Slide 1: Speciality Materials
Speciality Materials Ole Enger Executive Vice President, Speciality Materials
Slide 2: Agenda
Agenda Speciality Materials – Common themes SAPA Elkem Borregaard
Slide 3: Financial trends - EBITA margin 2000 through 2005
Financial trends - EBITA margin 2000 through 2005 14 % 12 % 10 % 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005* Elkem Sapa Borregaard *RTM per Q3-05
Slide 4: Speciality Materials – main figures
Speciality Materials – main figures Speciality Materials Elkem Sapa Borregaard RTM per Q3 2005 NOK million Sales 9 243 12 400 4 747 EBITDA 1 702 831 620 EBITA 1 157 457 350 No. of Employees* 3 242 7 953 1 857
Slide 5: Business characteristics
Business characteristics Both Elkem, Sapa and Borregaard have leading positions in their industries A number of interesting growth opportunities Hydro power and Solar Stable cash flow generating businesses Primary aluminium, Sapa Heat Transfer and Borregaard LignoTech Restructuring and imp
Slide 6: Operational excellence through a consistent set of systems and tools
Operational excellence through a consistent set of systems and tools Number of employees 6 475 -21 % 5 099 Elkem Borregaard 2000 2005
Slide 7: Specialisation/differentiation/innovation: Increasing the value to customers
Specialisation/differentiation/innovation: Increasing the value to customers Solar applications Profiles for building and housing Natural taste enhancers
Slide 8: Proactive structural development
Proactive structural development In % of sales 1996 2005* 100 % 80 % 60 % 40 % 20 % 0% 1996 2005 Steel related Downstream aluminium Silicon related Primary aluminium Other 100 % 80 % 60 % 40 % 20 % 0% 1996 2005 Speciality chemicals Fine chemicals Ingredients other *RTM per Q3-05
Slide 9: Agenda
Agenda Speciality Materials - Common themes SAPA Elkem Borregaard
Slide 10: Aluminium extrusions – The material of the future
Aluminium extrusions – The material of the future; strong, light and environment friendly 2.8 2.58 2.6 2.40 2.38 2.43 2.40 2.4 2.28 2.27 2.17 2.2 2.08 Million tonnes 2 1.91 1.91 1.87 1.80 1.79 1.80 1.8 1.71 1.66 1.67 1.6 1.41 1.4 1.29 1.17 1.2 1.11 1.11 1.04 1 0.8 05 82 83 84 85 86 87 88 89 90 91 92
Slide 11: Sapa – Among the world leading aluminium extrusion companies
Sapa – Among the world leading aluminium extrusion companies Share of Revenues 2004 total revenues in SEK million Profiles 64 % 9 287 Building System 20 % 2 842 Heat Transfer 16 % 2 383
Slide 12: Sapa segments - close relations with customers
Sapa segments - close relations with customers Building System Heat Transfer Profiles 20 % of sales 16 % of sales 64 % of sales 22 % 5% 11 % 19 % 1% 15 % 1% 6 % 11 % 9 % HOME BUILDING AND TRANSPORT OTHER AND ENGINEERING RETAILERS CONSTRUCTION AND END USE OFFICE 9% 5% 41 % AUTOMOTIVE 8% 11 % 26 %
Slide 13: Profiles production process
Profiles production process Alloyed Production Extrusion Extruded Surface Mechanical aluminium billets of dies products treatment refinement End products Source: Sapa and EAA’s homepage
Slide 14: Heat Transfer production process
Heat Transfer production process Rolling Hot and cold rolling Slitting Strips End products Tubes Source: Sapa’s homepage and Annual Report 2003
Slide 15: Production sites and sales offices – Further strengthening in growth areas required
Production sites and sales offices – Further strengthening in growth areas required
Slide 16: Aim is to turn weak profitability
Aim is to turn weak profitability SEK million 800 14 % 700 12 % 600 10 % 500 8% 400 6% 300 4% 200 100 2% 0 0% 2000 2001 2002 2003 2004 2005* EBIT Op. Margin ROCE *RTM per Q3 1999-2001 Pro forma and excluding non-recurring items
Slide 17: Sapa strategic issues and measures
Sapa strategic issues and measures Operational Implementation of significant cost improvement programmes Applying the best methodology from the entire Group Preliminary aim: SEK 400 million Structural Improve balance, Europe, US and Far East Location strategy for profiles in Europe Expan
Slide 18: Elkem
Elkem John G. Thuestad Managing Director, Elkem
Slide 19: Agenda
Agenda Speciality Materials - Common themes SAPA Elkem Borregaard
Slide 20: Elkem today – An overview
Elkem today – An overview Hydro power energy Solar Silicon related Primary aluminium - Growth potential - Growth potential - Restructuring - Stable cash flow RTM Q3 2005 NOK million Revenues 1 427 (13 %) 7 517 (66 %) * 2 317 (20 %) EBITDA 637 (37 %) 494 (29 %) 571 (34 %) EBITA 589 (51 %) 151 (13 %)
Slide 21: From cyclical results to stability
From cyclical results to stability 1 400 Income from operations (NOK million) Cyclical Stable 1 200 1 000 800 600 400 200 0 -200 -400 -600 Ann YTD Q3 2005 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Note: Before goodwil
Slide 22: Safety performance - Proxy for operational excellence
Safety performance - Proxy for operational excellence 16 Corporate lost-time injuries last 12 months - “H” 14 Per million working hours 12 10 8 6 4 2 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 23: Hydro power energy – Strong cash flow with growth opportunities
Hydro power energy – Strong cash flow with growth opportunities
Slide 24: Hydro Power Energy – High flexibility
Hydro Power Energy – High flexibility Production Norway: 3.5 TWh/year North America: 1 TWh/year Reservoirs 1.8 TWh Contracts 4-5 TWh until 2020 Trading 300 TWh turnover in 2004 Portfolio manager for power intensive industry Consumption Norway: 8 TWh/year Globally: 11 TWh/year Including Borregaard
Slide 25: Hydro Power Energy - Strong cash flow from production and trading
Hydro Power Energy - Strong cash flow from production and trading NOK million 1 800 80 % 70 % 1 600 60 % 1 400 50 % 40 % 1 200 30 % 20 % 1 000 10 % 800 0% 2002 2003 2004 2005* Net sales EBITA-margin ROCE *RTM per Q3 Including Borregaard, excluding Sauda project
Slide 26: Energy strategic issues – Well positioned for solid profitability and future growth
Energy strategic issues – Well positioned for solid profitability and future growth Good balanced between consumption and energy coverage Duality of industry and energy businesses allows flexibility and system optimisation Risk management capabilities Growth opportunities - 640 GWh new power
Slide 27: Silicon related
Silicon Siliconrelated related
Slide 28: Overview Silicon related
Overview Silicon related Silicon metal Foundry Carbon Microsilica Sales in NOK billion 2.5 1.5 0.8 0.7
Slide 29: Volatile market conditions and a challenging cost position
Volatile market conditions and a challenging cost position NOK million 7 800 10 % 7 600 9% 7 400 8% 7% 7 200 6% 7 000 5% 6 800 4% 6 600 3% 6 400 2% 6 200 1% 6 000 0% 2002 2003 2004 2005* Net sales EBITA-margin ROCE *RTM per Q3 Note: Net sales figures include internal sales
Slide 30: Silicon Metal strategic issues and measures
Silicon Metal strategic issues and measures Cost reduction through restructuring of Norwegian plant structure Secure cost position in Norway by converting to larger Si-furnaces Restructuring of plants Look for new opportunities in low cost countries Growth through specialisation Utilisat
Slide 31: Solar – Growth opportunities
Solar – Growth opportunities
Slide 32: Solar initiative - High growth potential and good strategic positioning
Solar initiative - High growth potential and good strategic positioning System Silicon Metal Feedstock Ingot/ Wafer Cell/ Module integration Chemical route ScanWafer ScanCell/ScanModule SolEnergy Silicon Metal Elkem Solar Metalurgical route • Continued high industry growth rates dependent on feedsto
Slide 33: Solar energy - Competitive position
Solar energy - Competitive position
Slide 34: Elkem Solar project - Solving the feedstock bottleneck
Elkem Solar project - Solving the feedstock bottleneck Market for solar power remains firm Germany remains attractive New countries (Spain, Korea and China) implementing attractive incentive programmes Solar power is competitive in sun rich areas with high retail power prices (California and
Slide 35: Primary aluminium – stable cash flow
Primary aluminium – stable cash flow
Slide 36: Primary aluminium - Solid cash generation, LT energy contracts and stable operations
Primary aluminium - Solid cash generation, LT energy contracts and stable operations NOK million 2 400 25 % 2 200 20 % 2 000 1 800 15 % 1 600 10 % 1 400 5% 1 200 1 000 0% 2002 2003 2004 2005* Net sales EBITA-margin ROCE *RTM per Q3
Slide 37: Well positioned for stable profitability and cash flow
Well positioned for stable profitability and cash flow Operational excellence – world class Manage costs to maintain competitive position Long term energy contracts until 2020 Complete anode plant and oxide contracts
Slide 38: Borregaard
Borregaard Per Sørlie Managing Director, Borregaard
Slide 39: Agenda
Agenda Speciality Materials - Common themes SAPA Elkem Borregaard
Slide 40: Mission Statement
Mission Statement Borregaard Borregaardisisthe theglobal globalleader leaderin inwood woodbased basedchemicals. chemicals. Strong Stronginnovation innovationefforts effortsincrease increasethe thevalue valueadded addedto toour ourcustomers. customers. Binding material z Lignin 30% z Vanillin z Speci
Slide 41: Market leader in global niche markets with a strong specialised product portfolio
Market leader in global niche markets with a strong specialised product portfolio End use Product Portfolio Applications Specialty Cellulose No. 1 European and leading global producer Market leader in selected applications Lignin No. 1 and only global supplier of lignin-based products Unique
Slide 42: Challenging markets met by restructuring and improvement programs
Challenging markets met by restructuring and improvement programs NOK million 6 500 14 % 6 000 12 % 5 500 10 % 5 000 4 500 8% 4 000 6% 3 500 4% 3 000 2% 2 500 2 000 0% 2002 2003 2004 2005* Net sales EBITA-margin ROCE *RTM per Q3
Slide 43: Sensitivity – External factors
Sensitivity – External factors Currency and oil price exposure Hedging effects (NOK million) Currency exposure 250 221 Sales currencies USD/EUR (45/35 % of revenues) 200 Change in NOK/USD rate of NOK 1 will affect 150 126 EBITA by NOK 180-200 million per year (no change in other parameters) 10
Slide 44: New enhanced improvement programmes: Increased runrate of NOK 400 million
New enhanced improvement programmes: Increased runrate of NOK 400 million compared to 2005 level NOK million Targeted runrate within 31 December 2007 400 400 Most activities mapped 350 Fixed costs 140 Reduced manning 300 Structure 250 Variable cost/Volume 200 140 Energy Raw materials
Slide 45: Profit drivers - The way forward
Profit drivers - The way forward Fully specialised cellulose business Innovation activities to maintain market positions and increase value added Improvement programmes to compensate for present currency situation and oil price Add on acquisitions within lignin and vanillin Wood based chem