Precision Cast Pvt. Ltd.

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  • Fiscal 2015 Q4 Earnings

    May 13, 2015

  • Precision Castparts Corp. 2

    Forward-Looking Statements

    Information included within this press release describing the projected growth and future results and events

    constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.

    Actual results in future periods may differ materially from the forward-looking statements because of a number of risks

    and uncertainties, including but not limited to fluctuations in the aerospace, power generation, and general industrial

    cycles; the relative success of our entry into new markets; competitive pricing; the financial viability of our significant

    customers; the concentration of a substantial portion of our business with a relatively small number of key customers;

    the impact on the Company of customer or supplier labor disputes; demand, timing, and market acceptance of new

    commercial and military programs, and our ability to accelerate production levels to meet order increases on new or

    existing programs in a timely fashion; the availability and cost of energy, raw materials, supplies, and insurance; the

    cost of pension and postretirement medical benefits; equipment failures; product liability claims; cybersecurity threats;

    relations with our employees; our ability to manage our operating costs and to integrate acquired businesses in an

    effective manner, including the ability to realize expected synergies; the timing of new acquisitions; misappropriation of

    our intellectual property rights; governmental regulations and environmental matters; risks associated with

    international operations and world economies; the relative stability of certain foreign currencies; fluctuations in oil &

    gas prices and production; the impact of adverse weather conditions or natural disasters; the availability and cost of

    financing; and the implementation of new technologies and process improvements. Any forward-looking statements

    should be considered in light of these factors. We undertake no obligation to update any forward-looking information

    to reflect anticipated or unanticipated events or circumstances after the date of this document.

  • Precision Castparts Corp. 3

    Challenging end to FY15 in select power markets

    Oil & gas and pipe volume, pricing and mix headwinds

    Decisive actions taken to respond to tougher market conditions

    Right-sized operations

    Exiting underperforming investments

    Evaluated inventory positions

    Commercial Aero/Industrial Gas Turbine (IGT) long-term trends intact

    Returned $729M cash to shareholders in Q4 FY15: total return of $1.6B in FY15

    PCC Board of Directors added $2B to share repurchase authorization

    Targeting completion over next 12-18 months

    Focused on executing FY16 outlook, with capital deployment upside

    Q4 FY15 Overview

  • Precision Castparts Corp. 4

    Q4 FY15 Consolidated Summary $ Millions, except EPS Q4 FY15 Q4 FY14 ChangeNet Sales $ 2,504 $ 2,519 (1) %Consolidated Segment Operating Income $ 490 $ 718 (32) %

    Margin % 19.6 % 28.5 % (890) bp

    Earnings Per Share from Continuing Operations (diluted) $ 1.06 $ 3.27 (68) %Adjusted Consolidated Segment Operating Income $ 625 (1) $ 718 (13) %

    Adjusted Margin % 25.0 % 28.5 % (350) bp

    Adjusted Earnings Per Share from Continuing Operations (diluted) $ 2.94 (2) $ 3.27 (10) %

    Y-O-Y Q4 Sales Performance Y-O-Y Q4 Operating Income

    Oil & gas and pipe challenges in Forged Products maskedperformance improvement throughout balance of operations

    Negative impact of volume leverage, weaker productmix, and higher-cost material remaining in inventory

    Decisive action taken to align oil & gas cost modelwith demand level

    Strong 40-50% incremental operating margin in InvestmentCast and Airframe Products

    Q4 FY15 currency headwinds of ~ $10M

    Y-O-YChange Comments

    Aerospace 2 % Large commercial +2% reported; +5% excludingimpact from single customer destocking

    Increased regional/business jet

    Military mid-single-digit decline

    Power (7)% IGT +2%

    Pipe: (11%)

    Oil & gas sales: (25%)

    General Industrial &Other (5)%

    Total Reported Sales (1)%

    Adjust: Currency 2 % ~ $46M negative impact

    Adjust: Acquisitions (2)% ADI

    Adjust: Metal 1 % $22M lower metal pricing

    Organic Growth(Constant Currency)

    Flat 3% organic excluding customer destocking andoil & gas

    (1) Excludes $135 million of pre-tax charges related to restructuring and asset impairment charges announced on April 15, 2015. See Non-GAAP Financial Measures in the Appendix.(2) Excludes $1.88 per share of after-tax charges related to asset impairment and valuation charges announced on April 15, 2015. See Non-GAAP Financial Measures in the Appendix.

  • Precision Castparts Corp. 5

    Investment Cast Products$ Millions Q4 FY15 Q4 FY14 Change

    Sales $ 648 $ 629 3 %

    Operating Income $ 233 $ 224 4 %

    Operating Margin 36.0 % 35.6 % 40 bp

    Y-O-Y Q4 Operational Performance

    Strong leverage of commercial aero and IGT volumegrowth

    ~ 40%+ incremental operating income margin

    Q4 FY15 currency headwinds of ~ $1M

    Y-O-Y Q4 Sales Performance

    Y-O-YChange Comments

    Aerospace Flat Large commercial down low-single digits

    - Driven by decline in spares of >15%

    - OEM demand flat

    Regional/business jet up strong double digits

    Military stable

    Power 10% Driven by IGT

    Total Reported Sales 3%

    Adjust: Currency 1% ~ $6M of negative impact

    Sales Growth (ConstantCurrency)


  • Precision Castparts Corp. 6

    Forged Products$ Millions Q4 FY15 Q4 FY14 Change

    Sales $ 1,067 $ 1,109 (4) %

    Operating Income $ 193 $ 300 (36) %

    Operating Margin 18.1 % 27.1 % (900) bp

    Y-O-Y Q4 Sales Performance Y-O-Y Q4 Operational Performance

    TIMET Morgantown update

    Single electron beam furnace out of commission EBIT impact: ~ $4M in Q4 FY15; ~ $25M-35M in


    Expect to meet all critical aerospace demand, butwith higher cost

    Challenging oil & gas and pipe

    Negative mix shift, compounded by higher costmaterial remaining in inventory

    Actions taken to align cost base with activity level Competitive pricing environment

    Aerospace and IGT demand drivers remain in place

    Q4 FY15 currency headwinds of ~ $4M

    Y-O-YChange Comments

    Aerospace 1 % Large commercial up low-single digits,despite continued destocking at singleaerospace customer

    Regional/business jet up high-single digits

    Military down mid-single digits

    Power (18)% Oil & gas and pipe down ~ 20%

    IGT OEM lower due to absence of customer'sQ4 FY14 retrofit

    General Industrial &Other (1)%

    Total Reported Sales (4)% Primarily driven by oil & gas and pipe

    Adjust: Currency 2 % ~ $20M of negative impact

    Adjust: Metal 2 % $21M lower metal pricing

    Sales Growth (ConstantCurrency & Metal)


  • Precision Castparts Corp. 7

    Airframe Products$ Millions Q4 FY15 Q4 FY14 Change

    Sales $ 789 $ 781 1 %

    Operating Income $ 237 $ 232 2 %

    Operating Margin 30.0 % 29.7 % 30 bp

    Y-O-Y Q4 Sales Performance Y-O-Y Q4 Operational Performance

    Strong leverage of commercial aerospace volume growth

    ~ 50% incremental EBIT margin

    Q4 FY15 currency headwinds of ~ $5M

    Y-O-YChange Comments

    Aerospace 4 % Large commercial up high-single digits

    Military down low-double digits

    Contribution of ADI acquisition

    General Industrial &Other (15)% Soft construction and pulp and paper demand

    Total Reported Sales 1 %

    Adjust: Currency 3 % Includes ~ $20M of currency headwind

    Adjust: Acquisitions (6)%

    Organic Sales (ConstantCurrency)

    (2)% Stable organic large commercial aerospacedemand

  • Precision Castparts Corp. 8

    $ Millions March 29, 2015 December 28, 2014 Q4 Change

    Cash $ 474 $ 430 $ 44

    Debt 4,587 4,147 (440)


    Net cash utilized for stock repurchase program (1) 729

    Total net change in cash, excluding cash utilized forstock repurchase program $ 333

    Cash and Debt Position for Q4 FY15

    (1) Includes $729M to repurchase 3,480,627 shares during the quarter at an average price of $209.35 per share, of which $8 million was settled after quarter-end.

    Strong cash flow generation and accretive deployment actions in the quarter

    Increased capex investments for Aerostructures capacity, and TIMET and Wyman-Gordon cost improvements

    Returned $729M cash to shareholders via share repurchases in Q4 FY15: total return of $1.6B in FY15

    PCC Board of Directors added $2B to share repurchase authorization

    Targeting completion in next 12-18 months

    Q1 FY16 Activity:

    Spent $270M to acquire two small businesses Continuing expansion of vertical integration capability

  • Precision Castparts Corp. 9

    Q4 FY15 Charges


    Chengde Impairment (1) $174 $179 Goodwill and other asset impairments

    Results remain in Equity in Earnings of Unconsolidated Affiliatesuntil exit completed

    Inventory and Other AssetImpairments

    127 81 Adjusts value of oil & gas-focused raw material, reflectingtougher final product pricing environment

    Revalues pipe inventory and other assets to reflect currentmarket value

    Restructuring 8 5 $30M-35M annual cost savings; ~ $0.15/share benefit to FY16

    Total $309 $265

    EPS Impact $1.88

    (1) PCC maintains a 50% ownership of Yangzhou Chengde Steel Tube Co. LTD, a large-diameter, pipe-manufacturing joint venture in China. This charge islower than the originally disclosed estimated range of $210M-220M due to finalization of the analysis. The charge also includes a small impairmentassociated with an unrelated joint venture.

    $ in millions, except EPS

  • Precision Castparts Corp. 10

    FY16 Financial Guidance Summary

    *Free cash flow defined as cash from operations, less capital expenditures

    $B, expect per share and percentage metrics

    FY16 Comments

    Sales $10.0 10.4

    % change year-over-year +0 4% Primarily organic

    Operating Income Margin 26.6 27.3%

    Basis point change year-over-year (80) - (10) Margin expansion at Investment Cast and Airframe Products

    EPS from Continuing Operations $12.50 13.40

    % change year-over-year (1%) 6%

    Free Cash Flow* ~ $1.4 1.5 Includes capital expenditures of ~ $550M

    Planning Assumptions

    Diluted shares: 137.9M

    Tax rate: ~ 32.5%

    Net interest expense: $70M

    Pension: Stable vs. FY15

    Currency: Euro 1.05

    Pound 1.45

    Chengde continues to be reported in "Equity in Earnings of Unconsolidated Affiliates" line until exit finalized

    Combined ~ $230M sales headwind and ~ $52M EBIT impact in FY16

  • Precision Castparts Corp. 11

    FY16 End Market Assumptions


    Commercial Military Regional/Business Jet

    Key Drivers:

    Sales % ChangeFY16 vs. FY15: Up mid-single digit Flat +/- Up high-single digit

    Initial activity tosupport higher buildrates on 787, A320, 737

    Continued A350 ramp

    Activity builds on LEAP

    Aerostructures sharegains

    Lower A330 activity

    Stable spares and OEMactivity

    Initial activity on newlarge cabin programs atGulfstream andBombardier

    Market share gains inlarge cabin

  • Precision Castparts Corp. 12

    FY16 End Market Assumptions


    IGT Oil & Gas and Other(1)

    Key Drivers:

    Sales % ChangeFY16 vs. FY15: Up high-single digit Down > 30% Flat +/-

    Continued activity rampon H-class and upgradeprograms

    Stable spares

    Weak demand andcompetitive pricing inoil & gas

    Softer demand fromChina power pipemarkets

    Selected sub-marketshave second derivativeoil & gas risk

    (1) Includes interconnect pipe

  • Precision Castparts Corp. 13

    Investment CastProducts

    Forged Products Airframe Products

    Outlook Drivers/ KeyConsiderations

    Sales Outlook vs. FY15 Mid-single digit growth Low-single digit decline Mid-single digit growth

    Operating IncomeMargin Outlook vs. FY15

    Incremental operatingmargin > typical 35-40%

    Modest margin expansionvs. Q4 FY15

    Incremental operatingmargin > typical 35-40%

    IGT OEM and retrofitactivity

    Commercial aero buildrates

    Initial LEAP activity

    FY16 Outlook Drivers by Segment

    TIMET share gainscontinue to flow

    Difficult demand andpricing in oil & gasmarkets

    TIMET Morgantown:$25-30M cost negative

    Currency sales/EBITheadwind

    Normal Q2 outagesplus extended outageat Wyman-Gordon UK

    Share gains and buildrates on largecommercial andbusiness jet

    Currency sales/EBITheadwind

  • Precision Castparts Corp. 14


    Investment in internal projects for growth, cost reductions, and safety

    Capital Allocation Framework

    ACQUISITIONS Pursue acquisitions that fit core competencies and meet return criteria


    Strong investment-grade, credit-rating profile through all phases of the cycle Flexibility to respond as strategic cash deployment opportunities arise


    Return excess cash to shareholders once above objectives are met Expect lower share count over time

    Unquestioned Financial Strength with Upside from Effective Capital Deployment

  • Precision Castparts Corp. 15

    Deployed ~ $8.5B to M&A from FY12-Q1 FY16,expanding capabilities and improving coststructure

    Rigorous evaluation framework and provenintegration practices

    Established leadership positions in coreaerospace and power markets

    Leveraged new capabilities to capture value viacost and market share

    M&A Framework

    Actively pursuing complementary acquisitions,large and small

    Value creation opportunity driven by leadershippositions

    Disciplined buyer

    Numerous attractive opportunities

    Targeting $3B-5B over next two years

    Successful M&A Track Record M&A Remains Top Priority

    Airframe Products illustration:Mid-Teens IRR on $5B+ Net Investment over 12 Years

  • Precision Castparts Corp. 16


    Strong fundamentals remain intact

    Balanced portfolio is key Aero and IGT growth drivers well-established

    Concrete actions taken to position PCC for profitable growth

    Funded restructuring, adjusted asset valuations

    Continual focus on daily metrics to drive efficiency gains

    Further strategic capital deployment

    M&A the central focus, with share repurchase as an important complement PCC Board of Directors added $2B to share repurchase authorization with targeted

    completion over next 12-18 months

    Expect to reduce share count

    Well-positioned to continue to deliver profitable growth beyond fiscal 2016

    Supportive end markets, plus capital deployment upside

  • Questions

  • Precision Castparts Corp. 18


  • Precision Castparts Corp. 19

    Non-GAAP Financial Measures Financial measures that exclude the impact of restructuring and asset impairment charges are non-GAAP (Generally Accepted Accounting Principles inthe United States) measures. To provide investors with a broader understanding of consolidated operating income earnings, the Company is providingadjusted consolidated segment operating income and adjusted earnings per share from continuing operations (diluted), excluding restructuring andasset impairment charges recognized during the quarter, along with the GAAP measure of consolidated segment operating income and earning pershare from continuing operations (diluted), because the excluded items are infrequent in nature.

    Management believes that measuring consolidated segment operating income and earnings per share from continuing operations (diluted) without therestructuring and asset impairment charges is important to investors because by separating out items that are infrequent in nature, the adjustedmeasure presents investors with a clearer comparison...