Elementis Plc · LSE:ELM
Elementis — Merger or Acquisition (July 2018)
27 slides from Elementis's merger presentation, July 2018
Slide 1: Elementis' Proposed $600M Acquisition of Mondo Minerals
ELEMENTIS’ PROPOSED $600M ACQUISITION OF MONDO MINERALS July 2018 | London Enhanced Performance Through Applied Innovation 1
Slide 2: Cautionary statement
Cautionary statement NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF
Slide 3: Cautionary statement continued
Cautionary statement continued . This presentation includes certain combined or pro forma financial information for the Group and Mondo. Such combined or pro forma financial information is preliminary in nature, only represents current estimates of the potential impact of the proposed acquisition on
Slide 4: Why Mondo Minerals?
Why Mondo Minerals ? ✓ Premium performance additives business ✓ Attractive growth opportunities ✓ Material Elementis synergy potential ✓ Positive financial impact Enhanced Performance Through Applied Innovation 4
Slide 5: Premium, value-in use additive franchise
Premium, value-in use additive franchise TALC CUSTOM FORMULATED ALONG FOUR DIMENSIONS: 1 PURITY 2 PARTICLE SIZE AND DISTRIBUTION T R A N S F O R M AT I O N 3 BRIGHTNESS 4 LAMELLARITY HIGHLY VALUED ATTRIBUTES MONDO PORTFOLIO MONDO ADVANTAGES FOR EACH APPLICATION (number of products) High stiffness
Slide 6: Quality, reliability and service
Quality, reliability and service DRIVE DIFFERENTIATION AND VALUE FOR CUSTOMERS IMPORTANCE CLIENTS’ DEMANDS KEY PURCHASING CRITERIA SUPPLY CONSISTENCY CONSISTENT 97% PURITY Partner of choice – SUPPLY RELIABILITY >90% OWN ORE SOURCING; GLOBAL HUB IN AMSTERDAM #1 best-in-class supply and services TECHN
Slide 7: Diverse customer base, high retention
Diverse customer base, high retention FRAGMENTED CUSTOMER BASE WITH THE EXCEPTION OF PAPER HIGH CUSTOMER STICKINESS 2017 talc sales per vertical and customer in €m Industrial talc sales in €m 100 TOTAL: 90 €95m €25m Over 40 years 100% relationship serving 80 Won c. 25% SMALL ACCOUNT >10 the industry
Slide 8: Rigorous supplier qualification process
Rigorous supplier qualification process SWITCHING BETWEEN TALC SUPPLIERS – COSTLY AND TIME CONSUMING COMMERCIAL PUSH / REFERENCING AS COMMERCIAL QUALIFICATION PRODUCTION TESTING SUPPLY OF SAMPLES POTENTIAL SUPPLIER NEGOTIATIONS AS SUPPLIER AND DELIVERIES After phase(s) of Talc product becomes part o
Slide 9: Pricing is value based
Pricing is value based STABLE AND DIFFERENTIATED BY APPLICATION VALUE BASED PRICING STABLE AND CONSISTENT PRICING Average price index (rebased to 100) Average price € / tonne for industrial talc and paper talc over time INDUSTRIAL TALC Appplication 5 / Product 5 275-300 Appplication 4 / Product 4 23
Slide 10: Resilient Mondo performance through GFC
Resilient Mondo performance through GFC SALES DECLINED C. 20% EBITDA FLAT, RESUMED GROWTH IN 2010 Talc sales in €m and year-over-year change Reported talc EBITDA (22%) 9% 124 97 106 2008 2009 2010 AVERAGE PRICE INCREASE Average talc selling price in € / tonne and year-over-year change 9% 1% 269 272
Slide 11: Material business transformation
Material business transformation SHIFT TO HIGH GROWTH INDUSTRIAL APPLICATIONS MONDO INDUSTRIAL TALC SALES INCREASING EVERY YEAR SINCE 2009 GROWTH AHEAD OF MARKET Mondo industrial talc and paper talc sales in €m Total industrial and paper sales in €m Talc sales 2013-2017 CAGR 124 120 8% 5% 95 90 84 M
Slide 12: Growth across all industrial segments
Growth across all industrial segments CONSISTENT GROWTH ACROSS EACH SEGMENT WITHIN INDUSTRIAL TALC POST 2009 Mondo industrial talc sales by segment in €m 2009-2017 CAGR 2009-2017 CAGR 95 90 2008-2009 change 9% 84 74 20% Plastics (19%) 70 64 67 60 57 49 5% Coatings Other 5% diversified 2008 2009 2010
Slide 13: Transformation led to improved profitability
Transformation led to improved profitability INDUSTRIAL TALC SHIFT DRIVES ABSOLUTE EBITDA GROWTH INDUSTRIAL TALC DRIVES SHIFT TO INDUSTRIAL TALC CONTRIBUTION MARGIN EBITDA PROGRESSION Talc sales split 2017 contribution margin per tonne Mondo EBITDA in €m and % of sales (€ / tonne rebased to paper) 2
Slide 14: A step change in 2018 trading
A step change in 2018 trading SALES EXPECTED TO INCREASE C. 15% YEAR OVER YEAR EXISTING CUSTOMER GAINS Growing industrial talc volumes Expanding to new geographies with existing customers Recent innovations getting specified: low oil absorption and heat treated antimicrobial talc Incremental
Slide 15: Compelling growth opportunity
Compelling growth opportunity Market led Cost and revenue Accelerated growth synergies innovation Coatings and Talc Growing share Cost Personal care Ongoing Elementis penetration of wallets Synergies Revenue trials expertise Synergies QUALITY T R A N S F O R M AT I O N 2018 TRADING GROWTH Enhanced P
Slide 16: Structural trends driving talc application growth above underlying end markets
Structural trends driving talc application Market led growth Cost and revenue synergies Accelerated innovation growth above underlying end markets EXPECTED KEY MARKET DRIVERS MONDO – SCOPE TO GROW ABOVE MARKET MARKET GROWTH Vehicle production growth c. +2% High quality and consistency PLASTICS c
Slide 17: Unlocking synergy potential
Unlocking synergy potential Market led growth Cost and revenue synergies Accelerated innovation C. $20-25M REVENUE SYNERGIES IDENTIFIED TO BE REALISED BY 2023 COST COATINGS PERSONAL CARE SYNERGIES REVENUE SYNERGIES REVENUE SYNERGIES Single corporate overhead structure Top-line growth via new rel
Slide 18: Opportunity to globalise and accelerate talc sales outside of Europe
Opportunity to globalise and accelerate talc sales outside of Europe North America Europe APAC 34x 2x 27x 32x 2x 35x 20x 1x 16x Elementis vs Mondo LATAM MEA 2017 sales ratio 15x 7x Salesforce FTE ratio 10x 4x R&D staff ratio 1x - Note: Mondo sales converted into $ using average 2017 exchange rate of
Slide 19: Innovation to create growth
Innovation to create growth Market led growth Cost and revenue synergies Accelerated innovation UNLOCKING OPPORTUNITIES THROUGH EXPERTISE IN SURFACE CHEMISTRY MODIFICATION Treat talc surface to compensate for removal of coalescents in low VOC paints Leverage talc’s hydrophobic, anti-corrosive an
Slide 20: Medium term financial framework
Medium term financial framework Revenue Revenue growth 5-7% p.a. over the medium term excluding synergies EBITDA expected to be driven by a number of factors, including: − Continued positive mix shift to industrial talc EBITDA − Operating leverage: fixed costs pre synergies growing slower than s
Slide 21: Material deleveraging profile
Material deleveraging profile NET DEBT / EBITDA c. 2.75x2 <2.25x <1.75x c. 1.40x1 Expected Elementis Expected Expected Expected Net Debt at Net Debt post Net Debt Net Debt transaction transaction (Dec 2019) (Dec 2020) (Sep 2018) (Sep 2018) Source: Mondo, company 1. Based on standalone Elementis Sept
Slide 22: Additional Materials
Additional Materials Enhanced Performance Through Applied Innovation 22
Slide 23: Growing into a customer's global footprint
Growing into a customer’s global footprint CONTINUED SUCCESS IN 2018 ON THE BACK OF PROVEN PRODUCT QUALITY PROGRESSIVELY GROWING INTO A PLASTICS CUSTOMER’S GLOBAL FOOTPRINT QUALITY DRIVING GROWTH Country First win on product quality and consistency (Mondo’s estimated share of site potential in 201
Slide 24: Favourable structural trends driving talc volumes growth above end markets
Favourable structural trends driving talc volumes growth above end markets FAVOURABLE STRUCTURAL SHIFTS DRIVING TALC VOLUMES TALC GROWTH AHEAD OF END MARKET % share of plastics in cars % talc penetration in auto plastics c. 15% c. 6% c. 9.5% c. 9.0% c. 8% c. 2% Expected growth Expected growth for fo
Slide 25: Other Minerals – ongoing monetisation of by-products
Other Minerals – ongoing monetisation of by-products OTHER MINERALS Other Minerals EBITDA in €m Natural generation of Other Minerals as a result of flotation process: Nickel, Cobalt, Magnesite 10 Limited incremental production and other costs 8 8 7 6 Long term offtake agreement for all produce
Slide 26: A well invested asset base
A well invested asset base CAPEX ANTICIPATED IN THE €10-11M RANGE CAPEX PROFILE DEPRECIATION AND AMORTISATION PROFILE Average historical and expected capex spend in €m Total D&A and D&A pre PPA D&A for Intangibles in €m Total capex c. €15m 14 13 14 Non-recurring Recurring capex c. €10-11m 16 15 14 4
Slide 27: SummitReheis integration complete
SummitReheis integration complete WHAT WE PROMISED WHAT WE DID DEAL COMPLETION Completion Q2 17 Integration by end 2017 Key account access I N T E G R AT I O N One Personal Care team Global manufacturing process VA L U E C R E AT I O N Up to $3 million cost savings per annum $5m identified Immediate