Arkema SA · EURONEXT:AKE
Arkema SA — H1 2009 Earnings Presentation
36 slides from Arkema SA's earnings presentation, Aug 3, 2009
Slide 1: Arkema's first half 2009 results
Arkema’s first half 2009 results Thierry Le Hénaff, Chairman and CEO August 3rd, 2009
Slide 2: 1H'09 highlights
1H’09 highlights Adapt successfully to a very difficult environment +€135m free cash flow* +€86m fixed costs savings €420m net debt Maintain a strong focus on cash generation and fixed cost savings for the next 6 months Continue to transform Arkema and prepare the company for the medium-term Two new
Slide 3: 1st half 2009 > Strong cash generation
1st half 2009 > Strong cash generation
Slide 4: Quickly adjusting to a challenging environment
Quickly adjusting to a challenging environment > Un-precedent economic environment Collapse of demand amplified Sharp decrease of raw material prices by massive de-stocking 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 YOY volume Raw material variation (%) index -18 -23 Jan-08 Jul-08 Jan-09 Jul-09 -27 > Quick
Slide 5: First half 2009 key figures
First half 2009 key figures in €m (except EPS) 1H’08 1H’09 Variation 1Q’09 2Q’09 Sales ………..….………..………..….…………… 3,001 2,259 (24.7)% 1,092 1,167 EBITDA ………....….………..………..….…… 317 127 (60)% 57 70 EBITDA margin ……..………..….…… 10.6% 5.6% 5.2% 6.0% Recurring operating income …. 197 (10) n.m. (12) 2 Net i
Slide 6: -25% sales on a low demand
-25% sales on a low demand in €m Prices Volumes (3.9%) (22.7)% FX rate - translation Scope of effect business +2.5% (0.6)% 3,001 2,259 1H’08 1H’09 sales sales 6
Slide 7: Strong contribution of fixed cost savings
Strong contribution of fixed cost savings in €m Inflation & Growth Fixed cost volume projects savings loss* and M&A Environment (16) +26 +86 (240) +€70m Inventory effect Productivity Others 317 (40) (6) 127 1H’08 1H’09 EBITDA EBITDA * Inflation of fixed costs and volume losses from restructuring ini
Slide 8: €86m fixed cost savings
€86m fixed cost savings in €m +86 Fixed cost savings: linked to current conjuncture > Reduction of G&A: -40% expenses at headquarters in 1H’09 vs 1H’08 > Reduction of variable compensation > Tight control of all type of fixed costs Fixed cost savings: structural projects > Full benefit from restruct
Slide 9: Vinyl Products
Vinyl Products in €m 1H’08 1H’09 Variation 1Q’09 2Q’09 Sales ……………...…….…….……..………..….……… 784 523 (33.3)% 257 266 EBITDA ……………....….………..………..….……… 31 (5) n.m. 2 (7) EBITDA margin ……..………..….……………… 4.0% (1.0)% 0.8% (2.6)% Recurring operating income ………… 12 (29) n.m. (10) (19) > Sharp contraction of
Slide 10: Industrial Chemicals
Industrial Chemicals in €m 1H’08 1H’09 Variation 1Q’09 2Q’09 Sales ……………...…….…….……..………..….……… 1,357 1,052 (22.5)% 509 543 EBITDA ……………....….………..………..….……… 190 148 (22.1)% 73 75 EBITDA margin ……..………..….……………… 14.0% 14.1% 14.3% 13.8% Recurring operating income ………… 131 83 40 43 > Strong resilience
Slide 11: Performance Products
Performance Products in €m 1H’08 1H’09 Variation 1Q’09 2Q’09 Sales ……………...…….…….……..………..….……… 857 678 (20.9)% 323 355 EBITDA ……………....….………..………..….……… 119 40 (66.4)% 17 23 EBITDA margin ……..………..….……………… 13.9% 5.9% 5.3% 6.5% Recurring operating income ………… 77 (7) (7) 0 > Weak demand in end market
Slide 12: 2Q'09 highlights
2Q’09 highlights > +23% EBITDA in 2Q’09 versus 1Q’09 > Weak demand despite sequential improvement of volumes 2Q’08 2Q’09 Variation 1Q’09 (18)% volumes in 2Q’09 versus 2Q’08 Notable improvement of volumes in June Sales …………. 1,509 1,167 (23)% 1,092 > Sharp decrease of caustic soda prices EBITDA ……… 1
Slide 13: +€135m free cash flow on 1H'09
+€135m free cash flow on 1H’09 Working capital Rec. reduction capex* Inventory level in €m -20% (125) Tax & +220 debt 1,026 816 (38) NR items 12/31/08 06/30/09 (30) Other items EBITDA (19) Free cash flow** 127 +135m * Excluding capex related to the acquisition of assets (included in M&A) ** Free cas
Slide 14: Net debt less than 1.5xEBITDA
Net debt less than 1.5xEBITDA* Net debt in €m €0.60/share €1.1bn syndicated credit line > bears short term interests Geo Specialty Chemicals’ > at 32.5 basis points organic peroxides > maturity***: March 2013 FCF** Dividend Others (135) M&A 36 (4) 28 495 420 12/31/2008 06/30/2009 * EBITDA over 12 pr
Slide 15: 2009 outlook
2009 outlook > Worst quarters in volumes behind us Decreasing de-stocking effects Improving market conditions in China > Maintain cautious approach of economic environment for 2H’09 Confirm priority on cash generation Continue to improve aggressively fixed cost position > Pursue in-depth transformat
Slide 16: Mid-term strategy > A far better company after the crisis
Mid-term strategy > A far better company after the crisis
Slide 17: A step by step transformation
A step by step transformation 2011 A leading chemical player Growth and performance 2008 First step fully achieved A more solid and focused 2005 Group initiating a targeted growth Prepare Arkema for independence Strong assets but a significant profitability gap with peers 17
Slide 18: Lowering the breakeven point: a strong track record
Lowering the breakeven point: a strong track record Cumulated fixed cost savings Headcount -23% > €400m 18,377 423 17,044 15,194 14,983 337 14,156 230 120 2005 2006 2007 2008 1H’09 2005 2006 2007 2008 1H’09 18
Slide 19: New initiatives announced in 1H'09
New initiatives announced in 1H’09 > Disposals in Vinyl Products Vanzaghello (It) site in Vinyl Compounds Aluminum chloride marketing assets in Europe and €70m sales Indian subsidiary Heating & Sanitary pipes > Reorganize North American operations -10% headcounts (headquarters and production sites)
Slide 20: €600m fixed cost savings in 2006-2010
€600m fixed cost savings in 2006-2010 Cumulated fixed cost savings (in €m) 50 > Other productivity 57 initiatives > Major announced plans: NA reorganization €263m 120 Methacrylates in Europe (*) in 2009 PVC downstream and 2010 Shared Service Centers Fixed cost 600 savings 86 > Already achieved in 1H
Slide 21: Maintain capex efforts in China
Maintain capex efforts in China €260m CAPEX in 2009 (€330m in 2008) Changshu: Arkema’s future MHSE 3rd worldwide industrial site Coatex €140m 2011 €50m > 3 major projects Fluorogas Fluoropolymer PVDF HFC-125 in Changshu (China) 2011 €70m 2010 3rd generation of fluorogases Polyamides (HFC125): partne
Slide 22: Continue to leverage R&D unique opportunities
Continue to leverage R&D unique opportunities > Over 2.5% of sales invested in R&D Acquisition of Oxford >40% in Performance Products Performance Materials 10% in corporate R&D for breakthrough projects Founded in 2000 Based in Enfield (USA) Development and marketing of high > Two main R&D long term
Slide 23: Building a leading chemical player
Building a leading chemical player Mid-term Vinyl Products Five core technology platforms Specialty niches % of total ~ 15% ~ 55% ~ 30% sales ls Organic peroxides, Key s a tes i ca ls i ca es Caustic soda, lic ryl m e m id molecular sieves, product y c e h m PVC Ac r tha i och r oc oly a glass coati
Slide 24: A clear path forward
A clear path forward A more Reduce weight to 15% of total sales Vinyl competitive Improve efficiency and reliability Products & focused Be attentive to evolution of the competitive landscape segment Consolidation of MMA / PMMA Technology Growing Leverage positions of Fluorochemicals and from a very
Slide 25: Keeping a very healthy balance sheet
Keeping a very healthy balance sheet Net debt* in €m 615 23% 420 > Non recurring cash outflows €(175)m gearing mainly restructuring charges > M&A net cash outflows €(188)m > Return to shareholders** €(100)m Spin-off 06/30/2009 * Net debt = net debt + NR pre spin-off items ** Dividends (€82m) and sha
Slide 26: Acquisition of part of Dow Chemical acrylic assets
Acquisition of part of Dow Chemical acrylic assets > A major milestone in Arkema’s transformation
Slide 27: Acrylic chain
Acrylic chain Latex resins Other (water treatment, plastic additives,…) Others Detergents 11% Acrylic Plastic 5% Hygiene Esters additives 35% 5% (SAP) Water treatment 6% Crude Acrylic Acid 9% Adhesives 29% Glacial Acrylic Acid Coatings Super absorbent polymers (SAP) Long term growth prospect: ~4% pe
Slide 28: Acrylic monomers
Acrylic monomers Worldwide market : 4.2 MT Europe BASF US Dow / R&H 1.3 1.1 Clear Dow / Sto Lake R&H Supply Demand Haas* Others Asia 1.3 1.2 Arkema FPC Nippon Supply Demand Shokubai BASF American BASF Acryl StoHaas* 2.4 1.9 LG Jiangsu Chemi- Jurong Supply Demand cals 50/50 JV between Arkema / Nippon
Slide 29: US acrylic polymer market
US acrylic polymer market US architectural coating latex market Latex industry landscape Latex chemistries offered Producer SB PVAc VA VAE VV SA AA Dow/ R&H Dow divested assets Wacker-Chemie BASF Dow / Dow Wacker BASF Others R&H divested Chemie assets Source: Kline and company data 29
Slide 30: Arkema's current position in Acrylics
Arkema’s current position in Acrylics A strong monomer production Downstream integration in asset base specific acrylic-based polymers > #4 worldwide in acrylic acid > Specialty Acrylic Polymers BU > ~€600m sales in 2008 Dispersants and thickeners ~€150m sales > A first-quartile site in Europe Acqui
Slide 31: Arkema long term strategy in acrylics
Arkema long term strategy in acrylics > Secure competitive and world-scale monomer production base in each geographical area Permanent optimization of Carling (Fr), first quartile site Expand in North America Secure capacities in Asia > Strengthen downstream integration Bolt-on acquisitions LT partn
Slide 32: Highlights of the deal
Highlights of the deal > Monomer and polymer businesses: an integrated chain 2009 Monomer sales: ~US$ 225m* Consolidated Sales: ~US$ 450m* 2009 Polymer sales: ~US$ 290m* (historical level >US$ 700m) 270 employees Alsip, IL > Asset deal Polymer production site Cary, NC Enterprise value = US$ 50m Torr
Slide 33: Dow acrylic assets included in the deal
Dow acrylic assets included in the deal Monomers Latex > 1 world-scale production > 3 production sites close to customers site in Clear Lake (Texas) Alsip (Illinois) Torrance (California) > ~ 280kt/year production St. Charles (Louisiana) capacity (eq. cAA) > Well-recognized brand name: UCAR®* > A so
Slide 34: Benefits from the deal
Benefits from the deal > Strengthening Arkema’s worldwide position in acrylic monomers Acrylic Acid capacity becoming #3 worldwide becoming #2 in the US > Increasing downstream integration Clear lake Grow a position in a new polymer chain 30% downstream integration after this acquisition BASF DOW+R&
Slide 35: Significant potential for EBITDA margin
Significant potential for EBITDA margin > Acquisition in low cycle conditions > Leverage on manufacturing best practices Process efficiency Production costs optimization Yield and logistic > Optimize production and maintenance fixed costs > Synergies in R&D and SG&A > Positive contribution to net in
Slide 36: 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