Synthomer Plc · LSE:SYNT
Synthomer — Yule Catto & — H1 2010 Earnings Presentation
38 slides from Synthomer's earnings presentation, August 2010
Slide 1: Yule Catto & Co plc Interim results presentation
Yule Catto & Co plc Interim results presentation August 2010
Slide 2: Introduction
Introduction Adrian Whitfield, Chief Executive Being part of all our lives 2
Slide 3: Key Themes
Key Themes • Continued strong progression in Group profitability • Business now clearly focused around core Polymers business • Significant and increasing exposure to high growth emerging markets • Geographic balance and market leadership positions create good growth dynamics • Strong balance sheet
Slide 4: H1 Highlights
H1 Highlights • A very good first half – Underlying PBT £24m up 26% – Underlying EPS up 26% – Builds on 27% increase in PBT delivered in 2009 • Polymer volumes continued to build through H1 • Strong increase in Polymers profitability year-on-year • Continued good progress in passing on increased raw
Slide 5: Yule Catto – Polymer Focused
Yule Catto – Polymer Focused Polymer Chemicals Pharma Chemicals 87% of Divisional Operating Profit • Water based polymers used • Manufacture of Active in a diverse range of applications Pharmaceutical Ingredients including: for both generic and ethical -Paints drug manufacture. Products -Adhesives i
Slide 6: Yule Catto – Sales Development 2006-2010
Yule Catto – Sales Development 2006-2010 Sales by Territory Sales by Territory Sales by Territory 2006 2009 H1 2010 USA USA USA UK UK UK 7% 7% 8% 12% Rest of World 16% Rest of World 13% Rest of World 11% 11% 8% Middle East Middle East Middle East 2% 5% 3% Europe Europe 35% Asia 36% 23% Europe Asia A
Slide 7: Interim Results
Interim Results David Blackwood, Finance Director Being part of all our lives 7
Slide 8: P&L - Underlying
P&L - Underlying 2010 H1 (£’m) 2009 H1 (£’m) Variance Underlying Underlying Total Sales 326.6. 264.3 +23.6% Operating Profit/(Loss) 28.7. 24.2. +18.6% Finance Cost (4.7) (5.2) Profit/(Loss) Before Tax 24.0. 19.0. +26.3%. Discontinued Operations - - Tax (4.8) (3.7) 20% rate Minorities (0.9) (0.7) Att
Slide 9: Consolidated Income Statement
Consolidated Income Statement 2010 H1 2009 H1 £’m £’m Und’lying Special IFRS Und’lying Special IFRS items items Total Sales 326.6 5.7 332.3 264.3 5.3 269.6 Operating Profit 28.7 12.7 41.4 24.2 1.5 25.7 Finance Cost (4.7) 4.2 (0.5) (5.2) (4.4) (9.6) Profit/(Loss) before tax 24.0 16.9 40.9 19.0 (2.9)
Slide 10: Special / Exceptional Items
Special / Exceptional Items • Gain of £12.7m on disposal of interest in Revertex Finewaters (of which £4.2m attributable to minorities), plus trading and Italian decommissioning costs • Finance £4.2m positive – Mark to market on US$ cross currency swaps – Does not qualify for “technical” hedge accou
Slide 11: Segmental Analysis
Segmental Analysis 300 278.8 Total Sales • Underlying group sales up 23.6% • Polymers sales up 28.4% 217.1 – Volume +9% 200 – Currency translation +2% £’m 100 33.8 35.7 11.5 14.1 0 • Group operating profit up £4.5m Polymer Pharma Impact • Polymer operating profit up £4.7m 29.2 24.5 Operating Profit
Slide 12: Cash Flow Statement
Cash Flow Statement H1 10 H1 09 2009 £’m £’m £’m Operating profit (before JV) 28.2 24.9 50.2 Movement in working capital (13.1) (5.2) 13.9 Depreciation 7.4 7.1 14.8 Capital expenditure (net) (4.6) (4.8) (8.6) Interest (4.6) (5.5) (10.5) Tax paid (5.6) (2.4) (6.8) Pension funding in excess of IAS19 c
Slide 13: Asset Disposals
Asset Disposals • Revertex Finewaters - Non-core downstream adhesives business - Consideration attributable to Yule Catto of £11m (8x EBITDA for 2009) - Long term contract to continue supplying raw material to Finewaters from existing Malaysian Polymers facility • Land disposals - Italian land – sal
Slide 14: Operational Review
Operational Review Adrian Whitfield, Chief Executive Being part of all our lives 14
Slide 15: Yule Catto – Operating Profit Development 2006-2010
Yule Catto – Operating Profit Development 2006-2010 Operating Profit Split Operating Profit Split Operating Profit Split FY 2006 FY 2009 H1 2010 Pharma Pharma Pharma 17% 9% Impact 9% Impact Impact 4% 2% 3% Polymer Polymer Polymer 88% 81% 87% *£43.0 million *£51.4 million £28.7 million *includes dive
Slide 16: Developing World Sales (H1 2010)
Developing World Sales (H1 2010) Average GDP growth for 05-09 Middle East South East China 8 11% Asia 56% Southern Others Africa 4 11% South East Asia 5 China 10% Middle East 5 Southern Africa Europe/USA 1 12% % 45% of Group Sales Being part of all our lives 16
Slide 17: Polymer Chemicals
Polymer Chemicals Being part of all our lives 17
Slide 18: Polymers – Sales by Territory
Polymers – Sales by Territory H1 2010 Asia 36% West Europe 42% East Europe 4% South Africa Americas and Middle 6% East 12% Being part of all our lives 18
Slide 19: Polymers – H1 Sales by Product
Polymers – H1 Sales by Product Dispersions 29% Latex 41% Nitrile 47% Compounds 9% SBR 53% Specialities* 21% Being part of all our lives 19
Slide 20: Operational Review - Polymers
Operational Review - Polymers • Operating profit increased 19% to £29.2m • 9% volume increase – Year-on-year growth in all areas of the world – Strong demand in the Middle East and Asia – We require additional Latex and Dispersion capacity in Asia • Material costs have risen sharply through H1 – Sig
Slide 21: Operational Review - Polymers
Operational Review - Polymers • Enhanced geographic capability – Egyptian compound facility will be commissioned in Q4 – Construction of a 15% increase in Asian Nitrile Latex capacity underway. Expect to commission in Q1 2011 – Detailed planning in hand for a further increase of 25% in Nitrile Latex
Slide 22: Polymers – Market Positioning
Polymers – Market Positioning Dispersions: Coatings Open market position in: A range of aqueous UK >45% polymers used in the Malaysia 60% manufacture of paint, S. Africa 36% wood stain etc Saudi Arabia >50% Cont. Europe <5% Latex: Vietnam 25% Dipped Goods Nitrile latex for thin Market Leader: 27% wa
Slide 23: Polymers - Volume Development
Polymers - Volume Development Dispersions Latex 240 300 230 280 260 220 240 210 220 '000 MT '000 MT 200 200 190 180 180 160 170 140 160 120 150 100 '01 '02 '03 '04 '05 '06 '07 '08 '09 '01 '02 '03 '04 '05 '06 '07 '08 '09 3% CAGR over 8 years 6% CAGR over 8 years 6% CAGR ‘01 – ‘07 10% CAGR ‘01 – ‘07 B
Slide 24: Polymers - 6 Year History
Polymers - 6 Year History Sales Operating Profit 550 60 507 54 500 455 450 425 50 399 400 42 365 41 39 £'m £'m 350 316 40 34 300 250 30 28 200 150 20 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 7% CAGR in 5 years 14% CAGR over 5 years Being part of all our lives 24
Slide 25: Pharma Chemicals
Pharma Chemicals Being part of all our lives 25
Slide 26: Pharma – H1 2010
Pharma – H1 2010 Sales by Market Sales by Territory Ethical USA 24% 20% Europe 49% Rest of World Generic 31% 76% (“Generic” - producers of off-patent drugs) Being part of all our lives 26
Slide 27: Pharma – Near Term Strategy
Pharma – Near Term Strategy • Continue to expand product range • Maximise asset utilisation • Drive further low cost sourcing / manufacture Being part of all our lives 27
Slide 28: Operational Review – Pharma Chemicals
Operational Review – Pharma Chemicals • Profitability declined slightly to £3.0m – Sales decreased 5.3% – Manufacturing costs controlled • Sales improved in Q2 – Strong order book – Environment remains competitive • We have created a Sales and Marketing JV with Synthetics International – Good qualit
Slide 29: Impact Chemicals
Impact Chemicals Being part of all our lives 29
Slide 30: Impact – Operational Review
Impact – Operational Review • William Blythe the only remaining business • Underlying profit progressed 76% (£0.9m £1.6m) – Demand strengthened through H1 – Several projects in the pipeline to further increase profitability • Anticipate current profitability run rate continuing for the full year B
Slide 31: Summary
Summary • A very good first half • Company focused on growth driven by Polymers • Strong financial position • Recommencement of dividend with a 2p/share interim Being part of all our lives 31
Slide 32: Summary
Summary • Yule Catto’s Key Growth Drivers are: – Excellent products and market positions – High and growing percentage of sales to Asia and other high growth economies – Strategy of expanding around existing hubs, particularly in developing economies – Solid new product development pipeline Being pa
Slide 33: Current Trading & Outlook
Current Trading & Outlook • Global growth patterns remain mixed: – Europe and North America stable – Robust growth in Asia • July and August in line with expectations • Raw material price increases now ameliorating after rapid increases through H1 • Confident about medium term prospects Being part o
Slide 34: Appendices
Appendices Being part of all our lives 34
Slide 35: Raw Material Prices 2000-2010
Raw Material Prices 2000-2010 2000 1800 1600 Euro/Tonne 1400 1200 1000 800 600 400 200 0 Q100 Q3 00 Q101 Q3 01 Q102 Q3 02 Q103 Q3 03 Q104 Q3 04 Q105 Q3 05 Q106 Q3 06 Q107 Q3 07 Q108 Q3 08 Q109 Q3 2009 Q110 Vinyl Acetate Butadiene Acrylonitrile Styrene BA Being part of all our lives 35
Slide 36: UQUIFA Short Term Development Pipeline
UQUIFA Short Term Development Pipeline Product Brand Name US Patent Expiry 2009 US Sales $m Lamotrigine Lamictal 2009 1,157 Lansoperazole Prevacid 2009 3,368 Venlafaxine Effexor XR 2013 2,914 Famotidine Repacid 2009 136 Pantoprazole (NI) Protonix 2010 1,964 Quetiapine (NI) Seroquel 2011 4,262 Levofl
Slide 37: UQUIFA Short Term Development Pipeline
UQUIFA Short Term Development Pipeline Product Brand Name US Patent Expiry 2009 US Sales $m Solifenacine Vesicare 2015 65* Cinacalcet Sensipar 2015 377 Ezetimibe Zetia 2016 1400 Tenofovir Viread 2018 667 Erlotinib Torceva 2020 137 Dexlanzoperazole Dexlantia 2020 23 Being part of all our lives 37
Slide 38: Yule Catto – An Excellent Position in Developing Markets
Yule Catto – An Excellent Position in Developing Markets (2009) Regional sales as % of Total ASIA / ROW EUROPE AMERICAS 44% 70% 84% 29% 57% 63% 28% 54% 44% 27% 53% 39% 25% 52% 37% 24% 50% 35% 21% 49% 33% 20% 48% 30% 19% 48% 29% 17% 43% 29% 17% 41% 28% 15% 39% 28% 13% 39% 25% 8% 16% 18% 2% 3% 7% Sour