Synthomer Plc · LSE:SYNT
Synthomer — FY2014 Earnings Presentation
25 slides from Synthomer's earnings presentation, Feb 26, 2015
Slide 1: 2014 Preliminary Results
2014 Preliminary Results 26th February 2015
Slide 2: Introduction – Calum MacLean
Introduction – Calum MacLean 2 Calum MacLean, appointed Chief Executive Officer, January 2015 • Senior Board executive and a founding member of INEOS • Executive Chairman of INEOS Olefins and Polymers Europe • Chairman of Styrolution, INEOS’s joint venture with BASF, and Petroineos Refining, INEOS
Slide 3: Highlights
Highlights 3 Robust performance in the context of a challenging macro‐economic environment Positive H1 in Europe offset by impact of weaker H2 demand • Year‐on‐year improvement in unit margins Asia and ROW weak but encouraging H2 trends • Nitrile volumes up towards the year end • Margins conti
Slide 4: Financial Review
4 FINANCIAL REVIEW David Blackwood – Chief Financial Officer
Slide 5: FY Results: Financial Highlights
FY Results: Financial Highlights 5 % Change 2014 FY 2013 FY As reported Constant FX Revenue (1) (£m) 990.5 1,054.9 (6.1)% (2.0)% EBIT (1) (£m) 96.5 104.8 (7.9)% (3.4)% PBT (1) (£m) 86.0 90.1 (4.6)% (0.2)% EPS 19.5p 20.7p (5.8)% DPS (ordinary) 7.8p 6.0p 30.0% Net debt (£m) 112.1 133.6 (1) Underlying
Slide 6: Europe & North America
Europe & North America (69% Sales, 83% EBIT) 6 % Change 2014 FY 2013 FY As reported Constant FX Sales (£m) 687.2 744.8 (7.7)% (5.7)% EBIT (£m) 85.7 89.8 (4.6)% (0.7)% Volumes (Ktes) 794.3 805.5 (1.4)% EBIT down – £4.1 million (of which £3.4 million translation) Volumes down 24.4 ktes • Exited lo
Slide 7: Asia & ROW
Asia & ROW (31% Sales, 17% EBIT) 7 % Change 2014 FY 2013 FY As reported Constant FX Sales (£m) 303.3 310.1 (2.2)% 7.1% EBIT (£m) 17.8 23.1 (22.9)% (17.5)% Volumes (Ktes) 396.5 376.2 5.4 % EBIT down – £5.3 million (of which £1.3 million translation) Nitrile continued to improve after weak H1 • Vo
Slide 8: Free Cash Flow
Free Cash Flow 8 2014 2013 Underlying operating profit (£m) – exc. JV 91.2 99.9 Depreciation (£m) 21.5 19.2 Movement in working capital (£m) (9.1) 5.8 Capital expenditure (net) (£m) (1) (21.5) (35.0) Tax, interest, pensions (£m) (2) (30.9) (31.6) Free cash flow (£m) 51.2 58.3 (1) 2014 £22.0m gross;
Slide 9: Net Cash Flow
Net Cash Flow 9 2014 2013 Free cash flow (£m) 51.2 58.3 Restructuring (£m) (3.8) (3.8) Purchase of business (£m) (8.6) ‐ Dividends paid (£m) (22.4) (19.4) Exchange / other (£m) (1) 5.1 (12.9) Movement in borrowings (£m) 21.5 22.2 Closing net debt (£m) 112.1 133.6 (1) Includes settlement of LTIP ince
Slide 10: Further Progress on Malaysian Land Sales
Further Progress on Malaysian Land Sales 10 Additional land sales contract signed January 2015 Current position on contracted sales – gross proceeds MYR 232.8 million Group share from 70% owned subsidiary – MYR 154.8 million – approx. £28 million Cash expected end 2015 – some risk this could
Slide 11: Capital Structure / Net Debt
Capital Structure / Net Debt 11 2014 2013 Net Cash (£m) 24.9 64.8 Term Debt (£m) (137.0) (198.4) Net Debt (£m) (112.1) (133.6) Undrawn committed facilities (£m) 85.3 60.0 Net Debt: EBITDA (LTM) <1.0 1.1 Conservative balance sheet – net debt: EBITDA below 1 times Substantial available liquidity
Slide 12: Full Year Dividend / Capital Management
Full Year Dividend / Capital Management 12 Full year ordinary dividend of 7.8p In line with announcement at interim results on dividend policy Cover of 2.5x Special dividend of 7.8p per share First ever special dividend, in line with capital management policy Represents a pay‐out of £26.
Slide 13: Business Review
13 BUSINESS REVIEW Calum MacLean – Chief Executive Officer
Slide 14: 2014 Operating Review – Europe and North America
14 2014 Operating Review – Europe and North America EBIT down £4.1 million; £0.7 million (0.7%) lower on a constant currency basis • Impacted by H2 demand weakness, after a better H1 Volume declines mainly due to exit of 18 ktes of low margin compounds • Underlying volume improvements in H1 offs
Slide 15: 2014 Operating Review – Europe and North America
2014 Operating Review – Europe and North America 15 Cost saving programme on track – “Synthomer 2015” • Annual benefits over €10 million run rate by end 2015 • Cost €10 million revenue; €5 million capex New product pipeline continues to contribute Completed investment in bio‐polymer hybrid lat
Slide 16: 2014 Operating Review – Asia and ROW
16 2014 Operating Review – Asia and ROW EBIT down £5.3 million; £4.0 million (17%) lower on a constant currency basis Nitrile improved in H2 • Demand improved towards end 2014 • Margins improved through H2 • Major new product launches – which will deliver up to 50 ktes extra capacity Non‐nitri
Slide 17: 2014 Operating Review – Asia and Rest Of World
2014 Operating Review – Asia and Rest Of World 17 Middle East 28 ktes capacity commissioned • Saudi plant now a 100 kte plant Two major new nitrile products launches in H2 • Will create up to 50 ktes of extra nitrile capacity Land sales to date now worth approx. £28 million to Group • Proceeds
Slide 18: Crude and Downstream Raw Materials
Crude and Downstream Raw Materials 18 Monomer prices have fallen across the board Combination of lower oil and supply demand for these monomers Generally passed through to customers with a circa one month lag Some cash margin improvement possible in low volume specialty products – but modest
Slide 19: Innovation
19 Innovation New product contribution continues to improve • 16% of current sales from products launched in last 5 years o Was 12% in 2013 • On track for mid‐term target of 20% of revenues Recent launches have had a material impact on business performance • 2 new nitrile grades for glove dippin
Slide 20: Europe and North America Focus
20 Europe and North America Focus Synthomer’s “Centre of Excellence” • Continuous improvement in SHE performance Continue to take actions to address European low growth environment AND drive global business model • Low cost de‐bottleneck opportunities • Close control of fixed costs and capital e
Slide 21: Asia and ROW Focus
21 Asia and ROW Focus Synthomer’s “Growth Engine” • CC strong in all territories, FP growing and HP very strong in APAC Very dynamic environment with ongoing need for extra capacity and technology pull • Expansion opportunities in both NBR and dispersions Build on European business model • Ong
Slide 22: Outlook
22 Outlook Challenging environment in Europe likely to continue but lower input prices should be modest positive to offset demand concerns Weakening of the Euro around year end will create a year‐on‐year translation impact Confident of improved performance from nitrile on tighter supply demand
Slide 23: Conclusion and Priorities
23 Conclusion and Priorities Safety, health and environmental (SHE) performance review Full and detailed understanding of the existing business, assets and cost base Optimise organisational structure Clearly defined 5 year plan all business entities Focus on growth opportunities • Low cost
Slide 24: 2014 Preliminary Results
2014 Preliminary Results 26th February 2015
Slide 25: Balance sheet, Dividend and Capital Management policy
25 Balance sheet, Dividend and Capital Management policy Balance sheet Investment opportunities Shareholder returns Not to move structurally Remain alert to acquisitions Ordinary dividend moves to below 1x EBITDA 2.5x cover effective 2014 – New Geographies Not to exceed 2x EBITDA for – New T