Nemak, S.A.B. de C.V. Business Report FY ended Dec. 2018

Financial Overview

(in million MXN)

	FY ended Dec. 31, 2018	FY ended Dec. 31, 2017	Rate of Change (%)	Factors
Net Sales	90,327	84,779	6.5	-The main factor behind the increase was higher average selling prices, which reflected increases in the price of aluminum, the Company’s main production input.
Operating Income	7,824	7,015	11.5	-The increase was mainly due to higher revenues and lower SG&A.

Contract

-The Company won contracts to produce structural and electric vehicle (SC/EV) parts worth USD 280 million, bringing its total order book in the segment up to USD 600 million in annual revenues.

Business Partnership

-The Company began working with a Chinese OEM on the development of structural components for pure-electric vehicles.

Recent Development outside Mexico

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-The Company achieved peak volume levels of its first program to produce structural components, supplying several SUV and sports car models of customer Volkswagen Group.

Business Overview

-By the end of 2018, it had produced and sold more than four million parts in this SC/EV segment.
-Battery housings represent one of its fastest-growing product lines in the SC/EV segment. Based on contracts won to date, the Company estimates that it will have a market share of approximately 20% in battery housings for plug-in hybrid vehicles in North America and Europe by 2020.

Awards

-The Company earned a special recognition from Audi for its successful track record of providing structural components with zero defects for the customer’s Q5 SUV.

-Thanks to its outstanding performance, the Company received the “Supplier of the Year” award from customer General Motors. The Company has been selected as a winner of this award fourteen times.

-The Company was selected as a finalist for the 2018 Automotive News Pace Awards for the adaption of its patented Rotacast casting process for use in the production of aluminum engine blocks.

R&D Expenditure

(in million MXN)

	FY ended Dec. 31, 2018	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016
Overall	16	6	11

R&D Structure

-The Company has ten Product Development Centers, located in Austria, Canada, Germany, Poland, Spain, China, Mexico and the U.S.

R&D Activities

-The Company’s research activities focus on enhancing vehicle efficiency through improvements to the powertrain and the vehicle’s body. Specific areas of focus include the following:
Alloy Systems
-High performance alloys for high powered engines
-Mechanical properties and microstructural predictions
-Body structural casting technologies
-Thin walls in cylinder heads

Complex Geometries
-3D printing for advanced powertrain prototypes
-Inorganic binders

Powertrain Component Integration
-Turbo housing integration to cylinder heads
-Range extender and aluminium electric motor components

Surface Treatment Technologies
-Bore coating
-Surface treatment for thermal efficiency
-Body structural casting technologies

Capital Expenditure

(in million MXN)

	FY ended Dec. 31, 2018	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016
North America	4,076	3,838	4,919
Europe	2,735	3,837	4,321
Rest of World	975	604	924
Overall	7,786	8,279	10,164