Ampco-Pittsburgh Corporation November 17, 2016 Southwest IDEAS Investor Conference
2 The Private Securities Litigation Reform Act of 1995 (the Act ) provides a safe harbor for forwardlooking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statements in this document other than statements of historical fact are statements that are, or could be, deemed forward-looking statements within the meaning of the Act. In this document, statements regarding future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words such as may, intend, believe, expect, anticipate, estimate, project, forecast and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For Ampco-Pittsburgh, these risks and uncertainties include, but are not limited to, those described under Item 1A, Risk Factors, of Ampco-Pittsburgh s Annual Report on Form 10-K. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
Agenda Introduction to Ampco-Pittsburgh Strategies to improve Ampco-Pittsburgh s Financial Performance Åkers Acquisition ASW Steel Acquisition 3
Who is Ampco-Pittsburgh Corporation? Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the world. Two segments are reported: 1. Forged and Cast Engineered Products (Union Electric Steel) 2. Air and Liquid Processing 4
Headquarters Carnegie, PA, U.S. Traded on NYSE (Symbol AP) 2015 Revenue -- $238.5M ~ 1,900 employees Ampco-Pittsburgh Forged and Cast Engineered Products (approx. 66% of sales pre-acquisition; approx. 80% post-acquisition) A world leader in the manufacture of steel rolls (cast and forged) Union Electric Åkers 90+ years of experience 14 sales offices Six manufacturing facilities in U.S. Three roll manufacturing plants in China (joint ventures); three roll manufacturing plants in Europe In July 2015, acquired Alloys Unlimited and Processing (Ohio) Supplier of specialty tool, alloy, and carbon steel round bar Forged and cast product distribution center for quick turnaround requests In March 2016 acquired Åkers (Sweden) roll producer Acquired ASW Steel Inc. in November 2016 (Ontario) specialty steel producer Air and Liquid Processing (approx. 34% of sales pre-acquisition; approx. 20% post-acquisition) 5 Custom-designed, specialty heat exchangers, air handling systems, and centrifugal pumps Three U.S. manufacturing facilities in Virginia (two plants) and New York
Ampco-Pittsburgh (cont d) Two Segments reported: 2015 Revenue Forged and Cast Engineered Products $152.3M Forged and Cast Rolls Open Die Forged Products Air and Liquid Processing $86.2M Aerofin - Heat Exchangers Buffalo Air Handling - Custom Air Handling Systems Buffalo Pumps - Specialty Centrifugal Pumps Åkers Revenue* $150.7M ASW Revenue** $47.0M * Includes only the businesses acquired by Ampco-Pittsburgh **Based on CAD $65 million 2015 revenue x $0.72216/CAD exchange rate on December 31, 2015 6
Union Electric Åkers Forged and Cast Rolls
Backup Roll Work Roll 8
9 Rolls Staged in Hot Strip Mill (HSM)
10 Cast Rolls Manufacturing Facilities
11 Forged Rolls Manufacturing Facilities
12 Key Customers
2014 Global Roll Market Cast Rolls Forged Rolls Total $1.4B/yr. $0.7B/yr. $2.1B/yr. U.S. Roll Market $0.3B/yr. 13
Competing Companies in Roll Industry Cast Rolls Forged Rolls *Ampco-Pittsburgh completed acquisition of Åkers in Q1 2016. 14
15 Air and Liquid Processing Segment (A&LP)
Aerofin Products Split-Fit Steam heating coils Copper spiral finned nuclear stamped coil 16
Aerofin Serves Four Markets 48.8% 15.2% 20.8% Fossil fuel power generation Industrial Nuclear power generation OEM/Commercial 15.2% Fossil Industrial Nuclear OEM/Commercial 17
Buffalo Air Handling Custom Air Handling Systems Rooftop unit at a pharmaceutical manufacturing facility Air handling unit in our manufacturing plant for a medical center in New York 18 Triple stacked units being installed at a research facility in Illinois
Buffalo Air Handling Serves Four Markets 29.0% 17.5% 19.0% 34.5% Pharmaceutical Hospital University General Industries Pharmaceutical Hospital University General Industry 19
Buffalo Pumps Products Specialized Centrifugal Pumps Seal-less pump Vertical double suction pump for a United States Navy surface vessel Vertical submerged lube oil pump 20
Buffalo Pumps Serves Three Markets 23.6% 10.9% 65.5% Fossil Fuel Military Use Industrial Refrigeration 21
Ampco-Pittsburgh Recent Performance 22
Ampco s financial performance has deteriorated in recent years primarily due to UES performance Global steel market depressed since 2011 UES sales, margins, and profits have declined as customers reduce production and costs Air and Liquid Processing profitable, consistent performer, but lacks growth 23
24 Ampco-Pittsburgh Corporation Operating Income
Key Factors Impacting 2016 Profitability Cast Roll Plants Volume/ Unfavorable Pricing Purchase Accounting (Åkers Acquisition) Åkers Transaction Deal Costs Åkers Integration Costs 25
Reasons to Expect Improved Performance Åkers acquisition synergy impact July 1, 2016 forged and cast roll product price increase Avonmore roll plant idling (January 2017) New negotiations of legacy negative margin contracts Industry diversification Renewed activity in oil field services industry 26
Strategies to Improve Ampco Performance 27
Reasons For UES Diversification Cyclicality of steel and aluminum industries drove decision to strategically diversify the company Lack of market size growth Manufacturing requirements for open die forge market are strong match for our manufacturing assets 3-1/2 year successful record in penetrating the oil field services industry 28
Strategies to Diversify UES Product Portfolio for Growth Utilize flexible manufacturing assets to diversify and offset roll/steel industry cyclicality Optimize market pull into oil field services industry and others Capitalize on opportunity to diversify into broader markets beyond oil field services Research M&A opportunities Acquired Alloys Unlimited (July 2015) Acquired ASW Steel (November 2016) 29
Fluid end Diversification through Open Die Forged Engineered Products (FEP) Fracking pump unit Mud Pump Multiple fracking pump units on-site 30
31 Source: FIA
Union Electric Steel Revenue Trend 17.0% CAGR 2015 2016 2017 2018 2019 32 *Forecast 2016 includes Mar-Dec for the Åkers Group and full-year for the UES group
Key Strategies to Improve A&LP Performance Grow revenue (market share) Reduce costs, increase margins Strengthen engineering and manufacturing capabilities Revise sales and marketing approach 33
Air and Liquid Systems Revenue Trend 7.5% CAGR 2015 2016 2017 2018 2019 34
Ampco-Pittsburgh Corporation Revenue Trend 9.1% CAGR 2015 2016 2017 2018 2019 35
36 Åkers Acquisition
Why Acquire Åkers? Combines the two top competitors in the roll industry, both recognized for product performance, technology, and customer service Manufacturing Adds four roll production facilities, including two low-cost producers Adds cast roll production in U.S. Adds forged roll supply in Europe Adds lower cost product alternatives 37
Why Acquire Åkers? (cont d) Sales/Marketing Joins complementary product lines (Ampco s strength in forged rolls; Åkers strength in cast rolls) Creates complete product line Fills gaps in UES product portfolio Increases potential customer base to include all steel and aluminum mills Provides both high-performance, high-quality rolls and low-cost rolls Accelerates R&D product launches Adds sales offices and complement of sales personnel Transforms Ampco into more of a global competitor Adds sales offices in Brazil, Germany, Turkey, Egypt and Singapore Establishes a center of strength in Asia-Pacific region, the world s largest market for rolls 38 Add service capability in U.S. (Vertical Seal in PA) closer to customer
Global Footprint Pre-Transaction UES Locations Manufacturing 39 Sales Office
Global Footprint Post-Transaction 40 UES Locations Manufacturing Sales Office Åkers Locations Manufacturing Sales Office
Financial Benefits of Åkers Acquisition Should contribute to stabilizing UES and improving performance of Ampco Revenue from roll business growing substantially Cost reduction and other synergies estimated to be $15M or greater Synergies estimated to be fully realized in the next 5-8 months Estimated cost to realize synergies: $4M to $5M Provides improved currency balance 41
Terms of Definitive Agreement to Purchase Åkers AB Purchase price $74.2M $29.4M cash paid at closing 1.78M shares of Ampco-Pittsburgh stock Fair value of $22.1M $22.6M notes payable March 2019 42
43 ASW Steel Inc. Acquisition
44 ASW Steel Inc. Located in Welland, Ontario, Canada Premier specialty steel-making facility Offers a unique combination of carbon, stainless, and other specialty steelmaking capabilities Flexible steel refining methods include: argon oxygen decarburization vacuum oxygen decarburization vacuum degassing ladle metallurgical station ASW Steel's specialty metals and flexible steel refining methods allow for the production of various high-quality products Annual revenue approximately CAD 65 million
Why Acquire ASW Steel? ASW s broad expertise in flexible steel refining methods provide us with the capabilities to manufacture the additional chemistries needed to expand our reach into the open-die forging market Enhances our ability to grow and add new markets for customers in the following markets: Oil & Gas Power generation Aerospace Transportation Construction 45
46 What Do ASW s Customers Make?
Equipment Argon Oxygen Decarburizer (AOD) Electric Arc Furnace (EAF) Ladle Furnace (LF) Vacuum Oxygen Decarburizer (VOD) Vacuum Degasser (VDG) Vacuum Equipment Servicing VOD and VDG Billet Caster 47
Acquisition of ASW Steel Acquisition completed November 1, 2016 Total Purchase Price approximately $13.1 million $3.5 million cash $9.6 million outstanding debt Bolt-on acquisition Indirect subsidiary of UES 48
Industry Recovery Appears To Be Beginning Price for steel across the world increasing US trade protection in place EU trade protection Trickle down impact on roll manufacturers However, fragile global economy restricting steel demand Expect customer roll inventories to be low due to cost control and working capital conservation 49
Ampco-Pittsburgh Corporation Thank you Questions