Slide 1: Formica Asia – Business Overview
Formica Asia – Business Overview September 13, 2010 1
Slide 2: Agenda
Agenda Overview of Asian Business • Locations & workforce • Geographies and channels Overview of the Markets • Formica sales growth (2005-2010) • Product mix • Sales by channel and Market focus • Flowchart of market distribution channel • Competition Situational Assessment • Asian countries by segme
Slide 3: Formica Asia manufactures at three plants and operates in over twenty markets
Formica Asia manufactures at three plants and operates in over twenty markets across the region, built around current bases in Thailand, Taiwan and China Distribution Ctr. Sales Office Employees Factories Operations Profile Taiwan Taiwan 1 3 252 Japan 1 Korea 1 6 China China 1 5 16 427 Hong Kong 1 2
Slide 4: Since 2005 the business has grown to 184 m.s.f. of volume and $185M
Since 2005 the business has grown to 184 m.s.f. of volume and $185 M in revenue NZ$m Total Asia SQF'm 200 200 190 184 180 168 164 160 160 153 187 185 176 181 120 120 153 142 80 80 CY2005 CY2006 CY2007 FY2008 FY2009 FY2010 Sales Sales Volume Note: Sales volume exclude Solid Surfacing and Stone produc
Slide 5: The region's sales are concentrated in HPL, including Compact
The region’s sales are concentrated in HPL, including Compact, and concentrated near our factories, as well as in Hong Kong and Malaysia Revenue by Product Volume by Country Vietnam, 1.6 Philippines, Korea, 1.7 Indonesia, 1.8 1.4 Singapore, 4 Japan, 0.8 Malaysia, Other 7.3 (14%) Hong Kong, Solid 9.7
Slide 6: Product moves both directly and through distribution, sold primarily into commercial
Product moves both Directly and through Distribution, and is sold primarily into the commercial specification sector—new housing is just 18% of the business Sales by Channel Sales by Sector Residential Remodel (10%) Residential Distribution Direct New (47%) (53%) (18%) Commercial (72%) Total Total =
Slide 7: Dealers still important; increasing effort on spec driven selling
While Dealers are still important to help drive sales, increasing effort is being put into pulling sales through spec driven selling to architects and designers Builders/ Architects/ Manufacturers Distributors Fabricators Retailers Consumers Contractors Designers Dealers / Small Traditional Distribu
Slide 8: Geographies, Channels & Market Share
In many markets the industry is highly fragmented—given our market share there are Geographies, Channels & Market Share lots of opportunities to grow, but no one acquisition is a game changer 100 Polyart Importer Low-end Other Other Other Other Other Maica ABC G. BoardToppal TAK Other Nihon Decoluxe
Slide 9: We segment countries into four categories and tailor our approach
In analysing the Asian market, we segment countries into four categories—Developed, Developing, Under-Developed and China—and tailor our approach to each Countries by Segment Developed— Taiwan, Thailand, Korea, Japan, Singapore, Hong Kong Developing— Malaysia, Vietnam, Indonesia, Philippines Under-D
Slide 10: Developed countries: leverage product portfolio in high share markets
In Developed countries, the focus is on leveraging our product portfolio in high share markets and looking externally to drive share gain in less favorable markets Key Characteristics • Generally larger markets, particularly in terms of laminate consumption • More mature, slower growth markets, part
Slide 11: Developing markets: brand and channel development to drive consolidation
In faster growing Developing markets, the focus is on brand and channel development to drive consolidation and achieve a sustainable position Key Characteristics • Generally smaller markets, particularly in terms of laminate consumption • Less mature, often rapid growth markets, particularly in term
Slide 12: Under-Developed markets supported through exports
Under-Developed markets generally cannot support significant in-market investment, supported instead through exports until fundamentals improve Key Characteristics • Very small markets • Slow growth with unattractive fundamentals to support economic expansion • Low GDP • Generally no domestic supply
Slide 13: China: spec led sales in developed regions, distribution and 2nd brand in developing
In China efforts are multiple—we are looking to drive spec led sales in developed regions and to build distribution and 2nd brand position in developing regions Key Characteristics • Large, unique market that actually incorporates characteristics of all three—Developed, Developing and Under-Develope
Slide 14: Priority strategies: Core growth, geographic expansion, adjacent markets
The priority strategies to be pursued include growth in Core products, geographic expansion and exploration of adjacent markets ss Overview c ro s Raw material Sales and Wholesale and Postforming/ a ie Manufacturing te nd aph production marketing distribution fabrication r • Primary focus of growing
Slide 15: Accelerating growth through 5 key strategies
The Asian business looks to accelerate growth in revenue and profits by pursuing the successful implementation of 5 key strategies 1 China Strategy: Position the business for growth • Restructure distribution—leverage to grow second brand • Redeploy resources toward higher end specification markets
Slide 16: The Chinese market is vast and the opportunity is not created equal
1 The Chinese market is vast and the opportunity is “not created equal”—development is moving north and to the west Overview of China by Regional Development Discussion • China is developing differently across territories • The furthest advanced are the ones in the 6 coastal provinces with more open
Slide 17: The market in China is divided into distinct tiers
1 The market in China is divided into 3 distinct tiers—Formica has 30% of its target, high-end market and 4% share overall Market Product Channel Primary Formica What to do Trend Market Share - Total China Segment / Characteristics Brands Share Size (SQF) (%) 100% High-end 1. Product Formica Formica
Slide 18: China Unit volume and revenue growth since 2005
1 While the top line Volume & Revenue are up almost 30% & 40%, respectively since 2005, growth has slowed as competition has increased & market development shifted NZ$m China Unit SQF'm 120 90 100 75 70 65 64 80 59 60 60 54 60 45 88 84 82 80 40 30 70 63 20 15 0 0 CY2005 CY2006 CY2007 FY2008 FY2009 F
Slide 19: New business model designed to systematically accelerate growth
1 We are implementing a new business model designed to systematically accelerate growth by putting the right resources in the right place Actions to Accelerate Growth Execute new Distribution strategy Re-examine the number and locations of all distribution centers Focus on recruiting independent dis
Slide 20: Exploring expansion into a low pressure offering, initially in China
2 At the same time, given the large market and rapid growth, we are exploring the possibility of expanding into a low pressure offering—initially in China Background Concept There is a large market in China for low Formica would look to partner with a pressure laminate—could be several company with
Slide 21: ASEAN region predominantly developing markets anchored by Thailand
3 The ASEAN region of Asia is predominantly characterized by developing (and even under-developed) markets—anchored by well developed Thailand market Overview of ASEAN by National Development Discussion • Most of the countries in Southeast Asia are expanding rapidly • Our focus in these markets is o
Slide 22: ASEAN volume and revenue grown steadily since 2005
3 Volume and revenue have grown steadily in the higher growth ASEAN region, up almost two thirds since 2005 to 68 m.s.f. and $56 million, respectively Asean Unit NZ$m SQF'm 70 84 60 72 68 62 61 50 60 58 52 40 48 44 56 50 53 30 36 44 20 39 24 10 33 12 0 0 CY2005 CY2006 CY2007 FY2008 FY2009 FY2010 Not
Slide 23: Positioning Formica to grow share in key ASEAN growth markets
3 The focus in the ASEAN region will be positioning Formica to grow share and consolidate a sustainable position in the key growth markets Total Market Volume Estimates for Key Countries 2010 and 2015 Malaysia Vietnam Indonesia 100 20 35 30 80 15 25 60 Volume (m.s.f.) Volume (m.s.f.) 20 Volume (m.s.
Slide 24: Taiwan region: Philippines growth and share in Japan and Korea
4 In the Taiwan region, the focus will be on exploiting the rapidly growing Philippine market and acquiring share in the large but developed markets of Japan and Korea Overview of “Taiwan Region” by National Development Discussion • Fairly large HPL markets in Taiwan region • Exception is Philippine
Slide 25: Taiwan Unit sales and volume
4 In the region, Formica’s business is dominated by its solid position in the large but relatively stable market of Taiwan Taiwan Unit NZ$m SQF'm 60 60 57 58 54 53 53 50 50 47 40 40 50 48 30 49 30 44 46 45 20 20 10 10 0 0 CY2005 CY2006 CY2007 FY2008 FY2009 FY2010 Sales Sales Volume Note: Sales volum
Slide 26: Taiwan Unit: extend position in Taiwan, build base in Japan and Korea
4 In Taiwan Unit, the focus will be on extending Formica’s position in Taiwan, while also looking to establish a strong base in Japan and Korea through acquisition or JV Taiwan Korea Japan Philippines 100 100 300 25 80 80 250 20 Volume (m.s.f.) 60 60 200 15 150 40 40 10 100 20 20 5 50 0 0 0 0 2010 2
Slide 27: Building the product portfolio: Compact and engineered stone
5 Finally, Formica Asia is looking at the opportunity to build its product portfolio to expand into new products in our core space, as well as products in adjacent space 1 • Compact represents an opportunity to extend Formica’s core product and process expertise to new, high value applications • The