Lanxess Ag · XETR:LXS
Lanxess — Q2 2008 Earnings Presentation
47 slides from Lanxess's earnings presentation, August 2008
Slide 1: LANXESS – Q2 2008 Results Roadshow
LANXESS – Q2 2008 Results Roadshow Strong performance in a more demanding environment Dr. Axel C. Heitmann, CEO Matthias Zachert, CFO August 2008 Q2 2008 Results Roadshow Chart-No. 1
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. Highlights Q2 2008 and Business Update 2. Financial review Q2 2008 3. Outlook and guidance 2008 August 2008 Q2 2008 Results Roadshow Chart-No. 3
Slide 4: Highlights Q2 2008: strong performance in a more demanding environment
Highlights Q2 2008: strong performance in a more demanding environment Business Update Financial Update LANXESS continues to deliver in a more Strong organic growth at 14.0% in Q2 2008 demanding market environment EBITDA* at €223 m in Q2 2008 Strong operational growth in Asia (+43%) EBITDA
Slide 5: Outstanding price and volume increases
Outstanding price and volume increases Sales variances (€ m) Price Volume Currency Portfolio Ongoing healthy demand Performance Polymers +12% +12% -8% +20% supported strong simultaneous volume growth Advanced Intermediates +5% +9% -5% 0% +6% +0% -6% 0% 43% operational sales growth Performance Ch
Slide 6: LANXESS achieves operational growth in all regions
LANXESS achieves operational growth in all regions Sales by Region (in %) Regional development of sales (€ m) Operational 1,727 1,765 development* Asia Germany Asia 310 + 4.2% + 43% 18 22 323 +9.3% Americas 430 470 +12% +4.2% EMEA 591 (excl. Germany) 567 + 18% EMEA Americas (excl. Germany) 27 33 Ger
Slide 7: Asian growth dynamics are a major driver for LANXESS
Asian growth dynamics are a major driver for LANXESS Example: Asian rubber demand BTR PBR TRP Americas Asia-Pacific Americas Asia-Pacific Americas Asia-Pacific 25% 51% 27% 45% 29% 40% EMEA EMEA EMEA 24% 28% 31% End Uses 86% automotive/ tyres 69% automotive/ tyres 46% automotive 14% various o
Slide 8: Agenda
Agenda 1. Highlights Q2 2008 and Business Update 2. Financial review Q2 2008 3. Outlook and guidance 2008 August 2008 Q2 2008 Results Roadshow Chart-No. 8
Slide 9: Q2 2008 financial overview: EBITDA margin expansion despite raw material pressure
Q2 2008 financial overview: EBITDA margin expansion despite raw material pressure and unfavorable currency effects (€ m) Q2 2007 Q2 2008 Δ in % Sales 1,727 1,765 2.2% Sales rose as price and volume increases offset negative currency EBITDA pre except. 211 223 5.7% effects. Consolidation of Petrofl
Slide 10: Strong P&L based on strong businesses
Strong P&L based on strong businesses (€ m) Q2 2007 Q2 2008 Δ in % Sales 1,727 1,765 2% Necessary price increases (+7.3%) and higher volumes (+6.7%) more Cost of sales -1,332 -1,343 1% than offset unfavorable currency SG&A -231 -242 5% effects (-5.8%). Even portfolio R&D -23 -27 17% changes (-6.0%
Slide 11: Performance Polymers: outstanding operational performance
Performance Polymers: outstanding operational performance (€ m) Q2 2007 Q2 2008 Sales increased due to significant price and volume increases in all units more than offsetting negative Sales 671 908 currency effects, as well as the consolidation of Petroflex. EBIT 68 46 Strong BTR volumes in com
Slide 12: Advanced Intermediates: underlying business remains strong
Advanced Intermediates: underlying business remains strong and fully compensates currency and raw material effects (€ m) Q2 2007 Q2 2008 Sales increased as both BUs achieve price increases, based on strong demand for agrochemicals, Sales 291 320 overcompensating negative currency effects Price i
Slide 13: Performance Chemicals: solid operational performance in a more demanding environment
Performance Chemicals: solid operational performance in a more demanding environment (€ m) Q2 2007 Q2 2008 Sales remain almost unchanged as increased prices and stable volumes outweigh unfavorable currency Sales 520 523 Price increases in almost all BUs, most pronounced in LEA (chrome ore), RUC
Slide 14: Balance Sheet re-levered while strength persists
Balance Sheet re-levered while strength persists (€ m) Dec 31, 2007 June 30, 2008 (€ m) Dec 31, 2007 June 30, 2008 Non-current Assets 1,806 2.092 Stockholders’ Equity 1,525 1,626 Intangible assets 33 143 thereof minority interest 17 78 Property, plant & equipment 1,459 1,590 Equity investments 33 46
Slide 15: Cash flow indicates persisting operational stability
Cash flow indicates persisting operational stability (€ m) Q2 2007 Q2 2008 Healthy operating business Profit before Tax -42 80 delivers improved profit before tax Depreciation & amortization 104 64 Operating cash flow in Q2 2008 Gain from sale of assets 0 -8 contains Result from investment in as
Slide 16: Agenda
Agenda 1. Highlights Q2 2008 and Business Update 2. Financial review Q2 2008 3. Outlook and guidance 2008 August 2008 Q2 2008 Results Roadshow Chart-No. 16
Slide 17: LANXESS remains confident for H2 2008 despite weakening macro-economic landscape
LANXESS remains confident for H2 2008 despite further weakening macro-economic landscape LANXESS expects another solid FY 2008 performance in a more challenging environment Continuously growing demand for many of LANXESS’ products (e.g. rubber and agrochemicals) especially in Asia but also further
Slide 18: LANXESS confirms guidance for 2008
LANXESS confirms guidance for 2008 A firm H1 2008 provides solid base for a successful 2008 EBITDA* FY 2008 is expected to be above €700 m Further financial information: Exceptional P&L expense FY 2008 expected around €70-90 m Exceptional cash outs FY 2008 expected around €110-130 m Tax rate ~
Slide 19: LANXESS reiterates targets in a more demanding economic environment
LANXESS reiterates targets in a more demanding economic environment EBITDA* targeted above €700 m 2008 EBITDA* margin: Peer group profitability 2008 No business < 5% EBITDA* margin 2008 Investment grade rating * EBITDA figures pre exceptionals 9 August 2008 Q2 2008 Results Roadshow Chart-No. 19
Slide 20: August 2008 Q2 2008 Results Roadshow Chart-No. 20
August 2008 Q2 2008 Results Roadshow Chart-No. 20
Slide 21: Appendix
Appendix August 2008 Q2 2008 Results Roadshow Chart-No. 21
Slide 22: Portfolio management allows for regrouping of LANXESS businesses
Portfolio management allows for regrouping of LANXESS businesses along chemical segmentation Performance Polymers Performance Polymers Advanced Intermediates Performance Chemicals Butyl Rubber Basic Chemicals Material Protection Products Polybutadiene Rubber Saltigo Inorganic Pigments Technical Rubb
Slide 23: LANXESS ranks among the leading companies at the core of the chemical industry
LANXESS ranks among the leading companies at the core of the chemical industry Segmentation of the chemical industry * Pharma Agro Specialty Chemicals Polymers Intermediates Mass Plastics Petrochemicals Feedstock, gas and oil * Since 2007-09-12 a division of Evonik Industries August 2008 Q2 2008 Res
Slide 24: Consistent delivery as four-phase strategy is implemented
Consistent delivery as four-phase strategy is implemented 2004 2005 2006 2007 2008 EBITDA* Acquisition margin target Purchase of Petroflex, strengthening worldwide presence in synthetic rubbers with Latin American activities 4. Acquisitions Purchase of chrome chemicals activities of Dow Chemical
Slide 25: Share of profitable businesses further increased
Share of profitable businesses further increased Profitability distribution (in % of group sales) EBITDA*-margin ~75% ~60% Almost tripled ~45% > 10% ~30% ~20% ~20% Markedly reduced 5 - 10% ~30% ~30% ~5% ~20% Almost eliminated ~25% < 5% ~40% 2004 2005 2006 2007** * Pre exceptionals; ** except for BU
Slide 26: Portfolio management has continuously strengthened the company
Portfolio management has continuously strengthened the company Divested Acquired EBITDA* Business Sales Cyclicality margin Driver ~€100 m <5% High Market shifting Fibers to Asia Paper ~€240 m <5% Moderate High industry consolidation Textile Processing Chem. ~€150 m 5-10% Moderate Market shifting to
Slide 27: Take-over of one of China's largest iron oxide pigment facilities
Take-over of one of China's largest iron oxide pigment facilities from Jinzhuo Chemicals Company Ltd Total annual capacity of 30kt. Half of which was already utilized by LANXESS and uses state-of-the- Krefeld, Germany art environmentally compatible production methods Up to now, LANXESS produced
Slide 28: Sustainable improvement trend of financials, based on strong operations
Sustainable improvement trend of financials, based on strong operations In € m 2004 2005 2006 2007 EBITDA* 447 581 675 719 EBITDA* margin 6.6% 8.1% 9.7% 10.9% Strength Net financial debt 1,135 680 511 460 Underlying EPS** 0.65 1.19 2.69 3.36 Financial metrics continuously improved * Pre exceptionals
Slide 29: Tire production with stable growth dynamics
Tire production with stable growth dynamics Average growth of ~3.4% over 14 years Global tire production in million units 2000 Performance & high performance tires Regular tires Supported by several trends: 1600 High Performance tires Tire Design towards larger 1200 rim diameters Radialization
Slide 30: Tire industry relocation to low cost countries continues
Tire industry relocation to low cost countries continues, LANXESS to supply customers globally e2007 Tire production by region Tire production growth rates by region World 4.0 % Western Other APAC Europe 7% India 17 % 3% EMEA 3.0 % WE -0.5 % CEE EMEA APAC 10% 31% 48% Greater China CEE 8.5 % 20 % Uni
Slide 31: Petroflex acquisition: a compelling strategic rationale
Petroflex acquisition: a compelling strategic rationale Petroflex is a major player in synthetic rubber in Latin America Overview of acquisition 2007 sales of ~€535 million with 1,300 employees (incl. contractors) target Solution (PBR, SSBR) and emulsion (NBR, ESBR) rubber Three manufacturin
Slide 32: Petroflex: good start of integration process
Petroflex: good start of integration process Integration process of business into BU PBR started in April 2008 Technology upgrade of Brazilian sites initiated Utilization of syndicated credit facility in Q1 to prepare financing – payment in Q2 Mandatory offer / de-listing process expected to
Slide 33: Strengthening our global butyl rubber business with a world scale facility in Asia
Strengthening our global butyl rubber business by adding a world scale production facility in Asia Summary Location: Singapore, chemical park on Jurong Island Distribution of cash outflows Most competitive BTR site Capacity: up to 100 kt/a 180 Start of production: mid 2011 160 140 Capex: u
Slide 34: Serving global markets with world-wide rubber manufacturing network
Serving global markets with world-wide rubber manufacturing network Butyl Rubber Polybutadiene Rubber Technical Rubber Products Zwijndrecht, Belgium Port Jerome, France La Wantzenau, France Sarnia, Canada Dormagen, Germany Dormagen, Leverkusen, Marl, Singapore (under construction) Or
Slide 35: Focused investment strategy strengthens profitability
Focused investment strategy strengthens profitability Capex distribution by profitability Selected Capex projects since 2006 of businesses BAC: Several expansion projects (hexanediol, m-cresol, maleic anhydride) >10%* ~80% BTR: Debottleneckings in Sarnia and Zwijndrecht ~60% ~40% ION: Expansio
Slide 36: Reminder: seasonal expense allocation for maintenance
Reminder: seasonal expense allocation for maintenance Planned annual maintenance work Distribution of expenses for planned maintenance in 2008 Heavyweight of work as usual in Q3 and Q4 Additional expenses and capex Idle costs Business units most impacted: TRP, RUC, PBR, BAC Q1 Q2 Q3 Q4 Augus
Slide 37: Updated restructuring savings
Updated restructuring savings Phase I+II+III+IV (€ m) 2005 2006 2007 2008e 2009e P&L Expenses -166 -31 -41 -35 5 -5 5 Cash outs -10 -89 -70 50 -120 -5 Headcount reduction ~540 ~650 ~280 ~40 0 Cost reduction vs. prior year 10 55 50 50 40 Cost reduction cumulative 10 65 115 165 205 EBITDA improvement
Slide 38: Broad supplier base
Broad supplier base Total raw material expenses in 2007 were approx. €3 bn Suppliers Petrochemical raw materials accounted for a purchasing volume of approx. € 1.6 bn of costs in 2007 LANXESS uses a centrally managed global Butadiene procurement organization to ensure a reliable Styrene monomer
Slide 39: Diversified customer base and industry portfolio
Diversified customer base and industry portfolio Customers Others Coating 15% Chemistry LANXESS’ top ten customers 3% 23% Textile accounted for about 23% of total sales in fiscal 2007. 37 2% customers accounted for annual sales in excess of €20 Leather million. 5% The number of customers in each seg
Slide 40: Update: upstream integration into chrome ore mine in South Africa
Update: upstream integration into chrome ore mine in South Africa Situation update: Chrome ore mine in South Africa/ Rustenburg operated by LANXESS Additional chrome ore reserves of ~80 million tons were discovered summer 2007 Due to global resource constraints, chrome ore prices have increase
Slide 41: H1 2008 financial overview
H1 2008 financial overview: EBITDA margin expansion despite raw material pressure and unfavorable currency effects (€ m) H1 2007 H1 2008 Δ in % Sales decrease mainly due to Sales 3,438 3,300 -4.0% portfolio and currency effects EBITDA pre except. 430 443 3.0% EBITDA pre exceptionals rose by marg
Slide 42: Sound P&L based on structurally healthy businesses
Sound P&L based on structurally healthy businesses (€ m) H1 2007 H1 2008 Δ in % Sales 3,438 3,300 -4% Necessary price increases (+5.6%) and higher volumes (+5.5%) more Cost of sales -2,647 -2,501 -6% than offset unfavorable currency SG&A -452 -455 1% effects (-5.4%). Even portfolio R&D -45 -50 11%
Slide 43: Cash flow indicates persisting operational stability
Cash flow indicates persisting operational stability (€ m) H1 2007 H1 2008 Healthy operating business delivers Profit before Tax 90 221 improved profit before tax Operating cash flow in H1 2008 contains Depreciation & amortization 166 128 ~€25 m restructuring cash out Gain from sale of assets
Slide 44: Exceptional items incurred in Q2 2007 and Q2 2008
Exceptional items incurred in Q2 2007 and Q2 2008 (€ m) Q2 2007 Q2 2008 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 0 0 49 0 Advanced Intermediates 0 0 0 0 Performance Chemicals 0 0 2 1 Reconciliation 195 44 -8 -1 Total 195 44 43 0 August 2008 Q2 2008 Results Roadshow Chart-
Slide 45: Exceptional items incurred in H1 2007 and H1 2008
Exceptional items incurred in H1 2007 and H1 2008 (€ m) H1 2007 H1 2008 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 0 0 54 3 Advanced Intermediates 0 0 0 0 Performance Chemicals 0 0 5 1 Reconciliation 203 45 -2 -1 Total 203 45 57 3 August 2008 Q2 2008 Results Roadshow Chart-
Slide 46: Abbreviations
Abbreviations Performance Polymers Advanced Intermediates BTR Butyl Rubber BAC Basic Chemicals PBR Performance Butadiene Rubbers SGO Saltigo TRP Technical Rubber Products SCP Semi-Crystalline Products Performance Chemicals MPP Material Protection Products IPG Inorganic Pigments FCC Functional Chemic
Slide 47: Contact details
Contact details Michael Pontzen (Head of IR) Tel.: +49-214 30 43804 Fax.:+49-214 30 959 43804 Mobile:+49-175 30 43804 Email: [email protected] Tanja Satzer Oliver Stratmann Tel.: +49-214 30 43801 Tel.: +49-214 30 49611 Fax.: +49-214 30 959 43801 Fax.: +49-214 30 959 49611 Mobile :+49-175 3