Evonik Industries Ag · XETR:EVK
Evonik Industries — Investor Presentation (May 2019)
74 slides from Evonik Industries's investor presentation, May 2019
Slide 1: Evonik Company presentation Q1 2019
Evonik Power to create. Portfolio Company presentation Profitable Growth Q1 2019 Innovation Culture 1
Slide 2: Table of contents
Table of contents 1. Evonik at a glance 2. Strategy 3. Financials Q1 2019 4. Appendix 2
Slide 3: A strong basis in Specialty Chemicals
A strong basis in Specialty Chemicals Market Customer Technology Unique brand Qualified leadership proximity leadership recognition employees Leading market Leading and Highly qualified Almost 90% positions in proprietary technology of direct sales platforms in workforce 80% via as key factor for a
Slide 4: Three segments with differentiated management
Three segments with differentiated management Group financials 20181 Sales Adj. EBITDA Margin ROCE €13,267 m €2,150 m 16.2% 10.2% Growth Efficiency Nutrition Resource Performance & Care Efficiency Materials Sales Adj. EBITDA / Margin Sales Adj. EBITDA / Margin Sales Adj. EBITDA / Margin €4,646 m €81
Slide 5: Balanced regional and end market split
Balanced regional and end market split Sales by region End market split Agriculture Renewable energies Other Electrical & electronics Western Europe Paper & printing Metal & oil products Food & animal feed Asia-Pacific Paints & coatings1 Other industries Pharmaceuticals Consumer & Central & South Am
Slide 6: Sustainability as core pillar of Evonik's operating businesses
Evonik Sustainability Strategy and Targets Sustainability as core pillar of Evonik’s operating businesses Targets 2004 – 2014 ▪ of sales covered by sustainability analysis1 ▪ Reduction of specific greenhouse gas emissions (GHG) emissions by 20% ▪ of sales covered by Life Cycle Management analysis
Slide 7: Evonik Sustainability product examples
Evonik Sustainability product examples Broad-based resource-efficient applications portfolio of sales generated with products for resource-efficient applications1 Product examples for Product examples for Product examples for POLYVEST® HT Silica-organosilane Catalyst NM 30 Sealing compounds for insu
Slide 8: RAG-Stiftung as long-term shareholder
“RAG-Stiftung” as long-term shareholder with focus on attractive returns Ownership structure RAG-Stiftung ▪ A foundation with the obligation to finance the perpetual liabilities arising from the cessation of hard-coal mining in Germany ▪ Evonik as integral and stable portfolio element with attractiv
Slide 9: Reliable and attractive dividend policy
Reliable and attractive dividend policy Payout ratio 53% 41% ▪ Sustainable dividend growth over the last years: 7% CAGR between 2008 and 2018 Dividend (in €) for FY 1.15 1.15 ▪ Attractive dividend yield +7% CAGR ▪ Reliable dividend policy targeting: dividend continuity a payout ratio of ~40% of
Slide 10: Table of contents
Table of contents 1. Evonik at a glance 2. Strategy 3. Financials Q1 2019 4. Appendix 10
Slide 11: Building a best-in-class specialty chemicals company
Building a best-in-class specialty chemicals company 11
Slide 12: Targeting excellence in three strategic focus areas
Targeting excellence in three strategic focus areas Portfolio: More balanced & more specialty Profitable Growth Open & Leading in performance-oriented innovation culture 12
Slide 13: Target portfolio structure: four growth engines
Target portfolio structure Four growth engines as drivers for profitable & balanced growth NUTRITION & CARE RESOURCE EFFICIENCY Health & Care Smart Materials Four growth Specialty Additives engines Animal Nutrition 13
Slide 14: Building on our strengths
Building on our strengths Developing our growth segments and businesses NUTRITION & CARE RESOURCE EFFICIENCY PERFORMANCE MATERIALS €4.6 bn €5.6 bn €2.4 bn Mature Mature Mature businesses businesses businesses Growth Growth businesses businesses Meeting specialty chemicals characteristics 2018 Financ
Slide 15: Step by step execution of strategic agenda
Step by step execution of strategic agenda What we achieved so far Acquisition of PeroxyChem Strategy Update London “Futurize Peroxide” “Building a best-in-class specialty chemicals company” Sale of Methacrylates “Consistent portfolio transformation” June Nov. Mar. Nov. Mar. 2017 2017 2018 2018 2019
Slide 16: Active portfolio management
Active portfolio management More balanced and specialty with improved financial metrics Acquisitions Divestments „Creating a global leader in Specialty & Coating Additives“ „Streamlining on business-line level” „Excellent complementary fit for resilient silica business“ „Major step towards a more sp
Slide 17: Portfolio transformation leads to higher margins with reduced volatility
Portfolio transformation leads to higher margins with reduced volatility EBITDA margin development: Acquisitions vs. “MMA/PMMA Verbund” 2015 2016 2017 2018 2019E Acquisitions: APD Specialty Additives; Huber Silica; Dr. Straetmans; PeroxyChem 17
Slide 18: Portfolio development: asset-light shift towards specialties
Portfolio development Asset-light shift towards specialties leads to margin uplift Processing PA12 product into powders suitable for highest needs in 3D printing (additive manufacturing) Margin potential Repurposing fermenters of mature lysine business to produce high-end algae based omega-3 fatty a
Slide 19: Strategic agenda reflected in ambitious financial targets
Strategic agenda reflected in ambitious financial targets Structurally lifting EBITDA margin and driving balanced growth Historic margin range (in %) Targets going forward (over the cycle) Structurally lift EBITDA margin into sustainably higher range of 18-20% 16.2 Above-average volume growth GDP+ 1
Slide 20: Table of contents
Table of contents 1. Evonik at a glance 2. Strategy 3. Financials Q1 2019 4. Appendix 20
Slide 21: Highlights Q1 2019
Highlights Q1 2019 Resilient start despite challenging macro environment Organic sales growth1 Adj. EBITDA Free cash flow Outlook Growth segments with Earnings stability proving Higher cash generation EBITDA at least stable; yoy growth despite increased resilience of driven by improved NWC significa
Slide 22: Free Cash Flow Q1 2019
Free Cash Flow Q1 2019 Strong FCF improvement Free Cash Flow Q1 2019 (in €m, continuing operations ) +€109 m ▪ FCF improved by €109 m 159 ▪ …despite €58 m lower EBIT ▪ Operating cash flow benefitting from lower cash outflows for NWC and pensions (CTA effect) 50 ▪ Strong cash generation above prior y
Slide 23: Resource Efficiency
Resource Efficiency Healthy organic growth driving higher earnings Sales (in € m) Adj. EBITDA (in € m) / margin (in %) +3% +2% 1,364 1,435 1,382 1,366 1,399 358 327 319 324 254 23.4 24.9 23.7 18.6 23.2 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Volume Price FX Other ▪ Specialty port
Slide 24: Nutrition & Care
Nutrition & Care Solid operational performance throughout the first three months Sales (in € m) Adj. EBITDA (in € m) / margin (in %) +3% -14% 1,119 1,189 1,167 1,171 1,149 209 222 212 167 180 18.7 18.7 18.2 14.3 15.7 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ▪ Strong volume develop
Slide 25: Performance Materials
Performance Materials Supply constraints impacting profitability Sales (in € m) Adj. EBITDA (in € m) / margin (in %) -7% -9% 601 616 634 79 543 559 72 65 59 49 10.8 12.8 11.4 9.0 10.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Volume Price FX Other ▪ Continuing operations in PM: C4
Slide 26: Outlook 2019: Adj. EBITDA
Outlook 2019: Adj. EBITDA Outlook increased after exclusion of Methacrylates ▪ Assumption of lower economic growth throughout the year 2019 „at least stable“ €2,150 m ▪ Outlook now excluding Methacrylates ▪ Nutrition & Care slightly lower; Resource Efficiency slightly higher; Perf. Materials around
Slide 27: Outlook 2019: Free Cashflow
Outlook 2019: Free Cashflow Further improvement in cash generation expected Positives: ▪ CTA pension reimbursement €526 m ▪ Lower cash-outflow for working capital Negatives: Cash conversion ▪ Normalization of cash taxes rate 24.4% ▪ Cash-out for efficiency program (SG&A) 2018 2019E 27
Slide 28: Additional indications for 2019
Additional indications for 2019 ▪ IFRS 16 effect ~€100 m equally split over four quarters of the year ▪ Synergies from acquisitions Additional synergies of ~€30 m (total synergies: ~€70 m) (APD & Huber Silica) ▪ PeroxyChem Not yet included in outlook, closing expected mid-2019 (Adj. EBTDA FY 2018: $
Slide 29: Segment outlook FY 2019
Segment outlook FY 2019 (continuing operations) Nutrition & Care Resource Efficiency Performance Materials ▪ We assume a continuation of the volume ▪ In 2019, the Resource Efficiency segment will ▪ In the Performance Materials segment (without growth and positive earnings trend in the continue to be
Slide 30: © evonik
© evonik
Slide 31: Appendix
Appendix 1. Strategy Details 2. Segment overview 3. Financials 4. Upcoming events 31
Slide 32: Consistently executing our strategic agenda
Consistently executing our strategic agenda Levers for structural uplift in profitability and growth Strategic lever Impact (p.a.) by (year) Synergy ▪ Realization of synergies from Air Products €85 m 2020/ and J.M. Huber acquisitions EBITDA 2021 realization Cost ▪ Targeting structural improvements i
Slide 33: Four growth engines
Four growth engines Growth drivers and product examples Growth trends and drivers Product examples Market growth ▪ More sophisticated requirements on additive effects Coating Additives Specialty Additives ▪ Need for increased product performance and PU-Additives 5-6% “Small volume, big impact” effic
Slide 34: Portfolio Management: targeted and disciplined M&A approach
Portfolio Management Targeted and disciplined M&A approach Air Products Huber Silica Dr. Straetmans PeroxyChem Performance Materials (2016) (2016) (2017) (2018) Purchase price ~ €3.5 bn ~ €600 m €100 m $625 m EBITDA margin >20% >20% ~20% ~20% Market growth ~4-5% ~4-6% ~10% ~6%1 Business Highly attra
Slide 35: Implementation schedule for acquisition synergies
Implementation schedule for acquisition synergies Ramp-up on track for Air Products specialty additives and Huber silica acquisitions Implementation schedule (in € m) Annual synergies One-time costs 110 Total 100 90 ~ €85 m p.a. (USD100 m) 80 Annual synergies APD: ~ €68 m p.a. (USD80 m) 70 Huber: ~
Slide 36: Methacrylates Divestment
Methacrylates Divestment Well-structured divestment process results in attractive valuation EBITDA 2016 - 2019E ▪ Continuous reduction of production costs ▪ Restructuring of business setup (e.g. site closure Gramatneusiedl) ▪ Implementing lean and optimized business model to efficiently serve custom
Slide 37: Methacrylates Divestment: attractive valuation
Methacrylates Divestment Attractive valuation Debt- & cash-free Enterprise Value Equity value adjustments ▪ EBITDA (2016-2018): ~ €350 m ▪ Mainly transfer of pension ▪ Strengthening balance sheet ▪ EBITDA (2019E): ~ €350 m obligations and assets to new owner ▪ Targeted growth ▪ Evonik impact: Immedi
Slide 38: Methacrylates Divestment: capital allocation priorities
Methacrylates Divestment Capital allocation priorities: Strengthening balance sheet and investing in growth Animal Specialty Health Smart Deleveraging Nutrition Additives & Care Materials ▪ Disciplined M&A via targeted bolt-on acquisitions in growth engines ▪ Highly attractive internal growth projec
Slide 39: Methacrylates Divestment: impact on Evonik financials (1/2)
Methacrylates Divestment Impact on Evonik financials (1/2) 2018 2019 Pro forma EBITDA 2019 as part of Evonik Group Impact on Evonik Group ex MMA Remnant cost also include impact from new market prices for Evonik ex MMA (implemented for “arm’s length” delivery terms of bulk monomers to NC and RE segm
Slide 40: Methacrylates Divestment: impact on Evonik financials (2/2)
Methacrylates Divestment Impact on Evonik financials (2/2) ▪ No change in dividend policy Dividend policy ▪ Dividend continuity (at least stable) / payout ratio of ~40% of adjusted net income ▪ €50 m in 2019 Remnant cost ▪ To be reduced by half by 2021 ▪ Reduction of sustained CAPEX level to €850 m
Slide 41: Achieving cost excellence: SG&A 2020
Achieving cost excellence: SG&A 2020 Targeting structural improvements in SG&A Cost savings of€200 m p.a. Reduction of 1,000 FTE €200 m savings p.a. Savings across all units and segments Perfomance Materials Nutrition & Care ✓ €200 m p.a. Full potential Resource Efficiency €50 m €100 m €180 m €135 m
Slide 42: SG&A 2020: FTE reduction
SG&A 2020 FTE reduction by 350 realized by Q1; >50% already fixed SG&A FTE reduction Total headcount development (Q1 yoy) # of FTEs # Group employees 32,977 -455 FTEs reduced 1,000 FTEs agreed ~540 32,623 32,522 ~270 ~350 2018 2019 Target Q1 2018 Q4 2018 Q1 2019 (end 2021) ▪ Reduction of 270 FTEs in
Slide 43: Recent cost initiatives
Recent cost initiatives Program to achieve cost excellence in admin and selling initiated Scope Cost initiative Administration Excellence SG&A 2020 Measures with savings potential Focus on all admin and selling functions Selling, General & Admin >€200 m implemented Project focus, e.g.: €200 m implem
Slide 44: Leading in Innovation: growth fields
Leading in Innovation Innovation growth fields with tangible size already today – strong growth ahead Innovation Growth Fields Sales contribution Advanced Food Ingredients Additional contribution to sales from Innovation Growth Fields Additive 25% p.a. Manufacturing (CAGR) Sustainable Nutrition Memb
Slide 45: Open & performance-oriented culture
Open & performance-oriented culture New corporate values and performance management system New corporate values • Guidelines for cultural change • Introduced in September 2018, now drilled down into the organization New performance management system • Leaner process and strict alignment with Group f
Slide 46: Appendix
Appendix 1. Strategy Details 2. Segment overview 3. Financials 4. Upcoming events 46
Slide 47: Business Lines managed in 3 operative segments
Evonik Group1 17 Business Lines managed in 3 operative segments Resource Performance Nutrition & Care Efficiency Materials Sales Adj. EBITDA / Margin Sales Adj. EBITDA / Margin Sales Adj. EBITDA / Margin €4,646 m €810 m / 17.4% €5,547 m €1,258 m / 22.7% €2,394 m €265 m / 11.1% Animal Nutrition Silic
Slide 48: Nutrition & Care
Nutrition & Care Fulfilling human needs in a globalizing world Key characteristics Adj. EBITDA (€ m) and margin (%) End market split ▪ Long-term development is especially 25.8 25.0 22.1 20.8 29.1 23.3 16.6 17.4 driven by socioeconomic megatrends and sustainability 1,435 ▪ High degree of customer int
Slide 49: Nutrition & Care: growth trends and product examples
Nutrition & Care Selected growth trends and products examples Growth example Growth example Growth example Growth example 49
Slide 50: Nutrition & Care – Veramaris
Nutrition & Care – Veramaris Algae to produce omega-3 fatty acids, skipping over the food chain in the ocean Specialist in developing industrial biotechnology processes and in operating large scale manufacturing sites for fermentative processes Specialist for the cultivation of marine organisms incl
Slide 51: Resource Efficiency
Resource Efficiency Innovative products for resource-efficient solutions Key characteristics Adj. EBITDA (€ m) and margin (%) End market split ▪ High-value and resilient specialty 19.9 21.4 21.3 20.7 20.9 21.8 21.8 22.7 Automotive, business with broad application scope transportation ▪ Focus on perf
Slide 52: Resource Efficiency: growth trends and product examples
Resource Efficiency Selected growth trends and products examples Growth example Growth example Growth example Growth example 52
Slide 53: Resource Efficiency – E-Mobility
Resource Efficiency – E-Mobility Significant additional sales opportunities Additional sales potential in auto end market 2018-2028 (in €m) > GDP + Opportunities arising from e-mobility … Plastics and composites (e.g. PA 12 or ROHACELL®) Cooling lines, charging and high voltage cables Lubricants (e.
Slide 54: Performance Materials
Performance Materials Integrated production platforms for efficient production of rubber and plastic intermediates Key characteristics Adj. EBITDA1 (€ m) and margin1 (%) End market split ▪ Strong integrated production platforms ▪ Leading cost positions 10.6 8.5 9.0 11.4 13.7 11.1 ▪ Favorable raw mat
Slide 55: Streamlined setup of Performance Materials segment
Streamlined setup of Performance Materials segment Merger Functional Solutions & Agrochemicals business lines Methacrylates Performance Merger Functional Solutions & Agrochemicals: Verbund Intermediates Bundling of competencies Setup today (MMA, PMMA, Cyplus) ▪ Complexity reduction: Text Functional
Slide 56: Appendix
Appendix 1. Strategy Details 2. Segment overview 3. Financials 4. Upcoming events 56
Slide 57: Trimming down sustained CAPEX level to ~€850 m
Trimming down sustained CAPEX level to ~ €850 m CAPEX development (in € m) 1,050 m ~950 m1 2018 2019 2020 2021 2022 “MMA/PMMA Verbund“ Sustained CAPEX level Polyamide 12 expansion 1. Continuing operations (excluding methacrylates) 57
Slide 58: Investments: selective projects announced for 2019
Investments Selective projects announced for 2019 Investment projects successfully completed … … and projects with start-up planned for 2019 Precipitated Silica plant Veramaris JV (Green Ocean) United States United States Rationale: new capacity in response to high demand for silica from tire indust
Slide 59: Financial policy: solid investment grade rating
Financial policy Maintaining a solid investment grade rating A3/A- Successful track record of a strong rating from both rating BBB+ (stable) agencies based on: Baa1/BBB+ ▪ Strong business profile underpinned by significant size and Investment Baa1 (stable) leading global market positions grade Baa2/
Slide 60: Debt structure
Debt structure Well balanced maturity profile (in € m as of March 31, 2019) 1,000 ▪ Well balanced debt maturity profile with no single maturity greater than €750 m 800 ▪ Long-term capital market financing secured at favorable conditions: 600 average coupon of 0.74% p.a. on €3.15 bn senior bonds 40
Slide 61: Development of net debt and leverage over time
Development of net debt and leverage over time (still including discontinued operations) (in € m) Net debt 2,251 2,741 6,840 6,639 7,467 ▪ Net financial debt increase as per Q1 2019 vs year-end 2018 mainly due to IFRS 16 including discontinued operations (+ €666 m) 3,437 3,023 2,907 3 ▪ Pension prov
Slide 62: Net financial debt and pension provision development Q1 2019
Net financial debt and pension provision development Q1 2019 (cont op) FCF improvement also becomes visible in net financial debt reduction (in € m) Net financial debt Pensions provisions -154 -285 3,573 - 159 3,419 5 +298 3,732 666 -583 2,907 3,447 31 Dec IFRS 16 1 January FCF Others1 31 Mar 2019 3
Slide 63: Pensions: funding overview
Pensions Pension funding overview as of 31 December 2018 (unaudited financials) ▪ Pensions very long-term, patient debt (>16 years) with no funding Unfunded Pension fund / obligations in Germany (~ pension reinsured support provision on 30% 30% fund ▪ DBO level of €11.7 bn yoy stable balance sheet)
Slide 64: Pensions: sustainable free cash flow improvement
Pensions: Sustainable free cash flow improvement Strong CTA performance as a basis for reimbursements without further top-ups Funding phase Reimbursement phase Pension payments by Evonik Pension payments partly taken over by CTA €5.2 bn ~70%1 €3.5 bn ~70%1 Cash-out until expiration of pension obliga
Slide 65: Impact on Cash flow statement
Impact on Cash flow statement in € m Change in 2019 Income before financial result and income taxes Depreciation and amortization Cash outflow from change in ∆ Net working capital pension provisions in OCF will Change in provisions for pensions and other post-employment sustainably reduce from 2019
Slide 66: Financials
Financials Sales (in € bn) Adj. EBITDA (in € m) / margin 19.0% 18.5% 15.7% 14.6% 18.2% 17.0% 16.4% 17.3% Methacrylates Divestment 15.5%1 16.2%1 14.4 15.0 2,439 2,467 2,465 2,601 9.3 13.3 12.7 12.9 13.5 12.7 2,165 2,357 1,989 1,882 12.7 13.3 1,970 2,150 2011 2012 2013 2014 2015 2016 2017 2018 2011 20
Slide 67: Segment overview by quarter
Segment overview by quarter – continuing operations Sales (in € m) Q1/17 Q2/17 Q3/17 Q4/17 FY 2017 Q1/18 Q2/18 Q3/18 Q4/18 FY 2018 Q1/19 Nutrition & Care 1,120 1,163 1,110 1,114 4,507 1,119 1,189 1,167 1,172 4,646 1,149 Resource Efficiency 1,326 1,321 1,316 1,279 5,242 1,364 1,435 1,382 1,365 5,547
Slide 68: Raw material split
Raw material split Total procurement volume 2018 (in € m) Breakdown of raw material spend1 (examples) Bio Logistic & Packaging ▪ Dextrose Energy ▪ Fatty alcohols (incl. natural gas) ▪ Tallow fatty acid Fossil ▪ Fatty acids ▪ Crack C4 ▪ tallow ▪ Propylene ~€5.9 bn ~€9.9 bn ▪ Acrylic acid Machincery ▪
Slide 69: Management compensation
Management compensation Fixed salary ▪ To be paid in cash for each financial year on a monthly basis ~1/3 ▪ Pay-out calculated on the basis of the achievement of ▪ Factor of between 0.8 and 1.2 to take into account the focused KPIs; aligned to mid-term strategic targets: achievement of further indiv
Slide 70: Appendix
Appendix 1. Strategy 2. Segment overview 3. Financials 4. Upcoming events 70
Slide 71: Upcoming IR events
Upcoming IR events Conferences & Roadshows Upcoming Events & Reporting Dates 4 June 2019 Credit Suisse Global Chemicals Conference, London 28 May 2019 AGM 5-6 June 2019 Deutsche Bank Access Conference, Berlin 1 August 2019 Q2 2019 reporting 12 June 2019 JP Morgan European Materials Conference, Londo
Slide 72: Evonik Investor Relations team
Evonik Investor Relations team Tim Lange Janine Kanotowsky Head of Investor Relations Team Assistant +49 201 177 3150 +49 201 177 3146 [email protected] [email protected] Ina Gährken Kai Kirchhoff Investor Relations Manager Investor Relations Manager +49 201 177 3142 +49 201 177 3145 i
Slide 73: Disclaimer
Disclaimer In so far as forecasts or expectations are expressed in this presentation or where our statements concern the future, these forecasts, expectations or statements may involve known or unknown risks and uncertainties. Actual results or developments may vary, depending on changes in the oper
Slide 74: © evonik
© evonik