Solvay Sa · EURONEXT:SOLB
Solvay Sa — H1 2019 Earnings Presentation
53 slides from Solvay Sa's earnings presentation, Jul 31, 2019
Slide 1: Second Quarter & First Half 2019 Results
Second Quarter July 31, 2019 & First Half 2019 Results Investor relations
Slide 2: Forenote
FORENOTE IFRS 16 has been implemented in the Group’s financial statements since January 1, 2019. Comparative information for the first quarter of 2018 in the business review is presented on an unaudited pro forma basis as if the implementation had taken place on January 1, 2018. This information is
Slide 3: H1 Results in Line with Expectations Amid Challenging Macro Conditions
H1 RESULTS IN LINE WITH EXPECTATIONS AMID CHALLENGING MACRO CONDITIONS Macro EBITDA Margin FCF to Solvay environment Underlying, yoy EBITDA / net sales shareholders[3] (continued operations) Headwinds continued reported[1] -0.5% into Q2 at €33m organic[2] -3.1% at 23% +€51m yoy Delivered res
Slide 4: CEO Highlights
CEO HIGHLIGHTS Executive Customer Strategy Committee Listening tour Review More operational 50+ Customers Update to market Paris Air Show: through webcast on Faster decision making Airbus composite wing November 7 during Q3 Hervé Tiberghien using Solvay resin results appointed new Chief
Slide 5: Progress on 2025 Sustainability Objectives
PROGRESS ON 2025 SUSTAINABILITY OBJECTIVES Occupational Greenhouse accidents gas intensity 0.50 -1Mt accident rate (MTAR) absolute terms, constant scope Also focused on driving sustainable progress on other key commitments in 2025 objective 2025 objective relation to: 2018 delivery H1 2019 2018 deli
Slide 6: Financial Highlights
Q2 & FIRST HALF 2019 RESULTS FINANCIAL HIGHLIGHTS Q2 & H1 2019 Results 6 July 31, 2019
Slide 7: Advanced Materials
ADVANCED MATERIALS Polymer & Composite Technologies AEROSPACE VOLUMES OFFSET HEADWINDS IN AUTO & ELECTRONICS MARKET DRIVERS OUR MARKETS OUR DELIVERY IN H1 Automotive market down Net sales up +1.2% organically -6%[1] global production decline in Automotive 29% Automotive sales down, but H1 ou
Slide 8: Advanced Formulations
Surface & Liquid Chemistry ADVANCED FORMULATIONS STRONG MINING & AROMA PERFORMANCE MITIGATE O&G CHALLENGES MARKET DRIVERS OUR MARKETS OUR DELIVERY IN H1 Oil and gas challenges Net sales down -5.1% organically Lower stimulation activity in North Mining & Environmental 13% Oil & gas business d
Slide 9: Performance Chemicals
Soda Ash & Peroxide chemicals PERFORMANCE CHEMICALS HIGHER PRICING & SOLID DEMAND MARKET DRIVERS OUR MARKETS OUR DELIVERY IN H1 Healthy demand in soda ash and Net sales up +5.1% organically peroxides markets Building & Construction 13% Volumes stable More consumer driven end- Pricing up in
Slide 10: Free Cash Flow Generation Improved
FREE CASH FLOW GENERATION IMPROVED H1 CASH GENERATION (in € million) FCF to Solvay shareholders from continuing operations in H1 at €33 million, €51 million better 1,195 (356) Compared to yoy -6 +7 2018 H1 pro forma Strong delivery in Q2 of €123 million, overcoming negative FCF in Q1 (355) +15
Slide 11: Underlying Leverage Ratio Maintained at 2.1x
UNDERLYING LEVERAGE RATIO MAINTAINED AT 2.1X UNDERLYING NET FINANCIAL DEBT PROVISIONS Leverage (in € million) Leverage (in € million) 2.1x 2.1x -241 +18 (3,998) -386 -10 -41 -25 (5,809) (3,820) +197 -111 -41 (5,538) +191 Changes Hybrid Remeasu- In/outflow Changes Hybrid Discounting Remeasu- in scope
Slide 12: 2019 Full Year Outlook Confirmed
2019 FULL YEAR OUTLOOK CONFIRMED EBITDA Free growth Cash Flow Underlying to Solvay shareholders excluding scope and forex conversion from continuing operations Flat to modestly down organically[1] €490 million[2] Comparison base more challenged in Q3 than Q4 Total FCF generation will drive m
Slide 13: Additional Information
Q2 & FIRST HALF 2019 RESULTS ADDITIONAL INFORMATION Q2 & H1 2019 Results 13 July 31, 2019
Slide 14: Net Sales Flat Organically in H1
NET SALES FLAT ORGANICALLY IN H1 WITH LOWER VOLUMES OFFSET BY HIGHER PRICES Net sales (in € million) +133 -125 +141 5,225 Volumes down -2.5% 5,092 -15 Significant decline in demand from the automotive, Scope Forex Volume Price electronics and oil & gas markets conversion & mix Continuation of
Slide 15: Underlying EBITDA Down 3.1% Organically in H1
UNDERLYING EBITDA DOWN -3.1% ORGANICALLY IN H1 AS POSITIVE NET PRICING OFFSETS VOLUME DECLINE Margin Underlying EBITDA Margin (in € million) 24% 23% Volume impact of -3.4% 1,200 -6 +38 -41 +48 -39 -6 1,195 Net pricing up +2.8% Benefiting from transactional forex effects Scope Forex Volume Net
Slide 16: Performance Chemicals Growth Partly Compensates Decline in Advanced Segments
PERFORMANCE CHEMICALS GROWTH PARTLY COMPENSATES DECLINE IN ADVANCED SEGMENTS organic growth -12% organic growth -5.8% 50% 21% Advanced Materials Advanced Formulations Aerospace volumes offset headwinds in H1 2019 Strong mining & Aroma Performance mitigate O&G auto & electronics EBITDA challenges
Slide 17: H1 EPS Supported by Higher Contribution from Discontinued Operations
H1 EPS SUPPORTED BY HIGHER CONTRIBUTION FROM DISCONTINUED OPERATIONS Underlying EPS (in €) 5.89 5.64 disc disc. -0.05 -0.15 +0.06 -0.22 ops. Underlying EPS from continuing operations ops. +0.05 - 0.39 0.80 down -6.7% in H1 EBITDA D&A Net Tax Tax rate Non-ctrl Lower EBITDA financial base change i
Slide 18: Net Debt Seasonally Up with Dividend Payments
NET DEBT SEASONALLY UP WITH DIVIDEND PAYMENTS Leverage UNDERLYING NET FINANCIAL DEBT Leverage 2.1x (in € million) 2.1x -386 -10 -41 -25 (5,809) (5,538) +191 Remeasu- In/outflow Changes Hybrid Hybrid FCF to Dividends rements from M&A in scope bonds bonds Solvay to Solvay (forex) & other (1,800) (2,50
Slide 19: Provisions Slightly Up with Actuarial Assumptions
PROVISIONS SLIGHTLY UP WITH ACTUARIAL ASSUMPTIONS (30/06/2019) PROVISIONS (in € million) -241 +18 (3,998) (3,820) +197 -111 -41 Changes Discounting Remeasu- in scope Environ- Payments: Net new rements & other Environ- costs ment cont. 191 provisions [1] ment (707) discont. 6 (691) Employee Employee
Slide 20: Efficient Capital Structure Leading to Reduced Cost of Debt
EFFICIENT CAPITAL STRUCTURE LEADING TO REDUCED COST OF DEBT Underlying financial debt [1] evolution in € billion DELEVERAGING CONTINUES (8,720) (7,626) (7,185) (2,200) (6,426) (6,743) (6,310) (2,200) (1,800) EUR perpetual hybrid bonds (828) (464) (2,200) (2,500) (2,500) (2,142) (2,391) (2,212) (961)
Slide 21: Balanced Maturities Allowing Flexibility
BALANCED MATURITIES ALLOWING FLEXIBILITY Major financial debt [1] in million $163m 3.95% €300m $196 4.25% 3.50% €750m €700m[4] $800m $800m Repaid in 1.63% 4.20% 3.40% 4.45% May 2019 €500m €500m €500m €500m 5.19% 5.43% 5.87% 2.75% 2019 2020 2021 2022 2023 2024 2025 2026 2027 December 31, 2018 June 30
Slide 22: 2019 P&L Considerations
2019 P&L CONSIDERATIONS UNDERLYING FCF TO SOLVAY FOREX EBITDA SHAREHOLDERS SENSITIVITY EBITDA to be flat to modestly down To be at around €490 million from continuing Mostly exposed to the U.S. dollar, with the organically compared to €2,330 million pro operations main sensitivities per US$/€0.10 ch
Slide 23: IFRS 16 Affects EBITDA, P&L & Debt Comparables
IFRS 16 AFFECTS EBITDA, P&L & DEBT COMPARABLES 2018 key figures (in € m) published IFRS 16 pro forma EBITDA 2,230 +100 2,330 • IFRS 16 implementation Advanced Materials 1,197 +28 1,225 Advanced Formulations 521 +12 533 Capitalizes leases, previously considered as operating leases Performance Chemi
Slide 24: Solvay Profile
SOLVAY PROFILE Q2 & H1 2019 Results 24 July 31, 2019
Slide 25: Solvay ID
SOLVAY ID >70% >50% ~33% specialty in GDP+ in each products markets region Created by Ernest Solvay in 1863, Solvay is today all Advanced Materials Automotive & aerospace Europe Advanced Formulations Electrical & electronics North America about advanced materials and Performance Chemicals Resources
Slide 26: Markets We Serve
MARKETS WE SERVE NEXT GENERATION MOBILITY RESOURCES EFFICIENCY Industrial Healthcare Electronics Aerospace Automotive Mining Oil & Gas Agro Consumer Food Construction goods AP P R O X 5 0 % O F G R O U P S AL E S OUR CORE Process leaders in Soda Ash & TECHNOLOGIES Peroxyde Chemicals Polymer & Surfac
Slide 27: Growth Engines Deliver 70% of EBITDA
GROWTH ENGINES DELIVER 70% OF EBITDA Advanced Materials Advanced Formulations Performance Chemicals 49% Providing solutions for sustainable Customized specialty Lead in chemical intermediates 21% through scale & technology, mobility, light weighting, CO2 and formulations for surface chemistry energy
Slide 28: Because We Need More Sustainable Mobility
BECAUSE WE NEED MORE SUSTAINABLE MOBILITY Doing more with less AUTOMOTIVE AEROSPACE BATTERIES Cleaner and more Enhanced Higher performance MORE energy-efficient lightweighting & fuel and energy storage mobility efficiency Reduce impact Reduce CO2 Reduce cost LESS to environment emissions per kWh ~50
Slide 29: Aircraft Fundamentals Support Higher Growth in Composites
AIRCRAFT FUNDAMENTALS SUPPORT HIGHER GROWTH IN COMPOSITES Composite materials on 4.5% 50% LEAP engines make fan >8,000 2X blades or wing box lighter Annual growth Record high Weight of composites Number of aircrafts expected in passenger traffic order backlog on new aircrafts vs <15% on legacy to do
Slide 30: We Make Cars Lighter & More Efficient
WE MAKE CARS LIGHTER & MORE EFFICIENT INCREASED MATERIALS USAGE DRIVES GROWTH SolvaLiteTM composites 2.4% ~30% STRUCTURAL are up to 40% lighter than metal Annual growth rate in Annual growth rate in light vehicles hybrid & plug-in electric & SEMI-STRUCTURAL INTERIORS production over 5 years vehicles
Slide 31: Technology Leader for Mission Critical Battery Materials
WE ARE A TECHNOLOGY LEADER FOR MISSION CRITICAL BATTERY MATERIALS A unique expertise in fluorine chemistry and advanced conductive materials ENERGAINTM NOHMS* TFSI ILS Fluorinated solvents Ionic liquids based on TFSI for and formulations High Voltage Li-Ion electrolytes for High Voltage *NOHMS Techn
Slide 32: Solvay Positioned in All Auto Platforms
SOLVAY POSITIONED IN ALL AUTO PLATFORMS OUTPACING THE INDUSTRY GROWTH BY 3X [1] ICE+ (P)HEV EV Increasing loading per car [2] ~ 6kg ~ 12kg 8kg ~ Internal combustion engine Transmission Performance drives value proposal Electrical engine Battery Opportunity for composites Chassis / functional parts T
Slide 33: Broadest Portfolio of Advanced Materials Differentiating Solvay
BROADEST PORTFOLIO OF ADVANCED MATERIALS DIFFERENTIATING SOLVAY FROM COMPETITION Aromatics Fluoropolymers High Perf Composites Adhesives & Thermo- Out-of- Thermoset Resin HPPA PPS PAEK PSU PTFE PVDF PFA FKM PFPE Carbon Fiber Surfacing plastic Autoclave Prepreg Infusion films prepreg prepreg Q2 & H1
Slide 34: Because We Need More Efficient Solutions
BECAUSE WE NEED MORE EFFICIENT SOLUTIONS Doing more with less MINING OIL & GAS AGRO Higher throughput Maximize cost Targeted use MORE and yield of metals performance and of ingredients for & minerals fracturing efficiency seeds & crops Reduce impact Reduce Less clean LESS to employees and environmen
Slide 35: How We Win: Innovation a Key Enabler of Customer Intimacy
HOW WE WIN INNOVATION A KEY ENABLER OF CUSTOMER-INTIMACY STEERING OPEN INNOVATION & COLLABORATION 21 € 352 m 2,200 R&I centers Investments R&I employees Ernest Solvay established first 18% > 75% 264 1911 prestigious meetings of top New sales ratio R&I pipeline in Patent applications scientists* Sust
Slide 36: Listening to Customers to Develop Opportunities
LISTENING TO CUSTOMERS TO DEVELOP OPPORTUNITIES Looking for Less fuel miniaturization Replacing toxic More efficiency product Higher performance SolvaLiteTM Jaguar® C162 Kalix® bio-based 40% lighter than metal Less irritant 40% of petrol consumption reduced Faster cure Better resource efficiency Pol
Slide 37: How We Win: Our Integrated Thinking Approach
HOW WE WIN OUR INTEGRATED THINKING APPROACH AMONG MANY INITIATIVES, WE WORKED WITH WBCSD Recent A new revolving TO IDENTIFY THE SDGs initiative credit facility MOST IMPACTED BY OUR linked to CO2 INDUSTRY reduction target Integrated thinking Solvay Way translates approach to align SD our SD ambitions
Slide 38: Integrating Sustainability into Decision-Making
HOW WE WIN INTEGRATING SUSTAINABILITY INTO DECISION-MAKING 29% OUR UNIQUE SUSTAINABILITY PORTFOLIO MANAGEMENT (SPM) 2018 Climate Change TOOL GUIDES OUR STRATEGIC CHOICES AND RESOURCES ALLOCATION 50% 17% of Group’s net sales generated Resource Efficiency by sustainable SPM assesses each SPM is embedd
Slide 39: Strong Financial Performance Outperforming Mid Term Objectives
STRONG FINANCIAL PERFORMANCE OUTPERFORMING MID TERM OBJECTIVES (2016-2018) + 7.5% organic growth vs 2015 + 0.8pp continuing operations € 2.7bn cumulative Underlying CFROI FREE CASH EBITDA FLOW Continuing operations Mid-to-high single + 0.5 - + 1.0 pp > €2.4 bn digit, % yoy Q2 & H1 2019 Results 39 Ju
Slide 40: Rewarding Shareholders with Growing Returns
REWARDING SHAREHOLDERS WITH GROWING RETURNS +19% Leverage 2.8 CAGR 2.6 ratio 8.48 2.2 Underlying EPS 7.59 Net financial 2.0 (6.6) (6.5) From continuing operations 6.02 (in €/share) 5.07 debt (5.3) (5.1) underlying (in € billion) 2015 2016 2017 2018 2015 2016 2017 2018 Free cash flow 566 Provisions T
Slide 41: A New Executive Committee
A NEW EXECUTIVE COMMITTEE Ilham Karim Hajjar, Kadri, CEO Vincent CFO De Cuyper Hervé Tiberghien, Augusto Di Donfrancesco Hua Du CPO (Sept 2019) Q2 & H1 2019 Results 41 July 31, 2019
Slide 42: Strong Track Record of Continued Shareholders' Distribution
STRONG TRACK RECORD OF CONTINUED SHAREHOLDERS’ DISTRIBUTION OUR POLICY IS TO PROPOSE A DIVIDEND + 4.2% vs 2018 INCREASE TO OUR 2018 SHAREHOLDERS DIVIDEND WHENEVER POSSIBLE €3.75 gross per share For more than 35 years, Dividend CAGR since 1982 the dividend has been stable or has gradually increased,
Slide 43: Not at the Expense of the Planet
NOT AT THE EXPENSE OF THE PLANET PROGRESS ON 2025 SUSTAINABILITY OBJECTIVES Employees Sustainable People involved in local solutions in Occupational Greenhouse engagement societal actions Group sales accidents gas intensity 76% 33% 50% -30% -24% since 2016 vs 77 % in 2016 vs 23% in 2016 vs 43% in 20
Slide 44: Unleashing and Accelerating Value Creation
2019 UNLEASHING AND ACCELERATING VALUE CREATION Q2 & H1 2019 Results 44 July 31, 2019
Slide 45: Combining Specialty Polymers and Composites Technologies
COMBINING SPECIALTY POLYMERS AND COMPOSITES TECHNOLOGIES, WE DELIVER THERMOPLASTICS COMPOSITES Value Proposition - Integrating composites advantages Enables higher build rates and Enables Total Cost of Ownership in large manufacturing series manufacturing cost reduction reduction and improved - Ligh
Slide 46: Moving Forward
MOVING FORWARD Strategy Culture & Customers review purpose focus Q2 & H1 2019 Results 46 July 31, 2019
Slide 47: Why Invest in Solvay?
WHY INVEST IN SOLVAY? Advanced Materials Offering innovative Customer Solid integrated Consistent and Specialty and sustainable obsessed performance Shareholders’ Chemicals company solutions Reward We are developing top- We provide sustainable By answering fast-pacing On top of our financial We crea
Slide 48: Invest in Solvay Stock
STOCK INFORMATION INVEST IN SOLVAY STOCK Q2 & H1 2019 Results 48 July 31, 2019
Slide 49: Solvay Share
SOLVAY SHARE Share data MAJOR Number of shares 105,876,416 SHAREHOLDERS 30.71% Market capitalization € 9 bn Listing Euronext Brussels & Paris Member code SOLB.BE Currency EUR Solvac ISIN code BE0003470755 SSOM Deferred settlement service Eligible 2.72% Shares savings plan PEA Eligible Other investor
Slide 50: ADR Program for US Investors
ADR PROGRAM FOR US INVESTORS ADR program for US investors ADR symbol SOLVY Contact CITI Benefits of ADR’s to create Platform OTC Solvay ADRs • Clear and settle according to US standards CUSIP 834437303 • Convenience of stock quotes and dividend New York DR ISIN US834437305 payments in US dollars Mic
Slide 51: Investor Relations Contact Us
INVESTOR RELATIONS Upcoming events From left to right: Geoffroy Raskin, Laetitia Van Minnenbruggen, Bisser Alexandrov, Anaïs Musimenta, Jodi Allen, Geoffroy d’Oultremont & Valérie-Anne Barriat YOUR INSTITUTIONAL CONTACTS SHAREHOLDERS’ CONTACTS Geoffroy Raskin Valérie-Anne Barriat Head of Investor re
Slide 52: Disclaimer
DISCLAIMER This presentation may contain forward-looking information. Forward-looking statements describe expectations, plans, strategies, goals, future events or intentions. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties relating t
Slide 53: www.solvay.com
Investor Relations Shareholders services Rue de Ransbeek, 310 Rue des Champs Elysées, 43 1120 Brussels, Belgium 1050 Brussels, Belgium T +32 2 264 3025 T +32 2 639 6630 M [email protected] M [email protected] www.solvay.com FOLLOW US ON QUESTIONS? Contact us investor.relations@solv