Industrial Plan Presentation Mauro Moretti Chief Executive Officer and General Manager Gian Piero Cutillo Chief Financial Officer London, 28 January 2015
Agenda 11.00 12.00 Mauro Moretti KEY MESSAGES CEO and General Manager ASSESS INPUTS TO THE INDUSTRIAL PLAN Approach Finmeccanica past performance Market environment Business review 12.00 12.30 Gian Piero Cutillo STRENGTHEN…
KEY MESSAGES (CEO and General Manager) ASSESS INPUTS TO THE INDUSTRIAL PLAN (CEO and General Manager) STRENGTHEN INDUSTRIAL PLAN (CFO) DEVELOP STRATEGIC PLAN (CEO and General Manager) CONCLUSIONS (CEO and General Manager) Q&A
Key Messages 10 things to take away 1. Serious turnaround plan ASSESS 2. Based on a rigorous review and prudent assumptions 3. Major cost cutting to deliver a significant step up in profitability 4. New discipline on capex, R&D…
Change is already happening We have done a lot 2014 last estimates ahead of guidance Increasing control through centralisation, moving towards one company started Significant and immediate actions on costs started Strategic…
KEY MESSAGES (CEO and General Manager) ASSESS INPUTS TO THE INDUSTRIAL PLAN (CEO and General Manager) STRENGTHEN INDUSTRIAL PLAN (CFO) DEVELOP STRATEGIC PLAN (CEO and General Manager) CONCLUSIONS (CEO and General Manager) Q&A
Industrial plan Approach Detailed analysis of the external environment Aerospace & Defence markets Competitive positioning Review of the financial health of the businesses ASSESS Profitability Cash Investments Industrial…
Past performance has been unsatisfactory NET RESULT BEFORE EXTRAORDINARY TRANSACTIONS ( MLN) FOCF ( MLN) 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 2013 700 521 565 557 323 563 506 469 443…
Unsatisfactory performance Main causes Acquisitions: overpaid and funded through high debt with significant financial charges Contracts: cost overruns in some contracts across the businesses Impairments: Selex ES, DRS, Alenia…
Macro Environment is challenging Impact on European Defence Industry WORLDWIDE KEY DYNAMICS Uncertainty due to the strong fall of the oil price EUROPEAN DEFENCE SCENARIO Continuing pressure on Defence Appreciation of the US Dollar…
Aerospace & Defence market expected to grow WORLDWIDE MARKET: EVOLUTION BY MACRO-BUSINESS SECTOR (2014-2023) - BLN CAGR % 2014-2023 630 550 8 8 Civil helicopters 2.1 445 8 104 10 Military helicopters -6.3 6 91 15 Space 3.9…
Aerospace & Defence Market Major spenders not expected to change dramatically 2014 PROCUREMENT AND RDT&E* TOP SPENDER EVOLUTION (% OF GLOBAL BUDGET) Defence 42% Procurement + RD&TE* 290 Bln 24% 10% 5% 4% 4% 3% 3% 2% 2% 1% USA…
Aerospace & Defence Market Different dynamics in our major markets ITALIAN MOD AND MOED BUDGET - BLN UK DEFENCE BUDGET - BLN US DEFENCE BUDGET - BLN CAGR 12 150 -3.9% 4.7 132 20% 11 4.5 10 33% 121 4.0 17% 35% 20% 44% 39%…
Finmeccanica has already a strong international presence NATIONAL VS INTERNATIONAL 2013 REVENUES 14% 22% 20% 18% 27% 40% 72%* 74%** 59% 57% Sector 65% 71% average 78% National 57% 86% 78% 80% 82% 73% 60% 10 % 11% 41%…
Finmeccanica still needs to do more to rebalance its portfolio mix towards civil MILITARY VS CIVIL 2013 REVENUES Safran 20% 80% Airbus 23% 77% Boeing 36% 64% Honeywell 48% 52% Rockwell Collins 56% 44% Finmeccanica A,D&S 70%…
Competitive positioning Benchmark vs sector peers POSITIONING OF THE MAIN PLAYERS IN THE SECTOR - 2013 NET RESULT AND REVENUES US big prime cluster supported by the captive market, still significant in size, that assures…
Our business portfolio is too diversified Presence MBDA A,D&S KEY PLAYERS Military Helicopters Civil Military Aeronautics Civil Defence Defence Electronics and Security Security Missiles Defence Tropedos…
A diversified portfolio is not an advantage Often a follower and not a leader FNM Sectors Main Lines of Business FNM Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Civil Helicopters L L Helicopters Military…
Our different businesses have produced very different results 2013 20,0% Agusta Westland Finmeccanica Group Aerospace Defence & Security Oto Melara Ansaldo STS DRS 10,0% Wass AleniaAermacchi 0,0% -300 -100 100 300 500 700…
Our review goes beyond Divisions Focus on segments and products Two key questions: What is our competitive position What is our Profitability EXAMPLES ASSESSMENT ACTIONS OPTIONS Some non core/loss making activities identified in two…
Finmeccanica Strategic roadmap 1 ASSESS PROFIT Cut costs 2 TURNAROUND STRENGHTEN INDUSTRIAL CASH Rationalise investments and PLAN working capital CAPITAL Balance net equity and STRUCTURE net debt PORTFOLIO More focused…
Industrial Plan Observations and objectives Increase the efficiency through the cost reduction in: Staff Rationalisations expected to ensure total savings for ca. Engineering New Organisational and Operating Model 150 m, of which 25%…
KEY MESSAGES (CEO and General Manager) ASSESS INPUTS TO THE INDUSTRIAL PLAN (CEO and General Manager) STRENGTHEN INDUSTRIAL PLAN (CFO) DEVELOP STRATEGIC PLAN (CEO and General Manager) CONCLUSIONS (CEO and General Manager) Q&A
Financials Objectives Through execution of actions described, Finmeccanica will significantly improve its financial performance Financial targets: Profitability improvement Adequate Cash Flow generation, with FOCF turning to…
Financials Levers for a Turnaround Plan Prudent and solid Full control of all assumptions the key drivers Orders and volumes are (360analysis and control consistent with market growth of all the cost items) Deep and granular…
Financials Engineering productivity Deep analysis across all A,D&S Companies on Engineering processes executed ASSESS Highlighted significant actions for improvement even considering external best practices Actions focus on: R&D…
Financials Supply Chain optimisation Complete review over A,D&S businesses performed over the last months, ASSESS From the traditional view by commodity to the new approach by supply chain 20 main initiatives identified to be…
Financials Manufacturing efficiency Deep analysis of each single plant ASSESS Several initiatives within A,D&S strongly focused on: workload stabilisation on all production lines/plants, even with ramping volumes; better…
Financials New Organisational and Operating Model Finmeccanica is implementing a new organisational and operating model that is more homogeneous, cohesive and integrated, moving towards a single A,D&S company. The new Model will…
Financials SG&A Reduction Mln 1,278 9.3% Total 10% reduction after the first 2 years Flat despite inflation and Revenue growth 2013 2014 2015 2019 Restated SG&A/Revenue ratio Aggressive action plan with material…
Financials Change is already happening FY 2013 GUIDANCE GUIDANCE GUIDANCE FY 2014 FY 2014 FY 2014 Actual (as at March 2014) (as at November 2014) (as at January 2015)** New orders b 15.1 13.0 - 13.5 13.5 - 14.0 15.2 - 15.5…
Financials 2015-2019 Assumptions Continuity assumptions: Transportation sector included in the total results of the Group, with the only exception of bus sector (de-consolidated since the end of 2014) Financial data do not include…
Financials Orders Bln 15.1 15.2 15.5 14.0 14.5 12.212.5 12.0-12.5 13.0 2.2 2013 2014 2015 2019 Restated Last Estimate Guidance Trasportation Aerospace and Defence Cumulated new Orders expected in the period 2015-19…
Financials Revenues Bln 14.4 14.7 14.0 14.5 13.7 12.2-12.5 12.0-12.5 12.0 2.0 2013 2014 2015 2019 Restated Last Estimate Guidance Trasportation Aerospace and Defence 2015 vs. 2014 decline due to the changes in…
Financials EBITA and ROS Mln 1,150 1,200 1,040 1,060 878 6.4% 1,080-1,130 990-1,010 988 -110 2013 2014 2015 2019 Restated Last Estimate Guidance Trasportation Aerospace and Defence ROS Substantial increase driven…
Financials Material rationalisation of Investments (CAPEX + R&D) Investments selection strictly CAPEX reduction and tooling based on financial return optimisation Improvements in Engineering productivity and reduced Capitalized…
Financials Reduced Operating Working Capital net of Customer Advances 6.5 bn 15 % reduction by 2017 2013 2014 2015 2019 Restated Customer Advances winding down (approx -6% per year) Net of Customer advances impact,…
Financials Back to cash generation Mln 100 - 200 (220) (160) (140) 200-300 135 80-100 -355 2013 2014 2015 2019 Restated Last Estimate Guidance Trasportation Aerospace and Defence Positive and growing Cash…
Financials Combined effects lead to Group Net Debt reduction Group Net Debt (year end) Operating Working 4.1bn Capital Below 3.5 bn by 2017 Industrial Plan Actions Engineering Productivity + Supply chain optimisation…
Financials FY 2015 Guidance Guidance FY2014 FY2015E (as at January 2015)* GROUP A&D GROUP A&D New orders bn 15.2 15.5 12.2 12.5 14.0 14.5 12.0 12.5 Revenues bn 14.4 14.7 12.2 12.5 14.0 14.5 12.0 12.5 EBITA mln 1,040 1,060…
Financials FY 2015 headlines Orders and Revenues: moderate growth taking into account the changes in perimeter Profitability: meaningful step up in 2015 and 2016, with a cumulative increase by 20% in A&D EBITA Below EBITA line:…
KEY MESSAGES (CEO and General Manager) ASSESS INPUTS TO THE INDUSTRIAL PLAN (CEO and General Manager) STRENGTHEN INDUSTRIAL PLAN (CFO) DEVELOP STRATEGIC PLAN (CEO and General Manager) CONCLUSIONS (CEO and General Manager) Q&A
Finmeccanica Strategic roadmap 1 ASSESS PROFIT Cut costs 2 TURNAROUND STRENGHTEN INDUSTRIAL CASH Rationalise investments and PLAN working capital CAPITAL Balance net equity and STRUCTURE net debt PORTFOLIO More focused…
Development Five key pillars Quality & Effectiveness Costs Internationalisation & Market Disposals FEWER BUSINESSES Rolling Stock 1 Bus business FOCUS ON A,D&S Industrial plants Other minor activities SELECTED JVS AND A,D&S…
Fewer businesses - focus on A,D&S 1 Disposals update Bus business: all the industrial activities, except for some old critical contracts, merged in a newco. 80% owned by King Long Italia (KLI) and 20% by FNM. Completed…
Selected JVs and A,D&S segments 2 Selection Criteria SEGMENTS Helicopters Satisfactory profitability Electronic Airborne CORE ACTIVITIES Relevant positioning on the markets Aeronautics TO DEVELOP Strategic relevance for the…
Selected JVs and A,D&S segments 2 JV's assess & select SPACE Recent efforts made by Italian Government to maintain an appropriate level of investments to sustain the Space sector Space is one of Groups Core sectors, in which…
Fewer A,D&S segments 2 JV's assess & select AERONAUTICS Finmeccanica/ Alenia Aermacchi (50%), Airbus Group (50%) ATR worldwide leader in turboprop regional aircraft achieved significant results, with 1,470 aircraft sold since…
Selected JVs and A,D&S segments 2 DRS Technologies MAIN ISSUES Difficulties in managing the company effectively as a real domestic player in the US market Continuing reduction in volumes (approx. -50% from 2009), also due to the…
Improve international footprint / extended reach 4 More focus does not mean getting smaller DOING MORE WITH LESS RESOURCES Extended More customers More More markets focused M= Standardisation and portfolio Modularity Dual…
Improve international footprint / extend reach 4 More customers MAIN OBJECTIVES Enlarging positioning in Service segment (mainly commercial) Reinforce positioning in key export markets (Asia, Middle East, China) HELICOPTERS…
Improve international footprint / extend reach 4 More customers MAIN OBJECTIVES Focus on civil avionics opportunities and specific competencies in Defence and Security Reinforce positioning in electronic warfare DEFENCE…
Improve international footprint / extend reach 4 More customers MAIN OBJECTIVES Reinforce presence in regional aircraft segment Reinforce positioning in Trainers developing operational version of the M-346 dual role, and completing…
Improve international footprint / extend reach 4 Focus on Unmanned Aerial Systems (UAS) MARKET SCENARIO OVERALL UAS MARKET (2014 2023) - BLN One of the most dynamic markets in A,D&S CAGR Application to civil (i.e. surveillance)…
Improve international footprint / extend reach 4 More markets - Internationalisation FINMECCANICA 2013 REVENUES BY EXPORT MARKET Denmark (2%) Middle East (4%) Turkey (1.5%) Saudi Arabia (2%) Sweden (0.8%) United Arab Emirates(1%)…
Improve international footprint / extend reach 4 More markets - Internationalisation Towards a new structured model for strategic markets A DEFINE A SUSTAINABLE AND COMPETITIVE PRODUCT PORTFOLIO B SELECT KEY GEOGRAPHIC…
5 New Governance: New Group Organisational and Operating Model Divisional Model OBJECTIVES Integrated Governance with benefits in terms of industrial productivity, scale economies and competitiveness Simplification/shortening of…
KEY MESSAGES (CEO and General Manager) ASSESS INPUTS TO THE INDUSTRIAL PLAN (CEO and General Manager) STRENGTHEN INDUSTRIAL PLAN (CFO) DEVELOP STRATEGIC PLAN (CEO and General Manager) CONCLUSIONS (CEO and General Manager) Q&A
Immediate Priority Strengthen the business Profitability Below the line Working capital Capex + R&D Much lower volatility + Net income FOCF Net Equity + Net Debt More balanced and flexible Capital Structure to support…
Key Messages 10 things to take away 1. Serious turnaround plan ASSESS 2. Based on a rigorous review and prudent assumptions 3. Major cost cutting to deliver a significant step up in profitability 4. New discipline on capex, R&D…
APPENDIX
Investor Relations & Sustainable Responsible Investors (SRI) Contacts Raffaella Luglini Head of Investor Relations & SRI +39 06 32473.066 raffaella.luglinifinmeccanica.com Valeria Ricciotti Alessio Crosa Paolo Salomone…
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