Solvay Sa · EURONEXT:SOLB
Solvay Sa — Q3 2012 Earnings Presentation
52 slides from Solvay Sa's earnings presentation, Oct 25, 2012
Slide 1: Further. Closer. Together. Roadshow Conference Presentation Q3'12 results
Further. Closer. Together. Roadshow Conference Presentation Q3’12 results October 25th, 2012 Roadshow presentation: Q3’12 results 1
Slide 2: Agenda
AGENDA Q3’12 financial highlights Outlook 2012 Building a strong leader Roadshow presentation: Q3’12 results 2
Slide 3: Q3'12 Solvay results: continued earnings strength
Q3’12 SOLVAY RESULTS Continued earnings strength supported by the growth engines and the highly resilient businesses Q3 2012 Net sales up 1% to EUR 3,291m yoy with volumes (4)%, prices stable and forex +5% REBITDA(1) at EUR 554 million +4% yoy € 3,291m € 554m • Record results in Consumer Chemicals (
Slide 4: Poor demand at cycle-sensitive businesses impacted net sales
Q3’12 SOLVAY RESULTS Poor demand at cycle-sensitive businesses impacted by lackluster macroeconomics and enhanced competition NET SALES In € million 158 (134) 8 5% (4)% 5 Scope Forex Volume Price 3,291 3,255 Q3’11 Q3’12 Pro forma Roadshow presentation: Q3’12 results 4
Slide 5: Improved REBITDA and efficiency gains delivery
Q3’12 SOLVAY RESULTS Improved REBITDA and efficiency gains delivery REBITDA* Variation In € million +4% 554 533 YoY 290 281 +4% 168 155 +8% 120 145 +21% Q3’11 Q3’12 Pro forma Group Chemicals Plastics Rhodia * Group REBITDA includes CBS and NBD, not represented here Roadshow presentation: Q3’12 resul
Slide 6: Q3'12 results: Plastics
Q3’12 RESULTS: PLASTICS Specialty Polymers, new record performance, Vinyls, continued difficult market conditions REBITDA (in € million) and margins (in %) Specialty Vinyls Polymers 115 93 32% 60 52 31% 10% 8% Q3’11* Q3’12 Q3’11* Q3’12 New record operating profitability Poor demand and tough competi
Slide 7: Q3'12 results: Chemicals, resilient growth
Q3’12 RESULTS: CHEMICALS Resilient growth REBITDA (in € million) and margins (in %) Essential Special Chemicals 132 Chemicals 103 22% 19% 15 13 10% 8% Q3’11* Q3’12 Q3’11* Q3’12 Resilient growth and Performance impacted by refrigerants excellent performance Less favorable pricing in refrigerants REBI
Slide 8: Q3'12 results: Rhodia, Consumer Chemicals and Advanced Materials
Q3’12 RESULTS: RHODIA Consumer Chemicals, record performance Advanced Materials, some demand slowdown REBITDA (in € million) and margins (in %) Consumer Advanced Chemicals Materials 162 24% 87 79 32% 14% 41 23% Q3’11* Q3’12 Q3’11* Q3’12 Record results Demand slowdown in selective markets REBITDA mor
Slide 9: Polyamide still depressed, Acetow & Eco Services strong
Q3’12 RESULTS: RHODIA Polyamide still depressed, Acetow & Eco Services continued strong performance REBITDA (in € million) and margins (in %) Polyamide Acetow & Materials Eco Services 64 52 50 27% 11% 23% 16 4% Q3’11* Q3’12 Q3’11* Q3’12 Further deterioration of market conditions Sustained strong per
Slide 10: Creating value in Energy & CO2 markets
Q3’12 RESULTS: RHODIA Creating value in Energy & CO2 markets REBITDA (in € million) Energy Poor liquidity of the carbon credit market Services resulting in much lower CERs sold But realized high average selling price 36 at € 11,9/T (vs. 11,0€/T in Q3’11) thanks to 26 highly effective long term hedgi
Slide 11: Strategic developments
Q3’12 SOLVAY RESULTS Strategic developments Group: Solvay determined to double its sales in India by 2015 • Signature of an agreement to acquire the Indian company Sunshield Chemicals specialized in surfactants serving fast growing markets • Capacity increase of 70% at Panoli plant, for the producti
Slide 12: Stringent operational cash management
Q3’12 SOLVAY RESULTS Stringent operational cash management Industrial Working Capital CAPEX and Investments in participations In % of total sales In € million 1,056 (18)% Forecast 210 862 56 (5)% 14.2 13.8 846 Q3: 204 806 Q3: 176 13.0 13.1 13.1 Q2: 180 Q2: 180 Q1: 114 Q1: 144 Q3’11* Q4’11* Q1’12 Q2’
Slide 13: Strong free cash flow generation and net debt reduction
Q3’12 SOLVAY RESULTS Strong Free Cash Flow generation and Net Debt reduction In € million € 346m FCF* in Q3’12 (1,815) 416 XXX (48) (11) 5 (6) (1,529) (176) (5) Dividends Conversion Divestment 111 Discontinued Net financial proceeds REBITDA/ operations charges Provisions/ Other Change Capex operatin
Slide 14: Agenda
AGENDA Q3’12 financial highlights Outlook 2012 Building a strong leader Roadshow presentation: Q3’12 results 14
Slide 15: Outlook 2012
SOLVAY Outlook 2012 The fragile macroeconomic environment reduces visibility across markets and industries. The fourth quarter will reflect seasonal inventory management from customers and the slowdown of some market segments. The integration progresses well which strengthens our confidence in the d
Slide 16: Agenda
AGENDA Q3’12 financial highlights Outlook 2012 Building a strong leader Roadshow presentation: Q3’12 results 16
Slide 17: Strong fundamentals
Strong fundamentals Roadshow presentation: Q3’12 results 17
Slide 18: A major player in chemicals with compelling strengths
STRONG FUNDAMENTALS A major player in chemicals with compelling strengths Our strengths 2011 Proforma Within top 10 worldwide largest chemical players from € 12.7bn developed markets NET SALES € 2.1bn REBITDA 90% of sales in businesses ranking among the top 3 global leaders Global presence with 40%
Slide 19: Strong global leadership positions
STRONG FUNDAMENTALS Strong global leadership positions World leader with 90% of its sales in businesses in which it is in the top 3 Specialty Silica & Rare Earth Consumer Essential Polymers Systems Chemicals Chemicals High Barrier Polymers, Specialty Hydrogen High-Performance High-Performance Surfac
Slide 20: Strong footprint in fast growing regions
STRONG FUNDAMENTALS Strong footprint in fast growing regions 40 INDUSTRIAL SITES Europe 43% 25 16,300 INDUSTRIAL North SITES America 17% 3,400 Asia 35 INDUSTRIAL SITES Pacific / Rest of the world 5,700 Latin 10 INDUSTRIAL 26% SITES America 14% 3,700 40% OF NET SALES AND INDUSTRIAL ASSETS Plastics &
Slide 21: R&D capabilities boosted by open innovation network
STRONG FUNDAMENTALS R&D capabilities boosted by open innovation network 2011 proforma figures 12 major worldwide 1,700 € 218m € 54m 322 R&D centers R&D employees net R&D investment in venturing new patents Europe North America Brussels 1,219 Hannover 222 people people Dombasle Paris Asia Milano Seou
Slide 22: Resilience to cycles from diversified end-markets
STRONG FUNDAMENTALS Resilience to cycles resulting from diversified end-markets Consumer goods 29% Industry 18% 17% Construction Pulp & Paper 2% Agriculture, Forestry and 4% Fishing 4% 15% Energy 4% 7% Automotive Environment Electricals & Electronics Roadshow presentation: Q3’12 results 22
Slide 23: A well defined strategy
A well defined strategy Roadshow presentation: Q3’12 results 23
Slide 24: Our ambition
STRATEGIC VISION Our ambition • Build a strong leader participating in the reshaping of the global chemical industry •Be a model of sustainable chemistry, attracting and growing the people who will imagine, engineer and make the solutions that meet the global challenges society faces, creating value
Slide 25: A transformation geared towards value creation
STRATEGIC VISION A transformation geared towards value creation Portfolio thorough strategic analysis performed early 2012 Solvay’s ability to extract value Growth engines Priority to seize GROWTH: Solvay organic, innovation, external Chemical industry average Areas of challenge requiring strategi
Slide 26: Value creation through differentiated strategic priorities
STRATEGIC VISION Value creation through differentiated strategic priorities Portfolio Strategic Management Focus on growth Consumer opportunities Chemicals Specialty • Organic growth › Double-digit Polymers profit growth • Innovation › Outperforming 16% 16% Advanced • External growth the market Mate
Slide 27: Focused on value creation
STRATEGIC VISION Focused on value creation Culture of Excellence HIGH PROFITABILITY REBITDA ROBUST STRONG CASH FLOW CAPITAL STRUCTURE € 3bn* by 2016 GENERATION VALUE CREATION CFROI > WACC Leveraging on strong track record * At constant scope and assuming no major macroeconomic crisis Roadshow presen
Slide 28: Building a strong leader: a major transformation underway
Building a strong leader: a major transformation underway Roadshow presentation: Q3’12 results 28
Slide 29: The integration keeps momentum
BUILDING A STRONG LEADER The integration keeps momentum Q1 Q2 Q3 Q4 Organization defined Enlarged Solvay’s Implemented Design finalized new organization & agreed upon* & structure Solvay Energy Serv. R&D Solvay Business Group Governance Services & Principles Finance Industrial Legal & Compliance Str
Slide 30: An inspiring common culture
BUILDING A STRONG LEADER An inspiring common Culture Focus on integration Focus on building the New Solvay September 2011 April 2012 July 2012 January 2013 A Culture of Empowerment and Accountability Customer - centric Entrepreneurial / Results-oriented Innovation - driven Geared towards Excellence
Slide 31: Operational excellence
OPERATIONAL EXCELLENCE Solvay & Rhodia combination: a powerful catalyst to unlock value Purchasing Industrial & Supply and Logistics Chain excellence € 400m* Action by 2014 ---------- Operational plans ~€ 130m* excellence in progress in 2012 Administrative & Marketing & process efficiency Commercial
Slide 32: Efficiency gains
OPERATIONAL EXCELLENCE Efficiency gains Purchasing & logistics excellence Administrative & process efficiencies Buy Cheaper, Buy Better, Buy Less Streamlined organization Volume bundling Purchases Horizon Integration synergies Prices and contractual terms benchmarking • Raw materials • Processes red
Slide 33: More & faster efficiency gains confirmed
OPERATIONAL EXCELLENCE More & faster efficiency gains confirmed Efficiency gains (€ m) 400 370 150 230 ~ 130 250 20 Fully Horizon 2011 2012 2013 2014 2015 Administrative & process efficiencies Purchasing & logistics Restructuring and associated costs estimated at €(150)m over the 2012/14 period Effi
Slide 34: Industrial & supply chain excellence
OPERATIONAL EXCELLENCE Industrial & supply chain excellence Developing the best tools to support excellence initiatives Overall Equipment Excellence in Yield Efficiency Maintenance Improvement Reduction Working Capital of Fixed Costs Management Improve Reduce Maximize competitiveness Capital intensi
Slide 35: Marketing and commercial excellence
OPERATIONAL EXCELLENCE Marketing and Commercial excellence • Value pricing for innovative solutions • Pricing power • Revenue synergies through cross-selling opportunities and faster project developments across markets and geographies Roadshow presentation: Q3’12 results 35
Slide 36: Innovation focused on growth megatrends
GROWTH - INNOVATION Innovation focused on growth megatrends GEOGRAPHIC SHIFT SUSTAINABILITY & NEW DEMAND PATTERNS MEGATRENDS DRIVING GROWTH IN CHEMICALS Over 1bn Health Climate Change Limited Resources new consumers & Well-being Renewable SOLVAY’S 6 INNOVATION PLATFORMS Chemistry Eco-Efficient Proce
Slide 37: Expanding industrial & human footprint in fast growing regions
GROWTH - GEOGRAPHICAL FOOTPRINT Expanding industrial & human footprint in fast growing regions Russia ~50% of Solvay Rusvinyl (330 kt/y, 2013) & Surfactants JV with Korea investments Joint R&D with over 2010/11 EWHA University Middle East China HPPO with • Feixiang (2015) • Specialty Polymers in Cha
Slide 38: Pursuing strategic bolt-on acquisition opportunities
EXTERNAL GROWTH Pursuing strategic bolt-on acquisition opportunities Spotless track record USA CHINA McIntyre 2009: Targeted Feixiang 2010: Specialty amines Specialty surfactants Successfully Ajedium Film US 2008: INDIA Conversion of high integrated performance resins into Gharda’s PEEK division 200
Slide 39: Building the new Solvay: a value creative journey
Building the new Solvay: A value creative journey April 24, 2012
Slide 40: Forward-looking statements disclaimer
“To the extent that any statements made in this presentation contain information that is not historical, these statements are essentially forward-looking. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties because of a number of factors
Slide 41: Appendices
Appendices
Slide 42: Broadest portfolio of high and ultra high performance polymers
PLASTICS Broadest portfolio of high and ultra high performance polymers PSU FEP PESU SRP/ MFA® FKM/ ECTFE PVDC HPPA PARA PPS LCP PPSU PEEK PAI PI HPS PEI PTFE PVDF PFA FFKM PFPE /ETFE XLCP Solvay Arkema BASF Celanese Daikin DSM DuPont Dyneon EMS Evonik Kuraray MEP SABIC Victrex Roadshow presentation
Slide 43: Market leadership in guar-based formulations
Q3’12 RESULTS: RHODIA Market leadership in guar-based formulations What is Guar • Guar gum, 4 feet high large leaves and clusters of pods • India produces 80-90% of world supply • 1.25 million(1) tons of seed produced and c. 3 million farmers • 2.85 million hectares planted • Seed taken to markets,
Slide 44: Guar innovation addressing fast growing market segments
Q3’12 RESULTS: RHODIA Guar innovation addressing fast growing market segments Leading bio-sourced technology for many applications & functions Agro Best Process Water Retention • Process leadership in guar derivative delivers • New project to start delivery in 2013 the best quality and enhances comp
Slide 45: Delivering on efficiency gains
Q3’12 SOLVAY RESULTS Delivering on efficiency gains Global Purchasing & Logistics* Administrative & process * Versus 2010 pro forma cost base efficiencies* Energy Raw materials Integration savings Deployment of France Fibre glass grouped purchases Corporate Functions Horizon savings upstream model f
Slide 46: Stable well-managed pension situation
Q3’12 SOLVAY RESULTS Stable well-managed pension(1) situation As of September 30, 2012 Other countries € (64)m France & Germany North America Pension schemes € (235)m Total provision(2) not funded € (2,631)m € (1,725)m Belgium € (211)m United Kingdom € (396)m Stable cash contribution expected for 20
Slide 47: Adjusted & pro forma considerations
Adjusted & Pro forma considerations Adjusted performance indicators exclude non-cash Purchase Price Allocation (PPA) impacts related to the Rhodia acquisition The PPA impacts are created by the reevaluation of assets, liabilities and contingent liabilities of Rhodia at fair value at acquisition date
Slide 48: Adjusted and IFRS Q3'12
Q3’12 SOLVAY RESULTS Adjusted and IFRS Q3’12 INCOME STATEMENT Adjusted PPA IFRS In € million Q3’12 impacts Q3’12 NET SALES 3,291 3,291 REBITDA 554 554 REBIT 382 (31) 352 Non-recurring items (54) (54) Net financial expenses (98) (98) Income taxes (66) 8 (58) Net result from continuing operations 165
Slide 49: Purchase Price Allocation impacts
Q3’12 SOLVAY RESULTS Purchase Price Allocation impacts Re-evaluation of stocks at fair value: € 205m Reversal of the inventory step-up balance in non-recurring items: € (160)m in Q4’11; € (45)m in Q1’12 Re-evaluation / recognition of intangible assets at fair value Recurring annual amortization char
Slide 50: Additional financial indications
Additional financial indications P&L considerations Depreciation & amortization (excl. PPA), yearly ~ € 670m Average cost of gross financial debt 5.6% Other financial expenses Re. Post employment benefits liabilities discounting c. € (100)m in 2012 (4.75*% discount rate used for YE 2011 pension liab
Slide 51: Additional financial indications: post-employment benefits
Additional financial indications Post-employment benefits 2012 projections P&L overall impact: € 145m in 2012 • € 45m Service costs • € 100m Financial costs Cash outflows: around € 200m in 2012 and beyond Limited impact from implementation of revised IAS 19 as from 2013 onwards: • P&L impacts (finan
Slide 52: Definitions
Definitions Adjusted net income = Net income before Purchase Price Allocation impacts REBITDA – Rec. Capex – Tax CFROI = Gross Assets + working capital Free cash flow = Cash flow from operating activities + cash flow from investing activities, excluding acquisitions and sales of subsidiaries and oth