Lanxess Ag · XETR:LXS
Lanxess — Q3 2005 Earnings Presentation
40 slides from Lanxess's earnings presentation, November 2005
Slide 1: LANXESS Q3 2005 Results Roadshow
LANXESS Q3 2005 Results Roadshow New York / London, November 18-21 Matthias Zachert, CFO
Slide 2: Safe Harbour Statement
Safe Harbour Statement This Presentation contains certain forward-looking statements, including assumptions, opinions and views of the Company or cited from third party sources. Various known and unknown risks, uncertainties and other factors could cause the actual results, financial position, devel
Slide 3: Agenda
Agenda 1. Q3 2005 Review 2. Q3 2005 Financials 3. Restructuring and Portfolio Update 4. Outlook and Guidance Chart-No. 3
Slide 4: Q3 2005 Review
Q3 2005 Review Business Update – Overall good business momentum in Q3 2005 despite comparison to strong Q3 2004 – Risen raw material and energy costs were offset by selling price increases – Additional selling price increases were announced for many products, effective beginning to end of October –
Slide 5: Financial Highlights: Improved Performance and Sharply Reduced Net Debt
Financial Highlights: Improved Performance and Sharply Reduced Net Debt (€ m) Q3 2004 Q3 2005 ∆ in % – Strong sales -even compared to Sales 1,764 1,776 0.7% robust Q3 2004- with continued implementation of price before volume strategy EBITDA pre except. 105 148 41.0% Margin 6.0% 8.3% – Net income in
Slide 6: Agenda
Agenda 1. Q3 2005 Review 2. Q3 2005 Financials 3. Restructuring and Portfolio Update 4. Outlook and Guidance Chart-No. 6
Slide 7: Performance Improvement Measures Overcompensate Summer Weakness
Performance Improvement Measures Overcompensate Summer Weakness (€ m) Q3 2004 Q3 2005 ∆ absolut ∆ in % Sales 1,764 1,776 12 1% – Price increases (+10%) and slightly stronger Cost of goods sold -1,395 -1,400 5 0% U.S. Dollar offset lower SG&A -279 -274 -5 -2% volumes (-10%) R&D -29 -24 -5 -17% – Rise
Slide 8: Q3 2005 Sales Variance by Segment
Q3 2005 Sales Variance by Segment (approximate numbers) (€ m) Q3 2004 Price Volume Currency Q3 2005 Performance Rubber 352 ~ +23% ~ -6% ~ +1% 414 Engineering Plastics 443 ~ +6% ~ -7% ~ +1% 441 Chem. Intermediates 416 ~ +4% ~ -15% ~ +0% 373 Perf. Chemicals 491 ~ +11% ~ -13% ~ +1% 489 LANXESS 1,764 ~
Slide 9: Performance Rubber: All Businesses on Track
Performance Rubber: All Businesses on Track (€ m) Q3 2004 Q3 2005 – All BUs contributed to increased sales on the basis of improved pricing with Sales 352 414 even higher volumes in BTR, overall fully EBIT 18 offsetting increased raw material costs 21 – Lower volumes due to comparison with Depr. / A
Slide 10: Engineering Plastics: STY Back in Black
Engineering Plastics: STY Back in Black (€ m) Q3 2004 Q3 2005 – Improved pricing in STY and stronger volumes in SCP offset impact from weak Sales 443 441 FIB EBIT 0 3 – Only slightly improved results on the basis of sound development in STY with raised Depr. / Amort. 13 11 prices, supported by easin
Slide 11: Chemical Intermediates: Good BAC Performance
Chemical Intermediates: Good BAC Performance Backed by Improved FCH and Stable IPG Business – As anticipated, volumes in BAC and FCH (€ m) Q3 2004 Q3 2005 comparably lower due to absence of summer- weakness in 2004, however slightly offset by Sales 416 373 increased prices EBIT 14 39 – EBITDA increa
Slide 12: Performance Chemicals: Effective Cost Management and Improvements in Several BUs
Performance Chemicals: Effective Cost Management and Improvements in Several BUs (€ m) Q3 2004 Q3 2005 – Stable Sales due to lesser seasonality in performance chemicals (specialities Sales 491 489 businesses) EBIT -16 38 – Stronger pricing mainly in RUC and FCC offset decreased volumes primarily in
Slide 13: Balance Sheet Has Been Strengthened
Balance Sheet Has Been Strengthened Dec 31, June 30, Sept 30, Dec 31, June 30, Sept 30, (€ m) 2004 2005 2005 (€ m) 2004 2005 2005 Non-current Assets Stockholders’ equity 1,365 1,225 1,422 Intangible assets 65 60 57 thereof Minority interest 14 15 17 Property, plant & equipment 1,521 1,517 1,514 Inve
Slide 14: Substantial Improvement in Net Financial Debt in Q3
With Substantial Improvement in Net Financial Debt in Q3 We Get Prepared for 2006 (€ m) -211 -102 -136 10 Incl. €30 m 1250 cash outflow from payment term 811 adjustment with Bayer June 30, 2005 Mandatory WC reduction Cash from Others/ Sept 30, 2005 convertible operations Currency excl. WC Exemplary
Slide 15: Improved Cash Flow
Improved Cash Flow: Stronger Operating Results Combined with Improved Working Capital Management (€ m) 9M 2004 9M 2005 EBIT 76 139 – Cashflow improved mainly Income Taxes -52 -72 on higher operating result Depreciation & Amortization 249 217 – Strong improvement in Change in Pension Provisions -27 0
Slide 16: 2nd Half-Year Effects and Better Working Capital Management
2nd Half-Year Effects and Better Working Capital Management % of sales**: 27.1% 21.7% 24.9% 25.4% 24.0% – Inventory: substantial Total WC* sequential decrease due to in € million: €1,769 €1,468 €1,714 €1,796 €1,701 tight management, planned 2500 maintenance turnarounds 2000 1217 1191 1212 – Receivab
Slide 17: Agenda
Agenda 1. Q3 2005 Review 2. Q3 2005 Financials 3. Restructuring and Portfolio Update 4. Outlook and Guidance Chart-No. 17
Slide 18: Restructuring: We Are Ahead of Our Plan
Restructuring: We Are Ahead of Our Plan Restructuring Achievements Phase I (initiated June 2005) − Phase II (initiated August/ September 2005) STY: − Agreement reached in STY, Tarragona: − Agreement reached for TRP, La Wantzenau, − annual worktime increased France: − reduction of annual bonus − head
Slide 19: Specialties - New Structure is a Prerequisite for Success
- New Structure is a Prerequisite for Success Challenge Approach Structure as per Q2 2006 BU Fine Chemicals Chemical conglomerate • Closures and consolidation • New business structure Pharma Agro Specialties Legacy asset structure • Establish own identity Unclear external profile Operations Customer
Slide 20: Fibers - First Adjustment to the Portfolio
Fibers - First Adjustment to the Portfolio Sale of Dorlastan Fibers business to Cornerstones: Asahi Kasei Fibers planned − Agreement is expected to be signed shortly; transaction subject to approval of authorities FIB − Purchase price not disclosed − ~280 employees in Dormagen, Germany (thereof ~170
Slide 21: Agenda
Agenda 1. Q3 2005 Review 2. Q3 2005 Financials 3. Restructuring and Portfolio Update 4. Outlook and Guidance Chart-No. 21
Slide 22: Business Outlook I
Business Outlook I – No noteworthy competitive capacity additions expected to come on stream in BTR and PBR midterm - therefore supply / demand is Performance expected to remain well balanced Rubber – New capacity additions at the Sarnia and Zwijndrecht BTR sites in ‘06 and ‘07 are going to support
Slide 23: Business Outlook II
Business Outlook II – We expect to continuously participate in the current cyclical upturn, by Chemical means of utilization of the outstanding market positions in BAC and IPG- remain optimistic for 2006 - balanced markets expected Intermediates – Restructuring and stand-alone strategy of FCH to lea
Slide 24: Outlook
Outlook Underlying assumptions – Exchange rate €1.0 = ~USD1.25 – Continuous supportive economic environment – Q4 somewhat weaker business versus Q3 – Only minor restructuring expenses expected Q4 2005 2005 Guidance based on above assumptions – Q4 expected with slightly weaker sales compared to previ
Slide 25: Financial Calendar 2006
Financial Calendar 2006 Full Year Results 2005 April 4, 2006 Q1 Results 2006 May 18, 2006 Q2 Results 2006 August 16, 2006 Q3 Results 2006 November 15, 2006 2nd Annual General Meeting May 31, 2006 Chart-No. 25
Slide 26: Contact Details
Contact Details Michael Pontzen (Head of IR) Oliver Stratmann Tel.: +49-214 30 43804 +49-214 30 49611 Fax.: +49-214 30 959 43804 +49-214 30 959 49611 Mobile: +49-175 30 43804 +49-175 30 49611 Tanja Satzer Dr. Gerd Zelesny Tel.: +49-214 30 43801 +49-214 30 71416 Fax.: +49-214 30 959 43801 +49-214 30
Slide 27: Independence. Restructuring. Portfolio.
INDEPENDENCE. RESTRUCTURING. PORTFOLIO.
Slide 28: Appendix
Energizing Chemistry Appendix
Slide 29: Built on Polymers and Chemicals
Built on Polymers and Chemicals Performance Engineering Chemical Performance Rubber Plastics Intermediates Chemicals Independence. Cost Reduction. Portfolio Management. Chart-No. 29
Slide 30: Entrepreneurial and Experienced Board Directly Connected to BUs
Entrepreneurial and Experienced Board Directly Connected to BUs Board of Management Material Protection Butyl Rubber Styrenic Resins Basic Chemicals Products Polybutadiene Rubber Semi-Crystalline Products Fine Chemicals Functional Chemicals Technical Rubber Products Fibers Inorganic Pigments Leather
Slide 31: LANXESS - a global player in the chemical industry
LANXESS - a global player in the chemical industry Global presence LANXESS Bayer Agency Other Assets by region Sales by region Employees by regions Asia 4% Asia 15% Asia 10% Americas Germany Americas 22% Germany Americas 24% 20% Germany 51% 26% 51% EMEA w/o EMEA w/o Germany 23% Germany 19% EMEA w/o
Slide 32: Strong Foundation, but Unsatisfactory Profitability in 2004
Strong Foundation, but Unsatisfactory Profitability in 2004 EBITDA Margin* 2004 Profitability Distribution LANXESS Sales Share EBITDA Margin* BASF 19.5% ~ 30% >10% Degussa 14.6% Ciba 14.3% ~ 30% 5-10% DSM 13.1% Clariant 11.1% ~ 40% <5% Rhodia 8.4% LANXESS 6.6% Æ ~12.5% *EBITDA pre exceptionals in %
Slide 33: LANXESS is a new company – Built on Polymers and Chemicals
LANXESS is a new company – Build on Polymers and Chemicals Bayer 2003 Spin-off: A new company HealthCare Polymers Performance Rubber Chemical Intermediates 35% Poly-Butadiene Basic Chemicals Rubber Fine Chemicals 32% Butyl Rubber Inorganic Pigments 11% Technical Rubber Products 9% 21% 12
Slide 34: Well Established Brands for Diversified Industry Portfolio
Well Established Brands for Diversified Industry Portfolio Brands End User Industries Others* Chemicals / Plastics Textile Leather (*) Electronic Automotive / Paper Transportation Life Science Construction Tire . * – Water Treatment . – Nutrition . – Furniture – Hygienics – Coatings – Packaging – He
Slide 35: Exceptional Items Incurred in Q3 2004 and 2005
Exceptional Items Incurred in Q3 2004 and 2005 (€ m) Q3 2004 Q3 2005 Exceptional thereof D&A Exceptional thereof D&A Performance Rubber 1 0 4 0 – “Rubber” Litigation – Capex write-off and Engin. Plastics 2 2 3 3 amendment to 2003 impairment in 2004 Chemical Intermediates 7 7 2 2 – Capex write-off –
Slide 36: Update on Impacts due to U.S.-Hurricanes
Update on Impacts due to U.S.-Hurricanes • No impact from hurricane „Katrina“ • Impacts from hurricane „Rita“ less significant than expected. By end of October, both sites were again fully operational • Financial P&L impact: additional low single digit million expenses • Continous high and volatile
Slide 37: LANXESS' Long Term Incentive and Employee Participation Programmes finalized
Reminder: LANXESS’ Long Term Incentive and Employee Participation Programmes finalized • Long Term Incentive Programme consisted of: • Stock Performance Plan (SPP) • and Economic Value Plan (EVP) • Condition to participation: personal investment (40%* of one annual fixed salary in three tranches) •
Slide 38: LANXESS LTIP's on Board Level: SPP and EVP
LANXESS LTIP’s on Board Level: Stock Performance Plan (SPP) and Economic Value Plan (EVP) • Condition to participation: Personal investment (40% of one annual fixed salary in three tranches) • Stock Performance Plan (SPP) • Benchmark: Outperformance of the DJ global STOXX 600 Chemicals index (index+
Slide 39: Quarterly Overview 2004/2005
Quarterly Overview 2004/ 2005 Q1 Q2 H1 Q3 9M Q4 FY Sales 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2004 Perf Rubber 326 392 368 432 694 824 352 414 1046 1238 385 1431 Eng Plastics 407 414 431 448 838 862 443 441 1281 1303 441 1722 ChemIntermed 366 389 320 406 686 795 416 373 1102 1168 3
Slide 40: Sound Financing Structure
Sound Financing Structure Main Financing Components €1,250 m Revolving Credit Facility 5-year maturity with two one-year extension options Improved terms and conditions vs. prior €1.5 bn facility Signed on October 5, 2005 €500 m Debut Eurobond Seven-year tenor, maturing on June 21, 2012 4.125% coupo