farnborough international airshow capital markets · pdf file2016-08-17 ·...

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voestalpine AG

Farnborough International Airshow

Capital Markets Day 2016

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Part I

Aviation 2016

Aircraft Raw Material Demand

Global Supply Chain

Aviation Industry China

Part II

voestalpine: A member of the club

Special Steel Division

Metal Forming Division

Conclusion

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Agenda

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Highlights and Insights

Aviation 2016

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The global aerospace market offers a steady growth

within the next years.

The global Aerospace market outlookBoeing current market outlook -

Fleet in service evolution 2014-2034:

Boeing and Airbus comprise two-thirds of

materials consumed for aerospace globally

This duopoly strongly influences behavior of

entire aerospace supply chain.

Boeing 36%

Airbus 30%

GE 5%

CFM Intl 4%

CFM 3%

Rolls-Royce 3%

Embraer; 2%

Pratt & Whitney 2%

other; 15%

2015 Aircraft material demand by OEM707kt per year

21.600

43.560

1.420

38.050

-17.510

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000E

nd o

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Rem

ove

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ed to

freig

hte

r

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deliv

erie

s201

5 to 2

03

4

End o

f ye

ar

203

4

Nu

mb

er

of

Air

cra

fts

removed build Total fleet

Source: Boeing Current Market Outlook 2015Source: ICF Analysis

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Aircraft Market Outlook 2034

asks for 38.050 new aircrafts

7%

70%

13%

9%

1%

Delivery units

Large wide-body

Medium wide-body

Small wide-body

Single aisle

Regional Jet

Source: Boeing Current Market Outlook 2015

World Market Value: 5.570 $b

New deliveries: 38.050 Airplanes

Average airplane value: 150 ($M)

Asia38%

Europe19%

North America

21%

Latin America

8%

Middle East8%

C.I.S.3%

Africa3%

60% of new aircrafts go

into emerging markets.

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Main Drivers of the Aviation Industry

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New Aircraft Delivery Demand

Air travel demandAirlines ability to acquire

new aircraft

Economic

Growth

Oil Price vs.

Air Fare

Aircraft

Retirements

Availability of

aircraft financing

Sources

Airlines

Finance

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Different forecasts, different approach

Airline Monitor

Top down approach from global

passenger growth rate to world fleet.

demand oriented 5.1% RPM1

Average build rate in 2035 is 2,500 AC

Major OEMs (Boeing and Airbus)

Bottom up approach from backlog and

projected orders to build rate.

Supply oriented Airbus 4.6% RPM1

Boeing 4.9% RPM1

Average build rate in 2035 is 2,450 AC

07/12/20167

1 Revenue Passenger Miles

Source: Airline Monitor 02/2016, Boeing Current Market Outlook 2015, Airbus

Global Market Forecast 2015

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1.300

1.800

2.300

2.800

2014 2019 2024 2029 2034

Airline Monitor

Boeing CMO

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0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Nu

mb

er

of

Air

cra

fts

Retired, scrapped, others

Increase in fleet

The average growth rate was increased

to ~3.7% per year until 2035

Retired small regional jets will be replaced by larger single-aisle aircrafts

Retirement age increases to 27-30 years

Source: Airline Monitor 06/2016

Average Growth rate 2016-2035:

~ 3.7% per year

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Aerospace a cyclical business with downturn

approximately every 8-10 years

0

200

400

600

800

1.000

1.200

1.400

1.600

Year 1970 1975 1980 1985 1990 1995 2000 2005 2010

To

tal

delivere

d a

ircra

fts total delivered aircrafts

The 70s

recessionEnergy price

recession

Gulf war

Tech bubble

and 9/11

-74%-42%

-50% -35%

Financial

market

meltdown

Source: Airline Monitor, Aircraft History, 02/2016, GE Aviation marketing analysis, Ascend

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Market Trends

Low oil price supports airline profitability

A change in aftermarket due to a slight overshoot in aircrafts

China economy development

The need for a MoM Middle of the Market Aircraft is heavily discussed

Some sign that a slow down maybe underway but no evidence so far

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Airbus and Boeing stay with their aggressive production plans

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Aerospace: Further a growth market!

Airline Monitor and major OEM forecast an

average growth of ~3.7% per year from

2016-2035.

Airbus and Boeing have a

backlog of >12,000 aircrafts

representing 8-10 years of steady

production.

Highest load factor of aircrafts ~80%

and parked fleets are 10-15 years low.

Source: Airbus, Boeing, Ascend, BCC analysis

Homato

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Outlook 2020

Aircraft Raw Material Demand

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Aluminum

Steel

Superalloys

Titanium

other

composites

~707 ktons

2015 Aircraft Raw Material Demand

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Aluminum

Steel

Superalloys

Titanium

Other

composites

~12bUSD

The aggregated fly to buy ratio is ~ 6

Source: ICF International

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Aluminum

Steel

Superalloys

Titanium

other

composites

~740 ktons

2020 Aircraft Raw Material Demand

07/12/201614

Aluminum

Steel

Superalloys

Titanium

Other

composites

~12,5bUSD

The aggregated fly to buy ratio is ~ 6

Source: ICF International; calculation with same commodity prices

CMD2016 Farnborough International Airshow

+0.7%

+1.9%

+4%

+5.8%

-0.7% (CAGR p. year)

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Majority of the aerospace material demand for

value added is US based, followed by Europe

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Aerospace raw material demand ~707ktons

North America

Europe

Asia

other

by Region*

Air Transport

BGA**

Heli

Military

by Market

*) Region where most value-added work is performed

**) Business and General Aviation

Source: Aerolytics, 12/2015 Sheet and Plate Study

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Aviation Industry

Global Supply chain

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Business Characteristics Aircraft

Limited players

Zero defect approach

Trust (track record, safety), relationship and market power are key

decision criteria

Highly conservative business behavior

(to become member of the club)

Price pressure

Serial business (small scale)

Defined products through very tight specifications

Frozen technologies

Strict management of failures

Low level of differentiation through the product/service portfolio

Product characteristics typical for Operational Excellence

The business

with the highest

entry barrier for

mission critical

parts/materials

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A challenge to the supply chain!

OEMs monitor their supply chain with frequent

capacity audits and ramp-up control

The supply chain is ready for the next growth

peak, OEM requested supplier to make

investment

Possible over-capacity will have to be managed

solely by supplier

Suppliers constantly high performance over the

next 3-4 years will guarantee them pole position

in the following multi-year-bids

Homato

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The global Aerospace Value chain is worth ~600bUSD

and employs more than 2.3 Million people*)

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North America

~1,100,000 people

~310bUSD

Europe:

~600.000 people

~175bUSDAsia*)

~600,000 people

~ 88bUSD

France 8%

200,000

Germany 4%

110,000

UK 4.5%

120.000

Source: TKA 2014, BPac, Market reports Mexico, Morocco, Brazil

*) w