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Technology+ Innovation= Sustainability
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• Second level
• Third level
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Q4 2011 Interim Report
David Woolley (CEO) & David Bessant (CFO)
22 February2012
1
June 2011
Agenda
• 2011 Highlights
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• Summary
ofsubhead
financial
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• Leading technology
DW
• 2012 Outlook
DW
• Q&A
DW & DB
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22
DB
June
22 February
2011
2012
2011 Highlights
• Full year results are best on record since the Engines and
Hydraulics businesses were combined in 2008
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• Concentric
continues to grow
faster than
the market
• The
Board
of Directors
proposes
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styles a dividend of SEK 2 per share,
corresponding to about 50% of EPS
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• to Strong
Q4
as the demand from Q3
• Second level
• Third level
• Demand
in US slightly ahead of Europe in
• Fourth level
average
sales per working day
• Fifth level
was largely sustained
Q4, reflected in
• Concentric continues to gain market share in India and China
• Strong profitability and working capital management reduces
net debt by MSEK 106 in Q4 and MSEK 198 for FY 2011
• Robust financial position – gearing (debt/equity) down to 12%
33§
June
22 February
2011
2012
Looking towards the future
• Concentric receive first production order for a variable flow oil
pump from a global truck manufacturer
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• Alfdex sign
exclusive supplier
agreement
valid until 2017 with
one of the world’s largest producers of heavy trucks – total
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500+
• toOrders
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text styles during the fourth quarter indicate that the
• Group’s
Second level
underlying sales activity will be sustained into the first
• Thirdof
level
quarter
2012, with a continuing trend of stronger demand in
• Fourth level
North America
compared to Europe
• Fifth level
• Our geographical spread and four distinct end-customer
segments means that we both can protect sales levels and
capture growth opportunities across the globe
4
June 2011
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Summary
ofsubhead
financial
results
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• Second level
• Third level
• Fourth level
• Fifth level
5
June 2011
Q4 2011 Results
Enterprise value
(based on share price of SEK 54.50)
Financial targets
(over a business cycle)
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Market capitalisation (MSEK)
Net Debt (MSEK)
Enterprise value (MSEK)
2,410
114
2,524
Sales growth
EBIT/Operating margin
Gearing (Debt/Equity)
Financial
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MSEK
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Net
• Second
level
In constant
currency
• Third level
Gross income
• Fourth level
Operating income
• Fifth level
Operating margin
Oct-Dec
2011
2010
Change
577
521
11%
Jan-Dec
2011
2010
Change
2,283
1,977
16%
12%
25%
167
120
47
630
472
158
80
53
27
(1) 305
(1) 151
154
13.9%
10.2%
13.4%
7.6%
60
1,232
49
1,267
176
1,232
35
1,267
25.0%
12.1%
25.0%
12.1%
Net debt
114
312
114
312
Gearing (Debt/Equity)
12%
45%
12%
45%
1.35
1.09
4.38
0.79
Net income
Capital employed
ROCE
(1)
EPS (1) (SEK)
(1)
66
7% p.a.
11%
<100%
Re-stated for one-off demerger and restructuring costs
June
22 February
2011
2012
Sales & Operating margin
development
Above market sales growth in
2011 driven by:
Sales & Operating income margins
(rolling 12 months)
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20.0%
2,500
18.0%
2,400
16.0%
2,300
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14.0%
2,200
12.0%
2,100
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Second level
8.0% •
• Third level
6.0%
• Fourth level
4.0%
• Fifth level
1,900
1,700
• Increased sales volumes
0.0%
1,500
Q2-11
Q3-11
Q4-11
Operating margin (Actual)
Sales (Actual)
Market growth (Blended)
Sales (Constant currency)
June
22 February
2011
2012
• Market share growth in India and
China
Improved operating margins:
1,600
Q1-11
• Order backlog catch up as
capacity constraints eased
1,800
2.0%
Q4-10
77
2,000
• Introduction of new off-highway
emissions programs in Europe &
North America leading to pre-buy
• Realisation of benefits from
Concentric Business Excellence
program and ongoing cost
management
• Recovery of raw material price
rises
Market Data for Q4 2011
Q4-11 vs. Q4-10
North America
Europe
Truck
+16%
+29%
Construction equipment
+4%
+8%
Agricultural
-8% styles +5%
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Industrial applications
+1%
+20%
FY-11 vs. FY-10
North America Europe
+29%
+29%
+11%
+11%
+3%
+5%
+15%
+25%
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Source:
statistics
fromstyles
Power Systems & Research, Off-Highway Research and International Truck Association Q4 2011 update
• Second level
2011 Sales by End Market
2011 Sales by Customer
• Third level
Location
• Fourth
level
Blended market
growth
rate
• Fifth
level
for FY 2011 was 16%
applying
18%
the above data to our mix of
End Markets and Geographical
spread of our customers
This compares to the actual
year on year growth achieved
of 25% in constant currency
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June
22 February
2011
2012
25%
31%
Con Equip
Ind Apps
Other
6%
Sweden
9%
USA
UK
17%
Ag Mach
27%
Trucks
53%
14%
Germany
Regional Performance
Americas
Q4-11
Q4-10
Change
265
27
18%
6
10.3
13.1
0.3
18.1
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Amounts in MSEK
Net sales
314
Operating income
33
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Operating margin
10.6
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on capital
employed (1)
31.2
Second level
• Third level
• Fourth level
Continued sales
growth year on year
• Fifth level
• In constant currency, sales were up 18% in Q4-11 vs. Q4-10, driven primarily by US heavy trucks
• On a sales per working day basis, activity levels were 4% up in Q4-11 vs. Q3-11, with strong demand
experienced across all end sectors
•
(1) The quarterly ROCE has been calculated on a rolling 12 month basis.
Solid operating margins, taking into account the internal supply chain
• Operating margins for the quarter were up to 10.6% (Q4-10: 10.3%) with the increased volumes
• Higher sales to US end customers of product manufactured in Europe & RoW has meant that not all
of the incremental contribution from the increased demand has dropped through into the Americas
99
June
22 February
2011
2012
Regional Performance
Europe & RoW
Q4-11
Q4-10
Change
256
26
3%
21
10.0
5.7
7.8
18.5
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Amounts in MSEK
Net sales
263
Operating income
47
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Operating margin
17.8
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on capital
employed (1)
24.2
Second level
• Third level
Fourth level
Sales levels• from
Q3-11 maintained in Q4-11
• Fifth level
• In constant currency, sales were up 5% in Q4-11 vs. Q4-10
• On a sales per working day basis, activity levels were down -5% in Q4-11 vs. Q3-11, due primarily to
weaker demand in the European truck market
•
(1) The quarterly ROCE has been calculated on a rolling 12 month basis.
Excellent operating margins
• Operating margins for the quarter were up to 17.8% (Q4-10: 10.0%), supported by the pass through
of material escalators and a lower cost base
• Contribution drop through from higher intra-regional activity has also improved the margins
10
10
June
22 February
2011
2012
Robust financial position
Amounts in MSEK
Q4-11
Q4-10 Comments
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Balance Sheet
Working Capital
-44 MSEK 57 of non-operating working
capital with Haldex AB was settled
in Q2 2011 as part of refinancing
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Capital Employed
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Net• Debt
Second level
• Third level
• Fourth level
Equity
• Fifth level
Gearing (Debt/Equity) ratio
42
1,232
1,267
114
312 Repaid MSEK 50 in Q4-11; total
available facilities of c. MSEK 360
936
699 Very low gearing
12%
45%
EBITDA
108
73
CAPEX
-15
-11
Cash Flow
Cash in flow before financing
11
11
June
22 February
2011
2012
90
54 Strong cash conversion in Q4-11
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Leading
technology
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12
June 2011
Hydraulic Products
CALMA – The Quiet Solution
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Providing low-noise solutions for the
electric counter-balanced and warehouse
lift trucks.
Also well
suited
to electric
aerial
lift styles
work
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platforms and other mobile hydraulic
equipment.
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• Second
level research and
Through
extensive
• Third level
development,
the pump features include:
• Fourth level
• Fifth
leveltooth
 Newly-engineered
gear



geometry
Innovative approach to gear flank
engagement
Reduced trapped oil volume
Advancements in management of the
trapped oil
13
20112012
13 22 June
February
Engine Products
Increasing focus on fuel consumption
Total Cost of Ownership
Western Europe - Trucks
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• Second level
• Third level
• Fourth level
• Fifth level
Source: Commercial Vehicles and CO2, ACEA/Iveco, 2011
14
14
June
22 February
2011
2012
If a manufacturer fits a
full range of our engine
products fuel savings
can reach 4% on typical
duty cycles
Impact of Variable Flow
Emissions vs. Fuel consumption
Emissions
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Conventional pump
Variable Flow pump
High
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• Second level
• Third level
• Fourth level
• Fifth level
Beneficial effect of
Variable Flow pumps
Low
Low
15
15
June
22 February
2011
2012
High
Fuel
consumption
Progress on Variable Flow
•
We have won our first order for our premium variable flow oil pump
from a global truck manufacturer
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•
Production is scheduled to start in Q4 2012 and ramp up in 2013, in line
with the Euro 6 emissions milestone, but details cannot be announced
until the new engines are unveiled
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We also have a number of ongoing development contracts with other
major
truck
and tier one system suppliers for variable
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technology
on their next generation, Euro 6 engines
• flow
Second
level
•
•
• Third level
The market
potential
for these variable
• Fourth
level
2014 some •650,000
engines will need to
Fifth level
flow products looks good - by
be Euro 6 compliant according
to Power Systems Research data
•
16
16
By matching flow to the engine's actual requirement at each point of
the operating cycle, Concentric variable flow pumps enable OEMs to
reduce parasitic losses, improve fuel economy and meet escalating
emission standards
June
22 February
2011
2012
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2012
Outlook
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• Third level
• Fourth level
• Fifth level
17
June 2011
Outlook
Orders received during the fourth quarter indicate that the Group’s
underlying sales activity during the quarter will be sustained during the
first quarter of 2012, with a continuing trend of stronger demand in
North America compared to Europe.
•
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• to
Weedit
firmly
believe
that ourtext
geographical
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customer segments, together with the flexibility we have in our
operations through our Business Excellence program, make Concentric
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very well positioned to tackle any challenges in 2012
•
•
18
18
Second level
Third level to see great opportunities for long-term
We• continue
• Fourth level
providing
value to our customers through our leading
• Fifth level
growth by
technology
addressing the key drivers in our market niches, such as the
forthcoming changes in emissions legislation and increased focus on
reducing fuel consumption
June
22 February
2011
2011
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• Second level
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19
June 2011
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Appendices
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• Fourth level
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20
June 2011
Company Overview



Concentric AB is organized regionally

Two regions – Americas and Europe and ROW

Manufacturing occurs in the UK, India, China, Sweden, Germany and the US
close to customers

The company employs 1,202 people

Focus on four end markets – Truck, Agricultural machinery, Construction
equipment and Industrial applications
We make pumps for diesel engines, used for pumping lubricating oil,
coolants and diesel fuel

Concentric AB is the global market leader in engine pumps in the 0.8 - 2 litre
per cylinder niche

Largest customers are engine manufacturers and large truck manufacturers
which produce diesel engines for their own trucks and construction machinery
We make gear pumps for a broad range of hydraulic pump applications
Concentric AB is a market leader in niches such as fan drives and supplementary
power steering
 Largest customers are OEMs of a wide range of industrial vehicles, agricultural
machinery and construction equipment

21 22 February 2012
Global Infrastructure
Footprint adjacent to our Customers
Birmingham, UK
Headquarters
Manufacturing & Distribution
200 Employees
Landskrona, Sweden
Manufacturing, JV with Alfa Laval
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Itasca, Illinois
Manufacturing &
Distribution
100 Employees
Skånes Fagerhult,
Sweden
Manufacturing
90 Employees
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• Second level
• Third level
• Fourth level
• Fifth level
Suzhou, China
Manufacturing
40 Employees
Rockford, Illinois USA
Manufacturing
350 Employees
Hof, Germany
Manufacturing
175 Employees
22
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22 22 June
February
Pune, India
Manufacturing
200 Employees
Engine Products
We offer best in class pumps for diesel engines focused on fuel economy and
emissions reduction, with the major products including:
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


Oil pumps, fixed and variable displacement, mechanical or electronic control
Water pumps, fixed and variable control with future stretch for electrification
Fuel transfer pumps, mechanical with electrification options
Variable
Alfdex oil mist separators
Flow Pumps

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Fuel Pumps
• Second level
• Third level
• Fourth level
Pumps
• OilFifth
level
Water Pumps
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20112012
23 22 June
February
Oil Mist
Separator
Hydraulic Products
Cab Tilt and Ladder
Stow
Auxiliary Pumps
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• Second level
• Third level
• Fourth level
• Fifth level
Transmission
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24 22 June
February
Axle Cooling
Fan Drive
Supplemental Steering
Implement Pump
Accumulator Charging
Blue Chip Customer Base
Top 10 Customers
Caterpillar, 19%
Other, 35%
Cummins, 17%
John Deere, 8%
Volvo, 6%
JLG, 2%
Kion Group, 2%
Nacco, 2%
Source: 2011 Group sales
Daimler, 3%
Navistar, 2%
Deutz, 3%

Top 10 customers account for 65% - reflects customer concentration for engines

Customer development can take up to 3 yrs but platform life cycle usually +10 yrs

Other customers account for 35% - reflects diverse base in hydraulic products (700+)
25 22 February 2012
Emissions Legislation
Europe/North America/Japan
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• Second level
• Third level
• Fourth level
• Fifth level
However large the engine,
wherever it is made and
wherever it is used, on or
off highway, there will be
tougher emissions
standards and increased
focus on reducing fuel
consumption.
This offers opportunities
for our technology.
Source: ACEA
26
26
June
22 February
2011
2012
Emissions Legislation
Emerging Markets
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• Second level
• Third level
• Fourth level
• Fifth level
Source: ACEA
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June
22 February
2011
2012