Sonae Indústria S.G.P.S — Sonae Indústria — Investor Presentation (July 2014)
45 slides from Sonae Indústria S.G.P.S's investor presentation, Jul 21, 2014
Slide 1: Sonae Indústria Strategy Update
Sonae Indústria STRATEGY UPDATE Together, creating the future 21 July 2014
Slide 2: Disclaimer
INVESTOR PRESENTATION | SONAE INDÚSTRIA DISCLAIMER THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES AND ACCORDINGLY IT IS PROVIDED FOR INFORMATION PURPOSES ONLY. THIS PRESENTATION DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO SONAE INDÚSTRIA, S.G.
Slide 3: Meeting Objectives
INVESTOR PRESENTATION | SONAE INDÚSTRIA MEETING OBJECTIVES Purpose of today’s presentation Present Sonae Indústria’s Strategic Plan Update on market trends Overview of on going refinancing process and capital structure initiatives 3
Slide 4: Contents
INVESTOR PRESENTATION | SONAE INDÚSTRIA CONTENTS Contents i. Sonae Indústria overview ii. Historical performance iii. Market trends and perspectives iv. Strategy v. Refinancing vi. Closing remarks Annexes 4
Slide 5: Sonae Indústria overview
INVESTOR PRESENTATION | SONAE INDÚSTRIA Sonae Indústria overview 5
Slide 6: Where we are
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW Where we are Global business with highly diversified revenue base Inflection point: cycle turning with high operational leverage Benefit from strategic initiatives already implemented to optimise performance and rationalise capacity Committed
Slide 7: Who we are
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW Who we are A major player in the wood based panel sector • Full range of wood based panel products o Particleboard o Oriented Strand Board (OSB) o Medium Density Fibreboard (MDF) o Melamine Faced Boards • Presence in major markets: Germany, Iberia,
Slide 8: Top world player
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW Top 5 world player TOP 15 world wood based panels players, in terms of production capacity ‘000 m3 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Kronospan M&P Kaindl (1) Egger (1) Swiss Krono Group (1) Arauco & Flakeboard (2) Son
Slide 9: A leading player in all our markets
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW A leading player in all our markets • Estimated wood based panels production capacity per region ‘000 m3 0 500 1,000 1,500 2,000 2,500 3,000 ‘000 m3 0 1,000 2,000 3,000 4,000 5,000 Iberian Peninsula North America Finsa/Utisa (1) Arauco & Flakeboard (2
Slide 10: Diversified industrial footprint
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW Diversified industrial footprint (as of June 2014) Sonae Indústria Installed Production Capacity: 5.8 million m3 # 22 sites (of which 14 are board plants) 10
Slide 11: Full range of wood based products
INVESTOR PRESENTATION | SONAE INDÚSTRIA OVERVIEW Full range of wood based products PARTICLEBOARD (PB) Strong range of high value added products • Very versatile • Mainly melamine products, veneer faced, laminates • Suitable for all general uses in furniture and and flooring for decorative solutions
Slide 12: Historical performance
INVESTOR PRESENTATION | SONAE INDÚSTRIA Historical performance 12
Slide 13: Turnover
INVESTOR PRESENTATION | SONAE INDÚSTRIA HISTORICAL PERFORMANCE Turnover • Sustaining turnover through a challenging phase of the market cycle Turnover and Installed Production Capacity GDP(1) (constant prices, annual percent change) 1,769 6% 4% 1,293 1,352 1,321 9.8 1,283 1,232 2% 0% 8.0 -2% 7.5 7.5
Slide 14: 2013 sales by market and product
INVESTOR PRESENTATION | SONAE INDÚSTRIA HISTORICAL PERFORMANCE 2013 sales by market and product • Diversified market base and value added product portfolio • Higher value added products represent circa 50% of sales • Circa 70% of sales generated in Europe By market(1) By product(1) Iberian Others Ot
Slide 15: 2013 sales by customer segment
INVESTOR PRESENTATION | SONAE INDÚSTRIA HISTORICAL PERFORMANCE 2013 sales by customer segment • Business well diversified by customer segment across each region of operation SOUTHERN EUROPE (1) GERMANY & NORTHEAST (2) EUROPE Total Sonae Indústria Others Trade Construction 30% 13% 21% Others Furnitur
Slide 16: Profitability: LTM Recurrent EBITDA
INVESTOR PRESENTATION | SONAE INDÚSTRIA HISTORICAL PERFORMANCE Profitability: LTM Recurrent EBITDA • Positive EBITDA despite overcapacity, the economic crisis and pressure on wood prices and other variable costs • Operational leverage makes the business well positioned to benefit from macro-economic
Slide 17: Key financial indicators
INVESTOR PRESENTATION | SONAE INDÚSTRIA HISTORICAL PERFORMANCE Key financial indicators 50 Recurrent 40 • European operations affected by EBITDA Rest of the World 30 economic downturn associated per Northern Europe with sovereign debt crisis region 20 Southern Europe • Rest of the World performed we
Slide 18: Market trends and perspectives
INVESTOR PRESENTATION | SONAE INDÚSTRIA Market trends and perspectives 18
Slide 19: Europe
INVESTOR PRESENTATION | SONAE INDÚSTRIA MARKET TRENDS AND PERSPECTIVES Europe WBP capacity vs demand (1) Capacity rationalization opportunities in '000 m3 Capacity Demand Utilization Rate Europe 80,000 100% • Wood based panels capacity in Europe has increased by 90% 7.9 million m3 between 2001 and 2
Slide 20: Average selling prices are starting to increase
INVESTOR PRESENTATION | SONAE INDÚSTRIA MARKET TRENDS AND PERSPECTIVES Average selling prices are starting to increase ‘000 m3 Average selling price index (Base 100: 2007) • Strong capacity reduction in Germany Particleboard 50,000 100% 150 89% 84% 90% 40,000 80% 100 • Important downward adjustments
Slide 21: North America
INVESTOR PRESENTATION | SONAE INDÚSTRIA MARKET TRENDS AND PERSPECTIVES North America PB capacity vs demand (1) million m3 Capacity Demand Demand/capacity Steady growth in recent years 16 100% • PB capacity in North America has adapted to a lower 97% 14 93% 90% demand through closures and mothballing
Slide 22: South Africa
INVESTOR PRESENTATION | SONAE INDÚSTRIA MARKET TRENDS AND PERSPECTIVES South Africa WBP capacity vs demand (1) Capacity Demand Market development opportunities '000 m3 Imports Utilization Rate 1,600 96% 100% • Historic demand exceeded capacity with the shortfall 93% supplied by imports (MDF mainly)
Slide 23: Improving demand in construction and furniture sectors
INVESTOR PRESENTATION | SONAE INDÚSTRIA MARKET TRENDS AND PERSPECTIVES Improving demand in construction and furniture sectors 4.0% • Decline in construction output Construction (1) 2.0% 0.0% reached a trough last year -2.0% • Sector expected to grow by -4.0% Western Europe (EC-15) 1.8% per annum in
Slide 24: Strategy
INVESTOR PRESENTATION | SONAE INDÚSTRIA Strategy 24
Slide 25: Strategic initiatives
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY Strategic initiatives • Targeted capacity rationalization and improving product mix, together with identified cost savings programme, will drive profitability and best position the business to capture the benefits of an economic upturn Build a high qu
Slide 26: Profitability improvement measures
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Profitability improvement measures Industrial footprint • Fix, sell or close underperforming assets optimization Operating • Improved capacity utilization index levels and specific improvements consumptions Improve product mix • Increase sha
Slide 27: Industrial footprint optimization
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Industrial footprint optimization • Divesting the non-performing plants What we have done What we plan to do Concentrate • Closed Knowsley, UK in 2012 • Complete closure of production in our Pontecaldelas, Spain in • Closed Solsona, Spain in
Slide 28: Industrial footprint optimization
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Industrial footprint optimization • Raw board plants closed or sold Age (# years) Horn (DE) Closed Mar’14 2008 - 2010 50 45 ≤ 12 years Age Le Creusot (FR) 40 Sold Apr’14 12 years < Age < 25 years 35 Solsona (SP) Auxerre (FR) Closed Dec’12 So
Slide 29: Industrial footprint optimization
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Industrial footprint optimization • Evolution of raw board production capacity Age 12 15 35 22 23 11 37 17 9 11 21 23 23 24 (# years) 200 160 335 10,040 640 350 (‘000 m3) 370 530 500 340 450 400 5,765 Meppen (DE) Coleraine(UK) St Dizier and
Slide 30: Operating improvements
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Operating improvements • Continuously improving operations to increase efficiency 90% 80% >80% • Improved capacity Capacity 70% 73% utilization utilization index 60% 66% • Improved consumption of 50% inputs 2009 2013 2017 T • Implementation
Slide 31: Improved product mix
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Improved product mix • Targeting higher value added products What we have done What we plan to do • Strategic realignment in • Leverage strategic investment Increase share of Northern Europe, and brand development to higher value added conce
Slide 32: Fixed costs reduction
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Fixed costs reduction • Reduction in overhead structure • Continuous negotiation of supply contracts with Strong reduction in improvement in key supply terms fixed costs, • Source insurance locally to capture benefits adapting the • Tight co
Slide 33: Strategic investments
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY EXECUTION Strategic investments • Investing for the growth of the business: Improve consumption levels of recycled wood and increase sales volumes of Melamine Faced Boards • New recycling equipment to increase recycled wood consumption CAPEX Recycling
Slide 34: Key figures
INVESTOR PRESENTATION | SONAE INDÚSTRIA STRATEGY Key figures • In a solid position to perform in the future due to the operational restructuring plan and strategic investments 2007 2009 2013 Turnover (million euros) 2,066 1,283 1,232 Recurrent EBITDA (million euros) 302 46 80 Recurrent EBITDA Margin
Slide 35: Refinancing
INVESTOR PRESENTATION | SONAE INDÚSTRIA Refinancing 35
Slide 36: Refinancing
INVESTOR PRESENTATION | SONAE INDÚSTRIA REFINANCING Refinancing 300 million euros of debt refinanced with two main creditor banks • Lower cost of debt SCHEDULED LOAN REPAYMENTS (million euros) • Extend maturities (6 to 8 years) • Grace period: 3 years for principal repayments 450 400 Securitisat
Slide 37: Closing remarks
INVESTOR PRESENTATION | SONAE INDÚSTRIA Closing remarks 37
Slide 38: Conclusions
INVESTOR PRESENTATION | SONAE INDÚSTRIA CLOSING REMAKS Conclusions Inflection point: cycle turning with high operational leverage Geographical diversification Engaged cornerstone shareholder, committed management team and support from key financing institutions Execution delivery: strategic
Slide 39: Annexes
INVESTOR PRESENTATION | SONAE INDÚSTRIA Annexes 39
Slide 40: Shareholding structure
INVESTOR PRESENTATION | SONAE INDÚSTRIA ANNEXES Shareholding structure • A stable shareholder structure, with a reference shareholder: Efanor, a Portuguese family holding company with other interests in food and non-food retail, shopping centres, telecoms, among other sectors Share capital FREE FLOA
Slide 41: Product innovation: Bio-materials, Woodforce
INVESTOR PRESENTATION | SONAE INDÚSTRIA ANNEXES Product innovation: Bio-materials, Woodforce® • Benefits of MDF wood fibres: GREAT GREAT GREAT PERFORMANCE INDUSTRIALLY ENVIRONMENTALLY • Bio-materials and market megatrends • Reduced gas consumption NON WOVEN MATS Smart • Reduce CO2 emissions mobility
Slide 42: P&L structure
INVESTOR PRESENTATION | SONAE INDÚSTRIA ANNEXES P&L structure m3: sales volumes 2011* 2012* 2013 1Q13 (a) 1Q14 M€ €/m3 M€ €/m3 M€ €/m3 M€ €/m3 M€ €/m3 Consolidated turnover 1,352 250.8 1,321 255.9 1,232 258.3 310 254.2 300 253.2 Operating expenses 1,302 241.5 1,253 242.7 1,193 250.2 300 246.2 296 25
Slide 43: Balance sheet structure
INVESTOR PRESENTATION | SONAE INDÚSTRIA ANNEXES Balance sheet structure Revaluation of Land and Buildings: In 2013 we changed our EURO million 2011 2012 2013 1Q13 (a) 1Q14 accounting treatment of tangible assets “Land and Buildings” from a Non current assets 1,063 936 940 918 923 cost model to a rev
Slide 44: Definitions
INVESTOR PRESENTATION | SONAE INDÚSTRIA ANNEXES Definitions • Capacity Utilization Index = Finished-Available Production (m3) / Production capacity (m3); raw boards only • EBITDA = Earnings Before Interests and Taxes + Depreciations and Amortizations + (Provisions and impairment losses - Impairment
Slide 45: Investor contacts
INVESTOR PRESENTATION | SONAE INDÚSTRIA Investor contacts António Castro Sílvia Saraiva Phone: (+351) 220 100 655 investor.relations@sonaeindustria.com 45