Solvay Sa · EURONEXT:SOLB
Solvay Sa — Q2 2016 Earnings Presentation
43 slides from Solvay Sa's earnings presentation, Jul 29, 2016
Slide 1: Q2 & H1 2016 Results
Q2 & H1 2016 July 29 2016 RESULTS
Slide 2: Safe Harbor
SAFE HARBOR This presentation may contain Consequently, actual results or future forward-looking information. Forward- events may differ materially from those looking statements describe expectations, expressed or implied by such forward- plans, strategies, goals, future events or looking statements
Slide 3: Forenote
FORENOTE The results of former Cytec are consolidated in the Group’s income and cash flow statements since January 1, 2016. Comparative information for the second quarter and first half year of 2015 is presented on an unaudited pro forma basis as if the acquisition of Cytec had taken place on Januar
Slide 4: Overview: Transformation delivery
OVERVIEW • Transformation delivery • Financial highlights • Priorities and outlook • Annexes Q2 2016 results 4 29/07/2016
Slide 5: Executing our plan
EXECUTING OUR PLAN Significant cash generation improvement Profit growth and record margin Q2 2016 Sustained excellence efforts Accelerated synergies from Cytec Delivering on priorities Q2 2016 results 5 29/07/2016
Slide 6: Q2 results: record margin and improved cash generation
Q2 RESULTS RECORD MARGIN & IMPROVED CASH GENERATION EBITDA Free Cash Flow [1] 8% 27% Pricing power Higher profits Positive for 10 quarters in a row Reduced CapEx Volume Working capital discipline Innovation-driven growth in Advanced Materials and solid growth in Performance Che
Slide 7: Recognition of Solvay's Advanced Materials
RECOGNITION OF SOLVAY’S ADVANCED MATERIALS Solvay and Mubadala JV strategically positioned to supply advanced composite materials for Boeing 777X primary structures Solvay wins supplier excellence award from GKN Aerospace Q2 2016 results 7 29/07/2016
Slide 8: Overview: Financial highlights
OVERVIEW • Transformation delivery • Financial highlights • Priorities and outlook • Annexes Q2 2016 results 8 29/07/2016
Slide 9: Strong results: Financial highlights Q2 2016
STRONG RESULTS FINANCIAL HIGHLIGHTS Q2 2016 € 2.9 bn -6% € 652 m +8% Net Sales yoy Underlying EBITDA yoy Volume decrease in Advanced Pricing power Formulations offset by other segments Fixed costs lower on Excellence and Forex impact on conversion synergies delivery Deflation impact on pri
Slide 10: Sales down due to adverse forex and deflation
SALES DOWN DUE TO ADVERSE FOREX & DEFLATION Net sales in € m Volumes up slightly 3,135 (30) (116) Market contraction in Advanced 30 (74) 2,946 Cytec Scope Formulations’ oil & gas market stand-alone 460 (0.9)% Conversion forex Volume & mix Price More than offset by solid growth in other (2.4)%
Slide 11: Record EBITDA margin underpinned by excellence and synergies
RECORD EBITDA MARGIN UNDERPINNED BY EXCELLENCE AND SYNERGIES Underlying EBITDA Pricing power in € m € 15 m Pricing power maintained in 38 652 deflationary 603 (2) (21) 17 environment 2 (74) 89 Cytec Others Scope Fixed stand-alone Conversion Volume (including (0.4)% costs 102 forex & mix equity (3.
Slide 12: Market contraction oil & gas more than offset in other segments
MARKET CONTRACTION OIL & GAS MORE THAN OFFSET IN OTHER SEGMENTS ADVANCED Growth driven by Contraction oil & gas ADVANCED MATERIALS volumes and market partly mitigated FORMULATIONS 275 +6.3% 293 excellence, despite by other activities 139 -11% smart device 124 destocking 42% 17% Q2 Q2 2015 2015 Q2 Q2
Slide 13: Underlying net income reflecting higher operating profit
UNDERLYING NET INCOME REFLECTING HIGHER OPERATING PROFIT Underlying P&L in € m Q2 2015 (in € m) Q2 2016 % yoy Underlying net income (Solvay share) pro forma up 4% Net sales 2,946 3,135 (6)% EBITDA 652 603 8% Depreciation and net financial charges EBITDA margin 22% 19% 2.9pp slightly up on growing
Slide 14: Cash conversion improved driven by higher EBITDA and lower capex
CASH CONVERSION IMPROVED DRIVEN BY HIGHER EBITDA AND LOWER CAPEX Cash conversion [1] EBITDA-capex 66% [2] EBITDA 2016 53% Growth capex at >50% of total ~2/3rd in Advanced Materials (1,092) Aerospace prepreg line in Germany Capex Continuing ~(950) Q4 Expansion of Adhesives for operations (333) ae
Slide 15: Reinforced focus leads to sustainable free cash flow growth
REINFORCED FOCUS LEADS TO SUSTAINABLE FREE CASH FLOW GROWTH Underlying net debt [1] evolution in € m Free cash flow € 174 m (208) (61) (7,012) (6,761) 652 (92) - 10 (166) (215) (85) (86) Perpetual Perpetual Other Free cash Acquisitions Net Dividends: hybrid hybrid Taxes Changes in changes Changes in
Slide 16: Effective treasury management leading to reduced cost of debt
EFFECTIVE TREASURY MANAGEMENT LEADING TO REDUCED COST OF DEBT Underlying debt [1] (8.7) (8.2) @ 3.80% evolution @ 3.60% in € bn (2.2) @ 5.07% (2.2) EUR perpetual hybrid @ 5.07% bonds (2.1) 0.8 @ 4.03% @ 5.45% (2.1) USD bonds @ 4.03% EUR bonds [2] repaid in (3.6) (2.8) @ 2.88% H1 2016 @ 2.07% Other d
Slide 17: Overview: Priorities and outlook
OVERVIEW • Transformation delivery • Financial highlights • Priorities and outlook • Annexes Q2 2016 results 17 29/07/2016
Slide 18: Outlook reaffirmed for FY 2016
OUTLOOK REAFFIRMED FOR FY 2016 EBITDA to grow high single digits Free cash flow to exceed € 650 m Q2 2016 results 18 29/07/2016
Slide 19: Our commitment
OUR COMMITMENT Exceed expectations on Cytec synergies Excellence & portfolio optimization continuing Reinforced focus on cash generation Attractive returns to shareholders Q2 2016 results 19 29/07/2016
Slide 20: Investor relations contacts and next events
INVESTOR RELATIONS CONTACTS Maria Alcón-Hidalgo Jodi Allen Geoffroy Raskin Bisser Alexandrov +32 2 264 1984 +1 (973) 357 3283 +32 2 264 1540 +32 2 264 3687 [email protected] [email protected] [email protected] [email protected] NEXT EVENTS September 29 November 8
Slide 21: Annexes
ANNEXES • Additional Q2 2016 financial data • Forex sensitivity & other financial considerations • Solvay general information Q2 2016 results 21 29/07/2016
Slide 22: Advanced Materials Q2 2016
ADVANCED MATERIALS Q2 2016 INNOVATION & EXCELLENCE OVERCOME HEADWINDS Net sales (in € m) EBITDA (in € m) margin 1,138 (32) (35) 17 (6) 1,082 27% 44% 24% Scope Conversion Volume Price (2.8)% (0.5)% forex & mix 275 293 (3.1)% 1.5% 11% 1,082 +6.3% (4.9)% 26% 20% Q2 2015 Q2 2016 Specialty Polymers Q2 20
Slide 23: Advanced Formulations Q2 2016
ADVANCED FORMULATIONS Q2 2016 OIL & GAS HEADWINDS MASK OTHER MARKET GROWTH Net sales (in € m) EBITDA (in € m) margin 19% 19% 740 (4) (28) (32) (26) 650 62% Scope Conversion (0.6)% Volume forex Price 139 (3.8)% & mix (3.5)% 124 (4.3)% 650 -11% (12)% 13% 25% Q2 2015 Q2 2016 Q2 2015 Q2 2016 Novecare pr
Slide 24: Performance Chemicals Q2 2016
PERFORMANCE CHEMICALS Q2 2016 DEMAND IMPROVEMENT DRIVES GROWTH Net sales (in € m) EBITDA (in € m) 30% margin 25% 757 4 (28) 35 (14) 753 53% 224 Scope Conversion Volume Price 187 0.6% forex & mix (1.9)% (3.8)% 4.6% 753 11% +20% (0.5)% 18% 18% Q2 2015 Soda Ash & Derivatives Q2 2015 Q2 2016 Q2 2016 Per
Slide 25: Functional Polymers Q2 2016
FUNCTIONAL POLYMERS Q2 2016 EXCELLENCE-DRIVEN PROFIT GROWTH & RUSVINYL UP Net sales (in € m) EBITDA (in € m) margin 14% 499 11 (28) 461 Scope 76% 10% Conversion Volume Price 0.5% forex & mix (5.6)% (4.9)% 2.2% 64 52 461 (7.7)% +24% 24% Q2 2015 Polyamide Chlorovinyls Q2 2015 Q2 2016 Q2 2016 pro forma
Slide 26: Corporate & Business Services Q2 2016
CORPORATE & BUSINESS SERVICES Q2 2016 COST DISCIPLINE MAINTAINED EBITDA (in € m) Q2 2015 pro forma Q2 2016 -6% -50 -53 Difficult business conditions for Energy Other Corporate & Business Services Services with low energy & CO2 prices benefited from cost improvement programs and Trading conditions
Slide 27: IFRS net income reflecting higher operating profit
IFRS NET INCOME REFLECTING HIGHER OPERATING PROFIT Underlying P&L Q2 2015 (in € m) Q2 2016 % yoy in € m pro forma Net income, Solvay share 223 216 4% IFRS net income (Solvay share) up (Adjustments) (39) (78) 51% 34% PPA impact (68) (72) Other legacy costs related to € (68) m PPA impact, entirely f
Slide 28: Working capital management compensates for higher needs of specialty businesses
WORKING CAPITAL MANAGEMENT COMPENSATES FOR HIGHER NEEDS OF SPECIALTY BUSINESSES Net working capital [1] 17.5% 17.4% % of total sales H1 2016 inflated for 17.4% 2.8% by receivable on Inovyn exit price 14.8% 14.9% 15.0% 14.6% 13.7% 13.7% 13.4% 12.7% 12.5% Working capital management efforts offset
Slide 29: Debt profile balanced maturities allowing flexibility
DEBT PROFILE BALANCED MATURITIES ALLOWING FLEXIBILITY Repaid € 1,000 € 500 in January Euribor 5.43% $ 800 4.45% +82bp € 700 $ 800 € 750 Repaid 4.20% 3.40% 1.63% € 500 € 500 € 500 € 500 in June 5.13% 5.12% $ 400 5.87% 2.75% 3.50% $ 250 $ 82 3.95% 8.95% 2016 2017 2018 2019 2020 2021 2022 2023 2024 202
Slide 30: Net pension liabilities up on lower discount rates
NET PENSION LIABILITIES [1] UP ON LOWER DISCOUNT RATES Pensions (30/06/2016) in € bn Net pension liabilities increase at € 3.2 bn Net pension Pension liabilities up to € (6.1) bn following liabilities discount rates drop after Brexit vote (3.2) Pension assets stable at € 2.9 bn (6.1) 2.9 Cash co
Slide 31: Annexes: Forex sensitivity & other financial considerations
ANNEXES • Additional Q2 2016 financial data • Forex sensitivity & other financial considerations • Solvay general information Q2 2016 results 31 29/07/2016
Slide 32: Underlying EBIT(DA) considerations for 2016
UNDERLYING EBIT(DA) CONSIDERATIONS FOR 2016 Excellence Scope effects Excellence programs on course to reach Acquisitions in 2015 target Cytec full consolidation as of January 1, 2016 € 800 m cumulative by YE16 vs 2013 cost base Small acquisition in 2015: EPIC > € 600 m delivered in 2014-
Slide 33: Other EBIT(DA) considerations for 2016
OTHER EBIT(DA) CONSIDERATIONS FOR 2016 Forex sensitivity Underlying adjustments to IFRS figures Immediate impact on conversion exposure To improve comparability of results over periods Deferred transactional impact due to hedging Exclusion of ( 6-12 month rolling basis) Amortization of PPA
Slide 34: Underlying financial & tax considerations in 2016
UNDERLYING FINANCIAL & TAX CONSIDERATIONS IN 2016 Cost of borrowings Discounting of pensions and HSE Total underlying financial charges expected at ~€ (350) m P&L: ~€ (100) m (¾ - pensions, ¼ - HSE) (incl. perpetual hybrid bonds) Sensitivity to change in discount rates [1]: Financial charges f
Slide 35: Other considerations for 2016
OTHER CONSIDERATIONS FOR 2016 Discontinued operations Cash flow elements Indupa chlorovinyls business in Latin America Cash expenses for pensions: Agreement reached on 02/05/2016 to sell to € (180) m - € (200) m Brazilian chemical group Unipar Carbocloro for EV of US$ 202 m, subject to closing
Slide 36: Annexes: Solvay general information
ANNEXES • Additional Q2 2016 financial data • Forex sensitivity & other financial considerations • Solvay general information Q2 2016 results 36 29/07/2016
Slide 37: Solvay group in transformation
SOLVAY GROUP IN TRANSFORMATION Much stronger portfolio More global * ACQUISITIONS More diversified Ryton Rhodia Chem- logics PCC Re- frige- Higher sustainability rants Eco INOVYN Services (JV) DIVESTITURE More innovative S 2011 2012 2013 2014 2015 More resilient FURTHER UPGRADE TO COME FROM DIVESTIT
Slide 38: Diversified & resilient market exposure
DIVERSIFIED & RESILIENT MARKET EXPOSURE Balanced Diversified & higher growth regional profile end-markets Consumer Automotive & North goods Aeronautics America Europe & Healthcare 26% 27% 30% 21% Energy & Environment Industrial 8% applications Agro, 18% Feed & Food Latin Asia/Pacific America & RoW 1
Slide 39: Aligned business segments strategically coherent to drive results
ALIGNED BUSINESS SEGMENTS STRATEGICALLY COHERENT TO DRIVE RESULTS GROWTH RESILIENT CASH ENGINES CONTRIBUTOR 42% 20% ADVANCED ADVANCED PERFORMANCE FUNCTIONAL MATERIALS FORMULATIONS CHEMICALS POLYMERS EBITDA High performance Customized specialty Leading positions in Leading regional 2015 PF materials,
Slide 40: Unique lightweighting offering driving sustainable mobility
UNIQUE LIGHTWEIGHTING OFFERING DRIVING SUSTAINABLE MOBILITY Solvay’s unique portfolio Driving sustainable mobility BROADEST HIGH-PERF. POLYMER RANGE AUTOMOTIVE AEROSPACE Thermoplastic Thermoset Under the hood Primary structure & alloys Polymers Current Applications polymers & resins & Battery tray S
Slide 41: Broad offering of innovative formulations
BROAD OFFERING OF INNOVATIVE FORMULATIONS MODIFYING SURFACE CHEMISTRY & FLUID BEHAVIORS NEXT GENERATION SOLUTIONS FOR HOME IMPROVED RECOVERY FABRIC & PERSONAL AND YIELD CARE COMPETITIVE technology portfolio Leader in global markets & niche specialty technologies: NATURAL (GUAR) & MILD SYNTHETIC PH
Slide 42: Committed to sustainability
COMMITTED TO SUSTAINABILITY SOCIETAL ACTIONS Contribute to Society X2 Innovate Employees involved in societal actions Sustainable solutions Light-weighting materials Air and water care SOLVAY’S Sustainable energy Smart and efficient SPM Ecofriendly materials processes COMMITMENT BY 2025 VS YE 2014 A
Slide 43: Q2 2016 results
Q2 2016 results 43 29/07/2016