015E
15% Historical Sales CAGR – Strong backlog and well diversified
Global customer portfolio drive Strong Sales Growth
Page 8
Strong Global Portfolio
China
17%
By Customer
Others
24%
Ford
25%
HMG, Ford,
JMC, Geely
Europe
HMG
51%
North America
23%
Korea
Ford, HMG,
VW, BMW
36%
HMG, Ford,
Chrysler
16%
HMG, Ford,
GM, Nissan
Others
Others: VW, Audi, BMW, GM,
Mazda, Renault Nissan, Honda …
8%
HMG, Ford,
Chrysler, Suzuki
(% of YTD Q3, 2013 Sales, Simple Sum-Up)
Strong Revenue Growth driven by Well Diversified Customer Portfolio
Page 9
Sales – QoQ Change
 Q3 sales fell 15% vs. Q2, explained by seasonality and eliminations.
(Unit: billon KRW)
- 94
8.8%
1,458
1,364
- 120
1,270
1,244
Q2 Disclosure
Eliminations
Adjusted
Q3 Seasonality
Q3 Disclosure
Market Consensus
Seasonality impact across the globe except for China, which
shows strong QoQ revenue growth
- Korea: summer shutdown, OEMs labor strike
- NA, Europe: summer shutdown
Slightly below market consensus despite of seasonality
10
Strong Sales Growth – 3rd Quarter
China
(KRW in Billions)
+20.0%
+4.2%
Q2
Q3
5,137
New
Entities
1,517
Q1
Legacy
Korea
Europe
285
3,335
+42.%
+1.3%
-8.1%
-11.5%
Q1
Q1
Q2
NA
Q2
Q3
+20.2%
-7.8%
Q2
Q3
Q3
Q1
Others
-3.0%
-4.9%
2012
YTD Q3, 2013
(Simple Sum)
(Sales increase, Simple Sum Up)
2013
Q1
Q2
Q3
Q3 Sales growth slowdown because of seasonality except China
Page 11
Operating Margin Improvement
(KRW in Billions)
101
94
79
9.0%
69
68
7.3%
7.8%
9.7%
78
6.3%
Q1
Q2
Q3
2012
Q4
Q1
73
7.0%
6.0%
Q2
2013
Q3 operating income slowed down
but expect enhanced operating income in Q4
Page 12
Q3
Operating Income Margin - QoQ Change
0.3%
0.4%
- 0.3%
- 1.4%
7.4%
7.0%
Q2 Disclosure
Eliminations
Adjusted
Cost efficiency
improvement
COGS *
SG&A *
6.0%
R&D
Q3 Disclosure
* Reclassification between COGS and SG&A for commission fee in India
Margin decrease is explained by increased engineering costs
Majority of costs will be recovered in the foreseeable future
13
Key B/S Metrics
Capex/Depreciation
Capex
Cash Flow
Depreciations
(KRW in Billions)
(KRW in bills)
146
143
113
120
108
106
116
126
Q1, 2013
Short-Term Debt
85
123
120
112
Long-Term Debt
251
250
240
Total Debt
336
374
360
480
389
342
44
15
-18
Net Cash
2009
2010
2011
2012
Substantial balance sheet and cash flow
Page 14
Q3, 2013
136
Cash
2008
Q2, 2013
Focus on Continued Growth
Operational Excellence
 Significant efficiency improvement, especially in Europe (leverage organization’s know-how and supply
chain excellence)
 Economy of scale by developing standardized parts and bulk deal
 Streamlined engineering and manufacturing process
Customer Retention and Diversification
 Refreshed Emphasis on improving customer relationship with critical customers
 Strong research and application development capabilities to build value proposition to global customers
 Europe Business Expansion through Product Diversification
Product & Technology Competitiveness
 Expedition on Cutting Edge Technology Development
 Profitable Emerging Market Product Strategy
 Further Improvement on Global Manufacturing Footprint Competitiveness
Continue to focus on efficiency improvement and further growth
15
Appendix
Page 16
Balance Sheet (Q3, 2013)
(K-IFRS / KRW in Billions)
Sep 30, 2013
Change
Cash and equivalents
341.5
401.3
(59.8)
Accounts receivable, net
928.9
726.3
202.6
Inventories, net
358.0
217.1
140.9
Property and equipment, net
946.6
655.4
291.2
76.7
29.8
46.9
155.3
154.0
1.3
57.9
52.3
5.6
2,864.9
2,236.2
628.7
897.0
622.3
274.7
56.9
8.4
48.5
360.4
83.3
277.1
92.4
83.6
8.8
1,421.7
1,396.6
25.1
36.5
42.0
(5.5)
2,864.9
2,236.2
628.7
Equity in net assets of non-consolidated affiliates
Intangible assets, net
Other assets
Total assets
Accounts payable
Accrued employee liabilities
Debt
Other liabilities
Halla Visteon Climate Control Corp. shareholders’ equity
Non-controlling interests
Total liabilities and shareholders' equity
Page 17
Dec 31, 2012
Income Statement (Q3, 2013)
(K-IFRS / KRW in Billions)
Q3, 2013 Q2, 2013
Q3, 2012
YoY
Sales
1,243.6
1,364.2
-8.8%
867.2
43.4%
Cost of sales
1,035.4
1,140.0
-9.2%
719.0
44.0%
208.2
224.2
-7.1%
148.2
40.5%
134.0
122.7
9.2%
80.4
66.6%
74.2
101.5
-26.9%
67.8
9.4%
(1.6)
5.2
N/A
9.7
N/A
Financial income/expense
8.6
(3.4)
N/A
2.0
330.0%
Equity in net income of non-consolidated affiliates
2.8
2.3
21.7%
0.6
382.8%
84.0
105.6
-20.5%
80.2
4.7%
Provision for income taxes
22.7
29.4
-22.9%
31.9
-29.0%
Net income
61.3
76.2
-19.6%
48.2
27.1%
4.2
3.1
34.4%
1.0
333.0%
57.2
73.1
-21.8%
47.3
20.9%
Gross margin
Selling, general and administrative expenses
Operating income
Other Income/expense
Income before income taxes
Net income attributable to non-controlling interests
Net income Halla Climate Control Corporation
Page 18
QoQ
Cutting Edge Technology
From Climate Control to Thermal/Energy Mgmt Solutions Provider
Page 19
Compressor Portfolio
Type
Electric
Variable
Fixed
ESC
VS
VSx
HS/FS
RS
27 ~ 33cc
90 ~ 190cc
90 ~ 180cc
90 ~ 213cc
90 ~ 200cc
HEV
Application
BEV
EcoFriendly
Page 20
Combustion Engine Vehicles
P-HEV
Fuel
Efficient
Weight
Savings
NVH
Reduction
Technical Center – Global
Technical
Centers – GlobalHVCC HQ, Daejeon
Kerpen
GERMANY
Chelmsford
UK
Charleville
FRANCE
Pamela
PORTUGAL
Van Buren Twp., Mich.
UNITED STATES
S. KOREA
Szekesfehervar
HUNGARY
Nový Jičin
CZECH REPUBLIC
Yokohama
JAPAN
Chennai
INDIA
Shanghai Hiroshima
CHINA
JAPAN (JCS)
Rayong
THAILAND
Juarez
MEXICO
Brazil
EU
NA
ASIA
4 Global R&D Centers
11 Regional Engineering Centers


Major Innovation Center
Engineering (Application, Simultaneous)
Well Positioned to serve requirements of global customers
Page 21
Thank You!
www.hvccglobal.com