Solvay Sa · EURONEXT:SOLB
Solvay Sa — FY2013 Earnings Presentation
64 slides from Solvay Sa's earnings presentation, Feb 26, 2014
Slide 1: Q4 & FY 2013 results
Q4 & FY 2013 results February 26, 2014
Slide 2: 2013 overview
2013 overview • Acceleration of Solvay’s transformation Forenote All references to 2012 Income Statement • Delivery in a challenging economic context data are restated for: • the Group’s new business organization effective as from January 1, 2013; • the application of IAS 19 revised; • Strong fundam
Slide 3: 2013 overview: Acceleration of Solvay's transformation
2013 overview • Acceleration of Solvay’s transformation • Delivery in a challenging economic context • Strong fundamentals to create value Q4 & FY 2013 results 3 26/02/2014
Slide 4: An in-depth transformation
An in-depth transformation • Reinforcing business profile through • our Strategy Build a strong global leader strategic portfolio upgrades our Vision in the chemical industry • Striving for excellence • Be a model of across businesses sustainable chemistry • Innovating to create • Become a high grow
Slide 5: Business profile enhanced through strategic portfolio upgrades
Business profile enhanced through strategic portfolio upgrades 2013 to extract value Solvay’s ability Reduced cyclicality through GROW phased disposals ENHANCE • European Chlorovinyls activities to be Chemlogics contributed to JV with Ineos Solvay YE 2013 • Indupa to be sold to Braskem Solvay Chemic
Slide 6: Footprint enhanced, poised for more growth
Footprint enhanced, poised for more growth Rebalanced Enhanced exposure to geographic exposure* higher growth end-markets* Aeronautics & Automotive +2% Europe -9% 17% North America 33% Consumer Goods +5% & Healthcare +2% 25% 25% Agro Food +1% 12% Asia Pacific Energy & & RoW +3% Environment 31% 11% L
Slide 7: Excellence initiatives embedded in the organization
Excellence initiatives embedded in the organization >120 major programs initiated Manufacturing excellence Energy efficiency • Variable & fixed cost reductions • Reducing 2020 energy consumption by 10% vs 2012 • Overall Equipment Efficiency • > € 100 m by YE 2016 Purchasing, supply chain Soda ash an
Slide 8: Innovative sustainable solutions launched
Innovative sustainable solutions launched Focused innovation fields Main 2013 achievements Climate change Innovative products launch Advanced materials • Bio-based products: Resource scarcity Ocalio, Starguar, Kalix®, … Health • High performance products : & well Technyl® One, Kalix® HFFR, ... being
Slide 9: Focus on performance
Focus on performance Executive Committee Strengthened Corporate Advanced Advanced Performance Functional & Business Formulations Materials Chemicals Polymers Services Strategic Growth Resilient cash Restoring Efficient priorities engines flow generation profitability Support REBITDA growth +++ +++ +
Slide 10: 2013 overview: Delivery in a challenging economic context
2013 overview • Acceleration of Solvay’s transformation • Delivery in a challenging economic context • Strong fundamentals to create value Q4 & FY 2013 results 10 26/02/2014
Slide 11: FY 2013 financial highlights
FY 2013 financial highlights • Forex headwinds Net Sales • CER phase-out REBITDA • Raw materials and guar effect deflation € 9.9 bn exceptionals € 1,663 m • Volume decrease (5)% yoy • Pricing power (12)% yoy primarily related to preserved Stable allowing for CER phase-out • Excellence programs excep
Slide 12: Stable underlying results allowing for exceptionals
Stable underlying results allowing for exceptionals Net Sales REBITDA in € m in € m 136 (328) 17 (36) 10,515 1,896 (126) Net pricing €3m 1% 1% (2)% Scope Scope (183) Conversion CERs (202) 205 (36) (82) (3)% (7)% 27 1,663 Conversion (202) Volume (2)% & mix Fixed costs (2)% (4)% 1% Volume Net Others &
Slide 13: Underlying operational performance flat, growth engine impacted by exceptionals
Underlying operational performance flat, growth engine impacted by exceptionals REBITDA 2013 in € m Advanced Essentially flat, Record Advanced Formulations allowing for exceptionals performance Materials • Successful integration of • Record performance at Specialty 3% (29)% Chemlogics, with strong s
Slide 14: Non-cash one-offs reduce net income
Non-cash one-offs reduce net income In € m Adjusted* P&L 2012 2013 Depreciation & Amortization and other elements • Recurring Depreciation & Amortization of € (603) m Net sales 10,515 9,938 • Other elements relate to pre-operational forex effect on Rusvinyl debt and temporary Chemlogics inventory st
Slide 15: Strong Free Cash Flow generation
Strong Free Cash Flow generation Net debt evolution in € m (978) 1,200 FCF € 524 m (1,125) 981 (35) (1,102) (147) (343) Changes in (708) 17 234 net debt Other attributable Change in changes to assets industrial (198) in net debt held for sale working capital Free Cash Aquisitions Dividends Flow from
Slide 16: Selective investments for value growth
Selective investments for value growth Capex Focused on (in € m) 785 700-800 superior growth areas 708 144 641 HDS Silica Discontinued Specialty surfactants operations Fluoro-polymers HPPO Continued Alkoxylation operations Bicarbonate 2012 2013 average Alkoxylation 2013-2016 Advanced Formulations Re
Slide 17: Sustained performance in Working Capital efficiency
Sustained performance in Working Capital efficiency Industrial Working Capital / Total Sales 14,6% 14,5% 14.2% 13,9% 13,9% 13,8% FY 13.8% 13.5% 13.5% TARGET TARGET 12,5% 12,5% 12,4% 2011* 2012* 2013 2016 Q1 Q2 Q3 Q4 2013 2013 2013 2013 * Restated to exclude discontinued operations Q4 & FY 2013 resul
Slide 18: A sound balance sheet
A sound balance sheet Capital structure Strong credit ratios YE 2013 YE 2013 in € bn 7.5 Hybrid Gearing 49% bond (Net debt / Equity) Including 1.2 3.5 pension Net 15% provisions Bilateral 0.4 financial debt 1.1 Rhodia bonds 0.8 Equity Cash 6.3 Leverage 2.19x & cash (Net debt / REBITDA) Solvay includ
Slide 19: Stable total dividend proposed
Stable total dividend proposed Solvay’s gross dividend in €/share 2013 € 3.20 / share (gross) dividend proposed CAGR >5% • € 1.33 interim dividend paid in January 2014 • € 1.87 balance to be paid in May 2014 1982 1987 1992 1997 2002 2007 2012 Over more than 30 years 40% average pay out Committed to
Slide 20: 2013 overview: Strong fundamentals to create value
2013 overview • Acceleration of Solvay’s transformation • Delivery in a challenging economic context • Strong fundamentals to create value Q4 & FY 2013 results 20 26/02/2014
Slide 21: 2014 Priorities
Transformation will continue • Complete initiated portfolio upgrades 2014 • Explore further strategic options Priorities • Grow with our customers • Sustain focus on excellence Asking more from chemistry Q4 & FY 2013 results 21 26/02/2014
Slide 22: 2014 outlook
2014 outlook Some end-markets show early signs of improvement Although Solvay well-placed to benefit from an cautious, Solvay upswing in macroeconomic conditions is confident that 2014 will show REBITDA growth Excellence programs will deliver in coming years Q4 & FY 2013 results 22 26/02/2014
Slide 23: Take-aways
Take-aways Progress on Poised On track towards many fronts for growth 2016 targets REBITDA to reach € 2.3 – 2.5 bn REBITDA margin to reach 18% CFROI to increase by > 100 bp vs 2013* 2016 2/3 of businesses in value-creation zone * Prior to discontinued operations Q4 & FY 2013 results 23 26/02/2014
Slide 24: Safe harbour
Safe harbour To the extent that any statements made in Consequently, actual results may differ this presentation contain information that is materially from those expressed or implied not historical, these statements are by such forward-looking statements. essentially forward-looking. The Forward-lo
Slide 25: Calendar
Calendar March 31, 2014 Annual report (on website) May 6, 2014 Q1 results publication May 13, 2014 AGM May 15, 2014 Ex-dividend trading date May 20, 2014 Dividend payment (balance) July 31, 2014 Q2 results publication November 13, 2014 Q3 results publication Q4 & FY 2013 results 25 26/02/2014
Slide 26: Annexes
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 26 26/02/2014
Slide 27: Annexes: Q4 & FY 2013 Group results
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 27 26/02/2014
Slide 28: Q4 2013 financial highlights
Q4 2013 financial highlights • Forex headwinds Net Sales • CER phase-out REBITDA • Raw materials and guar effect deflation € 2.4 bn exceptionals € 384 m • Chemlogics 2 months (5)% yoy • Pricing power (6)% yoy contribution preserved Up 8% allowing for • Excellence programs exceptionals & delivering C
Slide 29: Q4 2013 Net sales and REBITDA
Q4 2013 Net sales and REBITDA Net Sales REBITDA in € m in € m 79 (110) Net pricing 18 (16) € (2) m 2,541 407 (43) (15) (86) 4 384 16 3% 4% (4)% CERs (79) 77 Scope (4)% Scope Conversion Conversion (1)% 2,417 1% Volume (11)% 4% Net & mix Volume Fixed contribution (3)% & mix costs from Price associates
Slide 30: Q4 2013 net income
Q4 2013 net income In € m Adjusted* P&L 2012 2013 Depreciation & Amortization and other elements • Recurring Depreciation & Amortization of € (164) m Net sales 2,541 2,417 • Other elements relate to pre-operational forex effect on Rusvinyl debt and temporary Chemlogics inventory step-up and retentio
Slide 31: Q4 2013 Net Debt evolution
Q4 2013 Net Debt evolution Net Debt evolution in € m (909) 1,200 FCF € 246 m (1,475) 296 (267) 206 12 (67) (40) (1,102) Change in Free Cash Aquisitions (25) (31) REBITDA, Capex industrial Flow from & divest- provisions working discontinued Changes in ments Other & other capital Dividends net debt op
Slide 32: Portfolio actions and excellence delivery overcome exceptionals
Portfolio actions and excellence delivery overcome exceptionals CFROI Cash Flow Return On Investment REBITDA – Rec. Capex –Tax CFROI = Gross assets + Working Capital WACC 6,9% >100 bp • Demanding value-based framework for strategic decision making 6,5% +40 bp Portfolio overcame exceptionals • Provid
Slide 33: Balance sheet
Balance sheet In € m Balance sheet YE 2012 YE 2013 Fixed assets 9,572 9,395 Investment & shares 1,057 1,036 Loans and other non current financial receivables / payables 209 91 Assets held for sale 425 1,621 Taxes payable/receivable + Others 3 51 Working capital 1,379 1,216 Total invested capital 12,
Slide 34: Pension liabilities
Pension liabilities Net pension liabilities • Net pension liability YE 2013 in € m 75% denominated in EUR (72) (155) • Stable cash contribution in 2013 (403) of € (186) m (2,535) • Discount rate used at YE 2013 (173) (1,732) of 3.88% weighted average* • EUR: 3.25% • GBP: 4.50% France & Germany (unfu
Slide 35: Annexes: Q4 & FY 2013 segment results
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 35 26/02/2014
Slide 36: Advanced Formulations impacted by guar price developments
Advanced Formulations impacted by guar price developments Net sales Novecare FY 2013 Novecare • Successful integration of Chemlogics and € 2,432 m (6)% yoy (5)% yoy 65% strong start to synergies delivery 15% Coatis 2013 (4)% yoy • Back to stable guar demand conditions at Q4 2013 YE, after significan
Slide 37: Strong results at Advanced Materials
Strong results at Advanced Materials Net sales FY 2013 Specialty Polymers (4)% yoy € 2,551 m 50% Specialty Polymers (7)% yoy Silica 9% yoy • Record performance 22% 2013 Rare Earth Systems Q4 2013 (31)% yoy € 603 m 12% 16% Special Chemicals Silica (4)% yoy (5)% yoy • Record performance Rare Earth Sys
Slide 38: Resilient cash generation by Performance Chemicals
Resilient cash generation by Performance Chemicals Net sales FY 2013 Essential Chemicals € 3,125 m 56% (3)% yoy Essential Chemicals (1)% yoy 14% Acetow • Resilience of results proving sustainability 2013 7% yoy Q4 2013 9% € 784 m Eco Services Acetow 21% (8)% yoy (2)% yoy • Record performance Eco Ser
Slide 39: Challenging conditions for Functional Polymers
Challenging conditions for Functional Polymers Net sales FY 2013 € 1,763 m Polyamide Polyamide (8)% yoy (7)% yoy 12% • Persistent challenging trading conditions in 2013 Polyamide & Intermediates Q4 2013 88% PVC Compounds € 384 m 3% yoy • Improved performance at Engineering (10)% yoy Plastics followi
Slide 40: Annexes: Considerations for 2014
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 40 26/02/2014
Slide 41: REBITDA considerations for 2014
REBITDA considerations for 2014 • Carbon emission rights • Carbon Emission Rights (CER) scheme came to an end in 2013 • Total sales of CERS: € 58 m in H1 2013 • Rusvinyl ramp-up • PVC plant in Russia, JV with Sibur • Planned commissioning and subsequent ramp-up in H2 Q4 & FY 2013 results 41 26/02/20
Slide 42: Financial charges considerations for 2014
Financial charges considerations for 2014 • Debt repayments for € 1 bn in the year, € 1.5 bn by 2015 • € 500 m in January 2014 • € 500 m in May 2014 (call option on high-yield bond 2018) • € 500 m in 2015 Lead to a reduction of net interest charges Average gross interest rate to reduce by 40 bp to
Slide 43: Hybrid bond
Hybrid bond • Nominal value of € 1.2 bn, at initial average dividend yield of 4.7% • € 0.5 bn at 5.425% • € 0.7 bn at 4.199% • Dividends from hybrid bond will be accounted for in equity Income statement: No impact Statement of financial position: Treated under Equity Statement of cash flows: T
Slide 44: Other considerations for 2014
Other considerations for 2014 • Depreciation & Amortization • Recurring Depreciation & Amortization: ~€ 650 m • Rhodia PPA impact: ~€ 120 m • Restructuring costs expected to be lower • Recurring tax rate mid to low 30s over 2014-2016 • Discontinued operations, expected to reach completion in 2014 •
Slide 45: Annexes: 2016 ambition
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 45 26/02/2014
Slide 46: Solvay, a major global chemical player
Solvay, a major global chemical player € 9.9 bn Based on strengths 117 Net Sales Industrial sites Well-balanced geographical spread and end-user markets € 1.7 bn 15 REBITDA Major R&I centers Leading player in 90% of our businesses 16.7% 29,400 REBITDA margin Employees (EFTEs) Strong R&I portfolio €
Slide 47: Well-balanced geographical spread and end-user markets
Well-balanced geographical spread and end-user markets Balanced Exposure to geographic exposure* higher growth end-markets* Aeronautics & Automotive Europe 17% North America 33% Consumer Goods & Healthcare 25% 25% Agro Food 12% Asia Pacific Energy & & RoW Environment 31% 11% Latin America Building &
Slide 48: 90% of our business ranking among top 3 players
90% of our business ranking among top 3 players 1 ADVANCED FORMULATIONS Specialty surfactants Diphenols PERFORMANCE CHEMICALS Hydrogen peroxide Soda ash Phosphorus Bicarbonate chemistry ADVANCED High-performance Fluorinated Rare earth MATERIALS engineering polymers formulations polymers & compounds
Slide 49: Strong innovation portfolio aligned with global megatrends
Strong innovation portfolio aligned with global megatrends Focused innovation fields 2013 Climate change Advanced 15 Major R&I sites worldwide materials Resource scarcity 1,950 R&I staff Health € 280 m Advanced R&I efforts formulations & well being Renewable chemistry 22% New sales ratio Next billio
Slide 50: Converting vision into value
Converting vision into value Our strategy Our 2016 ambition • Reinforcing business profile REBITDA to reach € 2.3 - 2.5 bn through strategic portfolio changes REBITDA margin to reach 18% • Striving for excellence across businesses CFROI to increase by >100 bp vs 2013 • Innovating to create 2/3rd of
Slide 51: A business portfolio change
A business portfolio change Executing our strategic action plan 2010 2011 Pharma divestiture Rhodia acquisition 2012 2013 INTEGRATION TRANSFORMATION Integration & definition Chlorovinyls Europe JV To enhance our business profile of new strategic priorities announcement to extract value Solvay’s abil
Slide 52: REBITDA growth supported by strong operational levers
REBITDA growth supported by strong operational levers REBITDA > 10% CAGR in € m 2,300-2,500 Inflation Operational Organic Innovation Portfolio excellence growth 250 1,663* 280 Chemlogics (10 months) (260) 300 Market growth Manufacturing Variable Overall Excellence Innovation & fixed cost Equipment E
Slide 53: Enhanced quality of earnings across segments
Enhanced quality of earnings across segments with differentiated levers throughout our businesses REBITDA > 10% CAGR in € m Functional Corporate Performance Polymers & Energy Chemicals Advanced Advanced Materials Restoring Chemlogics (10 months) Formulations profitability Mid-single digit growth Enh
Slide 54: Unlocking value by increasing CFROI and REBITDA margin
Unlocking value by increasing CFROI and REBITDA margin 2012 2016 REBITDA margin REBITDA margin WACC Premium WACC Premium return return 30% 30% CFROI to increase by 20% 20% 100bp 10% REBITDA margin 10% to reach 1/3rd of 2/3rd of total assets 18% total assets 0% 0% 0% 6% 12% 18% 0% 6% 12% 18% CFROI CF
Slide 55: Focused on being a model of sustainability
Focused on being a model of sustainability taking commitments • Reach excellence in safety & health • Deploy unmatched sustainable portfolio Planet management • Reduce our impact on environment by 2020 Customers Energy consumption Water emissions** Investors Greenhouse gas emissions Groundwater cons
Slide 56: Targeting Sustainable Value Growth
Executing a clear value creation strategy Towards a higher growth, improved cash generation & enhanced returns Chemical Group Targeting Sustainable Value Growth Q4 & FY 2013 results 56 26/02/2014
Slide 57: Annexes: Segment presentation
Annexes • Q4 & FY 2013 Group results • Q4 & FY 2013 segment results • Considerations for 2014 • 2016 ambition • Segment presentation Q4 & FY 2013 results 57 26/02/2014
Slide 58: New organisation set-up
New organisation set-up Functional Polymers Advanced Materials Performance Chemicals Corporate & Business Services Advanced Formulations Novecare Specialty Polymers Soda Ash & Derivatives* Polyamide Solvay Energy Services P&I Aroma Silica Peroxide* Corporate Performance Functions Engineering Plastic
Slide 59: Advanced Formulations
Advanced Formulations € 2,432 m € 369 m Net Sales 2013 REBITDA 2013 Novecare Coatis Aroma Performance Net sales As growth engines for Solvay, the Advanced 15% Novecare Formulations activities are characterized by their 20% 2013 Coatis strong capacity for innovation and their low capital 65% intensit
Slide 60: Advanced Materials
Advanced Materials € 2,551 m € 646 m Net Sales 2013 REBITDA 2013 Specialty Rare Earth Special Polymers Silica Systems Chemicals Net sales Specialty Polymers A leader in markets with high entry barriers and high 22% returns on investment, the Advanced Materials Silica 2013 segment is a major contribu
Slide 61: Performance Chemicals
Performance Chemicals € 3,125 m € 724 m Emerging Net Sales 2013 REBITDA 2013 Soda Ash & Eco Bio- Derivatives Peroxides Acetow Services chemicals Net sales Essential Chemicals Performance Chemicals operates in specific, 14% Acetow highly resilient and mature markets whose key 9% 2013 success factors
Slide 62: Functional Polymers
Functional Polymers € 1,763 m € 93 m Net Sales 2013 REBITDA 2013 Polyamides & Engineering PVC Intermediates Fibras Plastics Compounds Net sales As part of its portfolio optimization strategy, the Group 12% Polyamide has refocused Functional Polymers on the 2013 polyamide chain. Solvay is one of the
Slide 63: Corporate & Business Services
Corporate & Business Services € 67 m € (169) m Net Sales 2013 REBITDA 2013 Energy Services Business Services Corporate & Business Services includes the GBU Energy Services offering of energy optimization programs for the Group and for third parties. It also includes the "Corporate" functions that ar
Slide 64: www.solvay.com
www.solvay.com SO LVAY asking more from chemistry®