Lanxess Ag · XETR:LXS
Lanxess — Q3 2010 Earnings Presentation
49 slides from Lanxess's earnings presentation, 2010
Slide 1: LANXESS – Q3 2010 Roadshow: A solid growth story
LANXESS – Q3 2010 Roadshow A solid growth story Dr. Axel C. Heitmann, CEO
Slide 2: Safe harbor statement
Safe harbor statement This presentation contains certain forward looking statements, including assumptions, opinions and views of the company or cited from third party sources. Various known and unknown risks, uncertainties and other factors could cause the actual results, financial position, develo
Slide 3: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q3 2010 Outlook/Guidance Chart 3
Slide 4: A leading specialty chemicals company based on three powerful segments
LANXESS – A leading specialty chemicals company based on three powerful segments LANXESS – Energizing Chemistry Performance Polymers Advanced Intermediates Performance Chemicals Globally No. 1-3 Europe No. 1-2 No. 1-4 in niches Global technology leader in synthetic Leading suppliers of custom sy
Slide 5: Portfolio management has continuously strengthened the company
Portfolio management has continuously strengthened the company - €1.5 bn of sales divested Divested Date Leadership Cyclicality Profitability Acquired Position Expectation Fibers 2005 Weak High Low Paper 2005 Moderate Moderate Medium Textile Processing Chem. 2006 Weak Moderate Medium Lustran Polymer
Slide 6: Improvement trend of financials, based on strategy implementation
LANXESS – Improvement trend of financials, based on strategy implementation In € m 2003 2004 2005 2006 2007 2008 2009 2010 * pr o EBITDA 311 447 581 675 719 722 465 ~900 form Net financial debt 1,429 1,135 680 511 460 864 794 * a da Net fin. debt / EBITDA 4.6x 2.5x 1.2x 0.8x 0.6x 1.2x 1.7x ta o Gear
Slide 7: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q3 2010 Outlook/Guidance Chart 7
Slide 8: Great untapped potential in Asia
Great untapped potential in Asia Car ownership and population – Asia compared to Europe and US Dynamics Passenger cars per 1,000 inhabitants There are ~300m Americans Population in millions In the US, of every 1000 796 people ~800 own a car 2,900 548 There are ~3bn Asians In Asia of every 10
Slide 9: Tire producers are reacting swiftly
Tire producers are reacting swiftly Bridgestone New plant in China New plant in China New plant in China Thailand: plus ~2.0 m tires/year ~€52 m investment ~€72 m investment ~€230 m investment China: plus ~1.3 m tires/year ~2.1 m tires/year ~2.0 m tires/year ~10.8 m tires/year India: plu
Slide 10: New EU tire legislation will reinforce high performance tire trend
New EU tire legislation will increase transparency of tire performance and thus reinforce high performance tire trend Labeling regulations Tire producers preparing for new requirements EU: as of November 2012, new tires will be labeled for - fuel efficiency Rolling resistance - wet grip Fuel effic
Slide 11: Share of high performance tires to grow further
Share of high performance tires to grow further Performance tires with solid growth prospects Acceleration of growth of Global tire production [bn units] high performance tires Increase by 53% of share of Standard tires (High-)performance tires high performance tires in 2 next five years ~ +53%
Slide 12: Strengthening butyl with a world-scale facility in Singapore
Strengthening butyl with a world-scale production facility in Singapore and smart debottlenecking in Belgium Performance Polymers Advanced Intermediates Performance Chemicals Facts BTR greenfield plant and debottlenecking Greenfield BTR plant, Singapore, ~200 employees Capacity: 100 kt/a Start
Slide 13: BU PBR – debottlenecking for Nd-PBR
BU PBR – debottlenecking for Nd-PBR as efficient option to expand into a growing market Performance Polymers Advanced Intermediates Performance Chemicals Facts Debottlenecking of Nd-PBR Debottlenecking of ~50 kt Nd-PBR in Cabo, Brazil; Dormagen, Germany and Orange, USA Dormagen +15 kt Pt. Jérôme N
Slide 14: BU SCP – Investing in upstream-integration
BU SCP – Investing in upstream-integration to strengthen focus on high-tech plastics end-compounds Performance Polymers Advanced Intermediates Performance Chemicals Facts SCP investments into growth Investments in - compounding in Wuxi, China and Jhagadia, India - caprolactam and KA-oil in Antwerp
Slide 15: Investing in mega trend clean water for ION
Investing in mega trend “clean water” ensures long-term growth for ION Growing demand trend for clean water Population growth in Asia Purification of available water is Increasing urbanization mandatory to satisfy future demand Rising energy consumption New plant in Germany New plant in India
Slide 16: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q3 2010 Outlook/Guidance Chart 16
Slide 17: Q3 2010 financial overview: another growth quarter
Q3 2010 financial overview: another growth quarter [€ m] Q3 2009 Q2 2010 Q3 2010 yoy in % Q3 sales on Q2 level and Sales 1,373 1,828 1,847 34.5% increased 35% year on year EBITDA pre except. 143 269 244 70.6% EBITDA held back vs. Q2 due to margin 10.4% 14.7% 13.2% maintenance turnarounds and red
Slide 18: Price-before-volume strategy successful
Price-before-volume strategy successful Q3 yoy sales variances Price Volume Currency Portf. Total Performance Polymers 30% 11% 9% 0% 50% Simultaneous price and volume increases in tandem in all Advanced Intermediates 6% 4% 4% 4% 18% segments Operational growth of 26% Performance Chemicals 4% 10%
Slide 19: Performance Polymers: strong price increases and solid volumes
Performance Polymers: strong price increases and solid volumes – EBITDA held back by maintenance turnarounds [€ m] Q3 2009 Q3 2010 All BUs manage successful price increases, Sales 656 986 Risen raw material prices, especially Butadiene, fully pushed EBIT 32 107 through Depr. / Amort. 34 36 Vol
Slide 20: Advanced Intermediates: strong performance despite agro weakness
Advanced Intermediates: strong performance despite agro weakness [€ m] Q3 2009 Q3 2010 Overall, prices and volumes increased Sales 284 336 Demand from agro end-markets remains soft albeit with some EBIT 22 41 light at the end of the tunnel, however no relief before beginning of next year Depr. /
Slide 21: Performance Chemicals: EBITDA improvement and solid margin
Performance Chemicals: EBITDA improvement and solid margin based on price and volume increases [€ m] Q3 2009 Q3 2010 Sales strongly improved on solid volumes as well as good Sales 425 515 pricing with further support from currencies EBIT 46 67 All businesses with operational sales growth Depr. /
Slide 22: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q3 2010 Outlook/Guidance Chart 22
Slide 23: Full year guidance increased to ~€900 m EBITDA pre
Full year guidance increased to ~ €900 m EBITDA pre Current macro view Global markets continue their recovery, highest momentum remains in emerging markets Good business environment expected to continue, however macroeconomic risks from high fiscal debt levels and currency volatilities remain LA
Slide 24: Achievement of all targets set in the past
Achievement of all targets set in the past Med Good Start in 2004 – ia/A Good Start Realistic in 2004 Targets Short-term – Conf nalyst Realistic Short-term Targets ovem erence N ber 2 004 2003 2004 2006 2003 Target*** 2004 Target*** 2006 9 Target*** Target*** EBITDA* Margin < 5% ~ 7% 9-10% EBITDA* M
Slide 25: In 2015 LANXESS will strive for an EBITDA of ~€1.4 billion
In 2015 LANXESS will strive for an EBITDA of ~€1.4 billion New EBITDA target bridge [€ m] Performance Polymers Additional EBITDA will be the BTR Singapore and debottlenecking result of: PBR debottlenecking of Nd-PBR SCP caprolactam and compounding - announced CAPEX projects Advanced Intermed
Slide 26: Chart 26
Chart 26
Slide 27: Additional financial guidance
Additional financial guidance Additional financial information for 2010 Capex : ~€450-470 m Hedging 2010 : ~40% at 1.30-1.40 USD / EUR 2011 : ~30% at 1.30-1.40 USD / EUR Tax rate : 20 to 25% Exceptionals : ~€20 m P&L expenses / one time costs Cash outs : ~€40 m for restructuring Challeng
Slide 28: Portfolio management allows regrouping along chemical segmentation
Portfolio management allows for regrouping of LANXESS businesses along chemical segmentation Performance Polymers Performance Polymers Advanced Intermediates Performance Chemicals Butyl Rubber Basic Chemicals Material Protection Products Performance Butadiene Rubbers Saltigo Inorganic Pigments Techn
Slide 29: Broad customer portfolio with varying demand patterns
LANXESS has a broad customer portfolio with varying demand patterns LANXESS sales distribution by industry, 2009 Others Tires Construction Agro Automotive Chemicals Consumer Goods Chart 29
Slide 30: Strongest growth in Latin America
Strongest growth in Latin America Sales by region [%] Regional development of sales [€ m] Operational 1,847 development* 408 7% Asia Germany 1,373 +21% 22 18 271 68% Asia 338 +86% LatAm 325 45% 146 +60% North America 203 LatAm +24% 503 22% 15 EMEA 407 (excl. Germany) EMEA (without Germany) Germany 2
Slide 31: A solid year of business recovery
A solid year of business recovery 9M yoy sales variances Price Volume Currency Portf. Total Performance Polymers 29% 34% 4% 0% 67% Solid pick up in volumes in tandem with prices Advanced Intermediates 5% 6% 2% 6% 19% Positive portfolio effect after acquisitions of Gwalior and Performance Chemica
Slide 32: Strong demand meets a flexible and adjusted cost structure
Strong demand meets a flexible and adjusted cost structure [€ m] 9M 2009 9M 2010 yoy in % Sales 3,665 (100%) 5,288 (100%) 44% Strong sales increase on the Cost of sales -2,884 (79%) -3,960 (75%) 37% back of significant volumes (+25%) and good pricing (+14%) Selling -386 (11%) -470 (9%) 22% as well
Slide 33: Performance Polymers: on the growth track
Performance Polymers: on the growth track [€ m] 9M 2009 9M 2010 All BUs manage successful price increases, motivated by Sales 1,663 2,772 higher raw material prices – especially Butadiene EBIT 26 348 Some support from currencies Depr. / Amort. 99 108 Volumes higher in all BUs EBITDA 125 456
Slide 34: Advanced Intermediates: strong performance despite agro weakness
Advanced Intermediates: strong performance despite agro weakness [€ m] 9M 2009 9M 2010 Sales increase on the back of positive effects from volume, Sales 827 980 portfolio and pricing EBIT 84 118 Portfolio effect reflects acquisitions in BU BAC Depr. / Amort. 35 41 Demand from agro end-markets
Slide 35: Performance Chemicals: volume-driven recovery
Performance Chemicals: volume-driven recovery of specialty chemicals [€ m] 9M 2009 9M 2010 Sales improved on strong volumes and some support by Sales 1,148 1,507 currency effects EBIT 96 196 All businesses with operational sales growth as markets continue their recovery Depr. / Amort. 49 49 St
Slide 36: Balance sheet – a strong financial backbone
Balance sheet – a strong financial backbone [€ m] Dec 31, 2009 Sep 30, 2010 Dec 31, 2009 Sep 30, 2010 Non-current Assets 2,382 2,546 Stockholders’ Equity 1,445 1,710 Intangible assets 196 202 thereof minority interest 13 15 Property, plant & equipment 1,809 1,898 Non-current Liabilities 2,504 2,547
Slide 37: Solid business performance provides strong cash flow
Solid business performance provides strong cash flow [€ m] 9M 2009 9M 2010 Profit before Tax 33 461 Profit before tax above previous Depreciation & amortization 194 204 year due to significantly Gain from sale of assets -18 0 improved demand situation Result from equity investments -12 -23 Cash
Slide 38: Lean cost structure maintained amid higher business activity
Lean cost structure maintained amid higher business activity [€ m] Q3 2009 Q3 2010 yoy in % Sales 1,373 (100%) 1,847 (100%) 35% Sales increased yoy on higher prices (+17%) and volumes Cost of sales -1,050 (76%) -1,387 (75%) 32% (+9%) as well as currency (+7%) Selling -135 (10%) -166 (9%) 23% and p
Slide 39: Strong cash flow based on solid business performance
Strong cash flow based on solid business performance [€ m] Q3 2009 Q3 2010 Profit before Tax 32 145 Profit before tax above previous Depreciation & amortization 66 69 year due to significantly Gain from sale of assets 0 0 improved demand situation Result from equity investments -7 -11 Cash outs
Slide 40: No major refinancing needs until 2012
No major refinancing needs until 2012 Long term financing secured Liquidity and maturity profile Long maturity profile 2010 2011 2012 2013 2014 2015 2016 Dependency on banks reduced 600 Bond Bond Ample liquidity in place to 400 Bond finance growth projects Short-term 200 (i.e. Singapore plant,
Slide 41: Strict CAPEX allocation criteria ensure improvement of profitability
Strict CAPEX allocation criteria ensure continuous improvement of profitability Performance Organic investment External growth Summary & conclusion CAPEX split by profitability of BUs CAPEX by type [€ m] 2004 [EBITDA* margin] 40% ~55% 60% > 15% ~40% ~25% ~40% 2010-2012e 10-15% ~30% ~20% 30% ~5% 5-10
Slide 42: Strong focus on growth markets
Strong focus on growth markets Performance Organic investment External growth Summary & conclusion Strategic development of asset base* to Asia and Latin America LANXESS sales 72% 20% 61% 13% North 14% America 5% EMEA Asia 23.9% 12% 10.1% 3% 2005 H1 2010 Latin 2004 Sales LANXESS America 2012e incl.
Slide 43: Is LANXESS a swing producer?
Is LANXESS a swing producer? Tire manufacturers produce insufficient synthetic rubber for their captive use Rubber producing capabilities of selected tire manufacturers: Importance in LANXESS Michelin Goodyear Bridgestone Continental Pirelli Hankook portfoIlio major BTR none none none none none none
Slide 44: Does natural rubber cannibalize synthetic rubber?
Does natural rubber cannibalize synthetic rubber? Risk of substitution Low substitution risk High substitution risk BTR PBR1 S-SBR E-SBR NBR EPDM Overall, very limited substitution possibility 1 Nd-PBR Chart 44
Slide 45: Exceptional items incurred in Q3 2009 and Q3 2010
Exceptional items incurred in Q3 2009 and Q3 2010 [€ m] Q3 2009 Q3 2010 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 10 0 1 0 Advanced Intermediates 5 0 0 0 Performance Chemicals 5 0 0 0 Reconciliation -7 0 5 0 Total 13 0 6 0 Chart 45
Slide 46: Exceptional items incurred in 9M 2009 and 9M 2010
Exceptional items incurred in 9M 2009 and 9M 2010 [€ m] 9M 2009 9M 2010 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 11 0 3 0 Advanced Intermediates 5 0 0 0 Performance Chemicals 5 0 0 0 Reconciliation 3 3 10 0 Total 24 3 13 0 Chart 46
Slide 47: Abbreviations
Abbreviations Performance Polymers Advanced Intermediates BTR Butyl Rubber BAC Basic Chemicals PBR Performance Butadiene Rubbers SGO Saltigo TRP Technical Rubber Products SCP Semi-Crystalline Products Performance Chemicals MPP Material Protection Products IPG Inorganic Pigments FCC
Slide 48: Upcoming events 2011
Upcoming events 2011 Upcoming events FY results 2010 March 17, 2011 Q1 results 2011 May 11, 2011 AGM May 18, 2011 Q2 results 2011 August 11, 2011 Q3 results 2011 November 10, 2011 Chart 48
Slide 49: Contact detail Investor Relations
Contact detail Investor Relations Oliver Stratmann Verena Simiot Head of Investor Relations Assistant Investor Relations Tel. : +49-214 30 49611 Tel. : +49-214 30 23851 Fax. : +49-214 30 959 49611 Fax. : +49-214 30 40944 Mobile : +49-175 30 49611 Mobile : +49-175 30 23851 Email : Oliver.Stratmann@la