Arkema Sa · EURONEXT:AKE
Arkema Sa — FY2008 Earnings Presentation
33 slides from Arkema Sa's earnings presentation, Mar 5, 2009
Slide 1: 2008 full year results
2008 full year results Thierry Le Hénaff, Chairman and CEO March 5th 2009
Slide 2: 2008 > A solid set of results
2008 > A solid set of results
Slide 3: Solid results in a challenging environment
Solid results in a challenging environment Delivering solid results €498m EBITDA including Challenging environment - €17m FX rate translation impact - €23m inventory write-downs in 4Q’08 In the first 3 quarters 2008 €100m net income Solid demand Historically high raw material Rigorously guard financ
Slide 4: Full year 2008 key figures
Full year 2008 key figures in €m (except EPS) 2007 2008 Variation Sales ………..….………..………..….……………………… 5,675 5,633 (0.7)% EBITDA ………....….………..………..….……………… 518 498 (3.9)% EBITDA margin ……..………..….……………… 9.1% 8.8% Recurring operating income …………… 293 250 (14.7)% Net income (group share) ..….……………… 122
Slide 5: Sales growth of +2.2% at constant perimeter and exchange rate
Sales growth of +2.2% at constant perimeter and exchange rate in €m Prices Volumes FX rate - translation (5.9)% effect Scope of +8.1% business (2.4)% (0.5)% 5,675 5,633 2007 2008 sales sales 5
Slide 6: Structural projects almost compensated for negative environment impact
Structural projects almost compensated for negative environment impact in €m Inflation & Growth Fixed cost volume projects Environment savings loss* and M&A and others (47) +51 +107 (131) Including +€60m Productivity €(17)m translation effect €(23)m 518 inventory 498 write-downs in 4Q’08 2007 2008 E
Slide 7: Structural projects: +€111m vs +€80m initial target
Structural projects: +€111m vs +€80m initial target +€60m EBITDA +€51m EBITDA from increased focus on fixed costs from new business and M&A +42 +60 +18 1H’08 2H’08 2008 EBITDA impact (€m) > Benefits from restructuring plans in: Photovoltaic Chlorochemicals and PVC downstream (France) Coatex Fluoroch
Slide 8: 4Q'08 highlights
4Q’08 highlights > Unprecedented decline in demand magnified by customer de-stocking Sales down -10% (vs 4Q’07) Volumes down -23% (vs 4Q’07) Prices up +9% (vs 4Q’07) > EBITDA at €47m (vs €107m in 4Q’07) Including -€23m of inventory write-downs Strong resilience of Industrial chemicals EBITDA by segm
Slide 9: Vinyl Products: margin squeeze in PVC
Vinyl Products: margin squeeze in PVC 2008 Performance Pursue reorganization in market adversity > Positive 6.3% Good demand and prices in caustic soda Benefits from restructuring initiatives 1,418 1,443 90 Strong focus on manufacturing efficiency 1.0% > Negative 14 Significant margin squeeze in PVC
Slide 10: Industrial Chemicals: +18% EBITDA growth
Industrial Chemicals: +18% EBITDA growth 2008 Performance Quality of portfolio has been confirmed 13.2% > Positive 11.4% Price increases in each BU to compensate for higher raw materials 2,529 2,582 341 Strong contribution from restructuring and 289 tight control of fixed costs Benefits from capacit
Slide 11: Performance Products: 11% EBITDA margin
Performance Products: 11% EBITDA margin 2008 Performance Support from new developments > Positive 10.7% 11.0% Price increases in each BU to compensate for higher raw materials Strict cost control 1,723 177 1,602 184 New business introduction > Negative Weak US construction all along the year 2007 20
Slide 12: Positive cashflow despite adverse economic environment
Positive cashflow despite adverse economic environment in €m Rec. Working capital reduction capex* EBITDA +56 498 (301) Tax & debt Free cash flow** (90) NR <€315m items initial target Other +68m (56) items (39) M&A: €(25)m 2007 dividends: €(46)m Share buy-back: €(25)m * Excluding CAPEX related to th
Slide 13: Maintain a strong balance sheet
Maintain a strong balance sheet in €m Long term Shareholders’ assets equity Provisions include: 2,159 2,018 > €109m restructuring No impairment booked in 2008 > €233m pensions > €143m environment > €216m others €359m out of €701m provisions are booked through EBITDA 18.7% working Provisions capital/
Slide 14: 2005 to 2008 > First step: fully achieved
2005 to 2008 > First step: fully achieved Spin off targets: delivered
Slide 15: Spin off targets achieved
Spin off targets achieved Initial 2008 targets* achievements EBITDA growth (2006-2008) +10 to 15% +12% per year on average per year Working capital 20% 18.7% of sales in 2008 Free Cash Flow (FCF)** Positive +€68m Gearing 30 to 40% 25% Divestments €300 to 400m €400m of revenues in 3 years divested *
Slide 16: Annual EBITDA growth on average: +12%
Annual EBITDA growth on average: +12% EBITDA in €m 498 355 2005 2008 16
Slide 17: Unfavorable macroeconomic environment
Unfavorable macroeconomic environment 2005 2008 €/$ exchange rate 1.24 1.47 Raw Material Index 140 190 PVC cycle Mid Low Acrylic acid cycle High Low Unprecedented customer Global demand Average de-stocking in 4Q’08 -€120m cumulative impact from economic environment over 3 years 17
Slide 18: Gap halved vs industry in 3 years
Gap halved vs industry in 3 years EBITDA margin 15% PEER AVERAGE PEER AVERAGE 11.2% 12.6% 10% ARKEMA 8.8% ARKEMA 6.2% 5% 2005 2008 Peer average includes: Akzo Nobel (excluding Pharmaceutical), BASF (excluding oil&gas), Celanese, Ciba, Clariant, Dow, Lanxess, Rhodia (excluding CER), Rohm & Haas and S
Slide 19: Focusing on productivity
Focusing on productivity Cumulated gross fixed cost savings in €m 2008 337 2007 230 2006 120 Headcount from 19,167 end 2004 2005 to 14,983 end 2008 19
Slide 20: Selective growth: +€82m EBITDA
Selective growth: +€82m EBITDA Calvert-City (US) Clear polyamides Changshu (China) +€82m Glass coating Oil fields additives Molecular sieves Beaumont (US) Photovoltaic panels Balan (France) 20
Slide 21: Stepping up the number of high performance materials
Stepping up the number of high performance materials Introduction of new high performance polymers in 2008-2010 PEKK High temperature polyamides Oxygen barrier polymers PVDF for photovoltaic Nanostructured materials Kynar® acrylic emulsions Clear polyamides Kynar® Price & performance Self-healing el
Slide 22: More focused portfolio
More focused portfolio €400m sales divested > Cerexagri > Urea formaldehyde resins > Specialty amines €200m sales > Water treatment acquired > Superabsorbents > Coatex > Repsol PMMA > Odor-Tech Net impact Sales €(200)m FY EBITDA* +€30m Cash outflow €(160)m * After implementation of synergies 22
Slide 23: Working capital optimization
Working capital optimization Working capital as % of sales 23.6% +€119m cash generated while prices up + 13% 18.7% 2005 2008 23
Slide 24: Cumulated free cash flow: +€275m
Cumulated free cash flow: +€275m FCF* 2006-2008 in €m Working capital Rec. reduction capex EBITDA +119 (887) 1,427 Cumulated free cash flow* Tax & debt +€275m (214) NR items (145) Other items 2007 dividends: €(46)m (25) M&A: €(160)m Share buy-back: €(25)m * Free cash flow before -€500m NR pre spin o
Slide 25: Strong balance sheet maintained
Strong balance sheet maintained Net debt and Gearing < 30% debt-like items in €m 615 550 55 Debt-like pre spin off items NR pre- 580 spin off items 495 Financial net debt Net debt 35 At spin off 12/31/2008 12/31/2005 proforma after €532m capital increase 25
Slide 26: Outlook > Fast acting in a very challenging environment
Outlook > Fast acting in a very challenging environment
Slide 27: Prepared for a tough 2009 economic environment
Prepared for a tough 2009 economic environment > Global recession and very weak demand expected in 2009 with low visibility > 1Q’09 shows no improvement compared to the unprecedented 4Q’08 economic conditions No sign of improvement in demand and further customer de-stocking No relief yet from raw ma
Slide 28: Strengthened cash generation
Strengthened cash generation > Further improvement of working capital Accelerate optimization of inventory Careful look at receivables +€100 to 150m cash Benefits from lower raw material costs > Selective spending on high-growth high-margin projects 2009 budget: <€270m vs €335m* in 2008 < €270m Grow
Slide 29: Close tracking of productivity
Close tracking of productivity > Reinforced cost savings program €500m cost savings target increased to €550m* Implement announced projects New productivity plans** in Vinyl Products (> 350p.) > €55m EBITDA impact Optimization of purchasing services: +€35m savings (FY basis) Realignment of PMMA busi
Slide 30: Long term strategic orientation maintained
Long term strategic orientation maintained 12% EBITDA margin target in 2010 under normalized conditions - Normalized conditions rather expected in 2011 2010 550 2009 440 2008 337 €500m cost savings target in 2010 vs 2005 - Increased to €550m 2007 230 - €220m in 2009 and 2010 2006 120 Cumulated fixed
Slide 31: Remained focused on Arkema transformation: towards a higher growth portfolio
Remained focused on Arkema transformation: towards a higher growth portfolio Build on five core technology platforms Five core - Strong integration monomers / polymers technology platforms Acrylics Reduce relative weight of Vinyls Vinyl Methacrylates Specialty - ~ 15% of total sales Products niches
Slide 32: Conclusion
Conclusion > Solid results in 2008 > 3 years on, all spin off commitments delivered > 2009 economic environment expected to be very challenging > Quick and strong response to the current economic crisis First priority: control cash and preserve solid balance sheet Reinforce cost saving program Posit
Slide 33: Disclaimer
Disclaimer > The information disclosed in this document may contain forward-looking statements with respect to the financial condition, results of operations, business and strategy of Arkema. Such statements are based on management’s current views and assumptions that could ultimately prove inaccura