Lanxess AG · XETR:LXS
Lanxess — Cheuvreux 5th German Corporate Conference (January 2006)
44 slides from Lanxess's conference presentation, Jan 16, 2006
Slide 1: LANXESS AG - Cheuvreux 5th German Corporate Conference
LANXESS AG Cheuvreux - 5th German Corporate Conference Schlosshotel Kronberg, January 16, 2006 Matthias Zachert (CFO)
Slide 2: Safe Harbour Statement
Safe Harbour 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, devel
Slide 3: Agenda
Agenda 1. Company Overview 2. Strategy and Restructuring 3. 9M Financials 4. Outlook and Summary Chart-No. 3
Slide 4: We have Achieved a Lot So Far And Keep Going With High Speed
We have Achieved a Lot So Far And Keep Going With High Speed... December 2005 Share based Restructuring incentive 2nd Phase program Sale of January 2005 Issuance of initiated iSL-business € 500m Annual (RCH) 2nd investment Benchmark General grade rating by Bond Meeting Purchase Moody’s: Baa3 agreeme
Slide 5: Built on Polymers and Chemicals
Built on Polymers and Chemicals Performance Engineering Chemical Performance Rubber Plastics Intermediates Chemicals Top 1-3* Top 3* Top 1-2* Top 1-4* * Excellent Market Positions in 70% of sales Independence. Restructuring. Portfolio Management. Chart-No. 5
Slide 6: Global Presence
Global Presence World Coverage Sales by Region Asia 15% Germany 24% Americas 26% EMEA w/o Germany 35% LANXESS Bayer Agency Other (21 countries) (~30 countries) Assets by Region Employees by Region Asia Asia 4% 20% Americas 22% Americas 10% Germany Germany EMEA w/o 51% EMEA w/o 51% Germany Germany 23
Slide 7: Strong Foundation, but Unsatisfactory Profitability in 2004
Strong Foundation, but Unsatisfactory Profitability in 2004 EBITDA Margin* 2004 Profitability Distribution LANXESS Sales Share EBITDA Margin* BASF 19.5% ~ 30% >10% Degussa 14.6% Ciba 14.3% ~ 30% 5-10% DSM 13.1% Clariant 11.1% ~ 40% <5% Rhodia 8.4% LANXESS 6.6% Æ ~12.5% *EBITDA pre exceptionals in %
Slide 8: Agenda
Agenda 1. Company Overview 2. Strategy and Restructuring 3. 9M Financials 4. Outlook and Summary Chart-No. 8
Slide 9: "Step-by-Step Approach" to Creating Value
“Step-by-Step Approach” to Creating Value EBITDA*- Short-term Mid-term Long-term Margin 4. Acquisitions Portfolio > 10% Portfolio 3. adjustments 2006 9-10% Targeted 2. restructuring Cost Performance 1. improvement <5% * EBITDA pre exceptionals Selective organic growth in profitable businesses Chart-
Slide 10: Restructuring 1st Phase and 2nd Phase
Restructuring 1st Phase and 2nd Phase Portfolioadjustment
Slide 11: 1st Phase: Immediate Action Taken for FCH and STY
1st Phase: Immediate Action Taken for FCH and STY - Implementation Ahead of Plan Fine Chemicals cornerstones Styrenic Resins cornerstones - 2 unprofitable facilities already closed - Agreement reached in STY, Tarragona: and others realigned -annual worktime increased -reduction of annual bonus - New
Slide 12: 2nd Phase: Small U.S. Production Sites to be Closed
2nd Phase: Small U.S. Production Sites to be Closed RheinChemie, Asset Consolidation Trenton – Approx. 20% of LANXESS sales are in the U.S. market – Some production sites of under-critical size with unfavourable cost structure – Closure of three out of ten production sites; decision to consolidate t
Slide 13: 2nd Phase: Process Optimization and Cost-Cutting in TRP and LEA
2nd Phase: Process Optimization and Aggressive Cost- Cutting in TRP and Closure of Outdated Plant in LEA Uerdingen; LEA – Eroding European market – Outdated plant design Uerdingen – Capacities underutilized Leather Plant – Plant closure and shift to other facilities improves profitability La Wantzen
Slide 14: Financial Impact Due to Major Restructuring
Financial Impact Due to Major Restructuring Phase I+II (€ m) 2005 2006 2007 2008 P&L Expenses -145 -35 -30 -15 Cash outs -40 -95 -75 -40 Cost reduction 40 90 160 EBITDA improvement 40 85 120 Headcount reduction ~340 ~670 ~400 Key Take-Aways: – €225 m total P&L expense; €250 m total cash costs – €160
Slide 15: Portfolio Adjustment
Restructuring 1st Phase and 2nd Phase Portfolioadjustment
Slide 16: Fibers - First Adjustment to the Portfolio
Fibers - First Adjustment to the Portfolio Sale of Dorlastan Fibers business to Cornerstones: Asahi Kasei Fibers planned − Purchase agreement with AKF signed on December 22, 2005; transaction subject to approval of authorities FIB − Purchase price not disclosed − ~280 employees in Dormagen, Germany
Slide 17: Second Adjustment to the Portfolio: iSL
Second Adjustment to the Portfolio: iSL - A Non-Core Business of RheinChemie (RCH) Sale of iSL-business to Berlac AG, Cornerstones: Switzerland, which is non-core to RCH − iSL is a leading provider of refined color products and related services to the plastics and especially the PU industry iSL − Co
Slide 18: Sale of BU Paper: Third Adjustment with Kemira
Sale of BU Paper: Third Adjustment to the Portfolio with Kemira as Strong Partner Sale of BU Paper to Kemira: Key Business Items: Strengthening Kemira’s leading market position − Sales of ~€240 million in 2004 - around 2/3 of sales by completing their product portfolio and consisted of toll-manufact
Slide 19: Agenda
Agenda 1. Company Overview 2. Strategy and Restructuring 3. 9M Financials 4. Outlook and Summary Chart-No. 19
Slide 20: Financial Highlights: Improved Performance and Reduced Net Debt
Financial Highlights: Improved Performance and Sharply Reduced Net Debt (€ m) 9M 2004 9M 2005 ∆ in % – Increased sales due to Sales 5,047 5,364 6.3% continued implementation of price before volume strategy EBITDA pre except. 385 492 27.8% – Net income improved Margin 7.6% 9.2% substantially despite
Slide 21: 9M 2005 Sales Variance by Segment
9M 2005 Sales Variance by Segment (approximate numbers) (€ m) 9M 2004 Price Volume Currency 9M 2005 Performance Rubber 1,046 ~ +17% ~ +2% ~ -1% 1,238 Engineering Plastics 1,281 ~ +9% ~ -7% ~ -0% 1,303 Chem. Intermediates 1,102 ~ +6% ~ +0% ~ -0% 1,168 Perf. Chemicals 1,459 ~ +7% ~ -5% ~ -1% 1,478 LAN
Slide 22: Balance Sheet Has Been Strengthened
Balance Sheet Has Been Strengthened Dec 31, June 30, Sept 30, Dec 31, June 30, Sept 30, (€ m) 2004 2005 2005 (€ m) 2004 2005 2005 Non-current Assets Stockholders’ equity 1,365 1,225 1,422 Intangible assets 65 60 57 thereof Minority interest 14 15 17 Property, plant & equipment 1,521 1,517 1,514 Inve
Slide 23: 2nd Half-Year Effects and Better Working Capital Management
2nd Half-Year Effects and Better Working Capital Management % of sales**: 27.1% 21.7% 24.9% 25.4% 24.0% – Inventory: substantial Total WC* sequential decrease due to in € million: €1,769 €1,468 €1,714 €1,796 €1,701 tight management, planned 2500 maintenance turnarounds 2000 1217 1191 1212 – Receivab
Slide 24: Agenda
Agenda 1. Company Overview 2. Strategy and Restructuring 3. Q3 Financials 4. Outlook and Summary Chart-No. 24
Slide 25: Outlook
Outlook Underlying assumptions – Exchange rate €1.0 = ~USD1.25 – Continuous supportive economic environment – Q4 somewhat weaker business versus Q3 – Only minor restructuring expenses expected Q4 2005 2005 Guidance based on above assumptions – Q4 expected with slightly weaker sales compared to previ
Slide 26: LANXESS - Promise and Delivery
LANXESS - Promise and Delivery Status and Way Forward Independence - Clear roles and responsibilities and committed management - Price-before-volume strategy with positive results - Strengthened finance structure Restructuring - 1st Phase: Immediate action taken for largest loss makers - 2nd Phase:
Slide 27: Thank you very much for your attention!
Thank you very much for your attention!
Slide 28: Appendix
Energizing Chemistry Appendix
Slide 29: Contact Details
Contact Details Michael Pontzen (Head of IR) Oliver Stratmann Tel.: +49-214 30 43804 +49-214 30 49611 Fax.: +49-214 30 959 43804 +49-214 30 959 49611 Mobile: +49-175 30 43804 +49-175 30 49611 Tanja Satzer Dr. Gerd Zelesny Tel.: +49-214 30 43801 +49-214 30 71416 Fax.: +49-214 30 959 43801 +49-214 30
Slide 30: Financial Calendar 2006
Financial Calendar 2006 Full Year Results 2005 April 4, 2006 Q1 Results 2006 May 18, 2006 Q2 Results 2006 August 16, 2006 Q3 Results 2006 November 15, 2006 2nd Annual General Meeting May 31, 2006 Chart-No. 30
Slide 31: Performance Rubber: All Businesses on Track
Performance Rubber: All Businesses on Track (€ m) Q3 2004 Q3 2005 – All BUs contributed to increased sales on the basis of improved pricing with Sales 352 414 even higher volumes in BTR, overall fully EBIT 18 offsetting increased raw material costs 21 – Lower volumes due to comparison with Depr. / A
Slide 32: Engineering Plastics: STY "Back in Black"
Engineering Plastics: STY “Back in Black” (€ m) Q3 2004 Q3 2005 – Improved pricing in STY and stronger volumes in SCP offset impact from weak Sales 443 441 FIB EBIT 0 3 – Only slightly improved results on the basis of sound development in STY with raised Depr. / Amort. 13 11 prices, supported by eas
Slide 33: Chemical Intermediates: Good BAC Performance
Chemical Intermediates: Good BAC Performance Backed by Improved FCH and Stable IPG Business – As anticipated, volumes in BAC and FCH (€ m) Q3 2004 Q3 2005 comparably lower due to absence of summer- weakness in 2004, however slightly offset by Sales 416 373 increased prices EBIT 14 39 – EBITDA increa
Slide 34: Performance Chemicals: Effective Cost Management
Performance Chemicals: Effective Cost Management and Improvements in Several BUs (€ m) Q3 2004 Q3 2005 – Stable Sales due to lesser seasonality in performance chemicals (specialities Sales 491 489 businesses) EBIT -16 38 – Stronger pricing mainly in RUC and FCC offset decreased volumes primarily in
Slide 35: Update on Impacts due to U.S.-Hurricanes
Update on Impacts due to U.S.-Hurricanes • No impact from hurricane „Katrina“ • Impacts from hurricane „Rita“ less significant than expected. By end of October, both sites were again fully operational • Financial P&L impact: additional low single digit million expenses • Continous high and volatile
Slide 36: Business Outlook I
Business Outlook I – No noteworthy competitive capacity additions expected to come on stream in BTR and PBR midterm - therefore supply / demand is Performance expected to remain well balanced Rubber – New capacity additions at the Sarnia and Zwijndrecht BTR sites in ‘06 and ‘07 are going to support
Slide 37: Business Outlook II
Business Outlook II – We expect to continuously participate in the current cyclical upturn, by Chemical means of utilization of the outstanding market positions in BAC and IPG- remain optimistic for 2006 - balanced markets expected Intermediates – Restructuring and stand-alone strategy of FCH to lea
Slide 38: Exceptional Items Incurred in Q3 2004 and 2005
Exceptional Items Incurred in Q3 2004 and 2005 (€ m) Q3 2004 Q3 2005 Exceptional thereof D&A Exceptional thereof D&A Performance Rubber 1 0 4 0 – “Rubber” Litigation – Capex write-off and Engin. Plastics 2 2 3 3 amendment to 2003 impairment in 2004 Chemical Intermediates 7 7 2 2 – Capex write-off –
Slide 39: Long Term Incentive and Employee Participation Programmes finalized
Reminder: LANXESS’ Long Term Incentive and Employee Participation Programmes finalized • Long Term Incentive Programme consisted of: • Stock Performance Plan (SPP) • and Economic Value Plan (EVP) • Condition to participation: personal investment (40%* of one annual fixed salary in three tranches) •
Slide 40: LTIPs on Board Level: SPP and EVP
LANXESS LTIP’s on Board Level: Stock Performance Plan (SPP) and Economic Value Plan (EVP) • Condition to participation: Personal investment (40% of one annual fixed salary in three tranches) • Stock Performance Plan (SPP) • Benchmark: Outperformance of the DJ global STOXX 600 Chemicals index (index+
Slide 41: Sound Financing Structure
Sound Financing Structure Main Financing Components €1,250 m Revolving Credit Facility 5-year maturity with two one-year extension options Improved terms and conditions vs. prior €1.5 bn facility Signed on October 5, 2005 €500 m Debut Eurobond Seven-year tenor, maturing on June 21, 2012 4.125% coupo
Slide 42: Improved Cash Flow: Stronger Operating Results
Improved Cash Flow: Stronger Operating Results Combined with Improved Working Capital Management (€ m) 9M 2004 9M 2005 EBIT 76 139 – Cashflow improved mainly Income Taxes -52 -72 on higher operating result Depreciation & Amortization 249 217 – Strong improvement in Change in Pension Provisions -27 0
Slide 43: Quarterly Overview 2004/2005
Quarterly Overview 2004/ 2005 Q1 Q2 H1 Q3 9M Q4 FY Sales 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2004 Perf Rubber 326 392 368 432 694 824 352 414 1046 1238 385 1431 Eng Plastics 407 414 431 448 838 862 443 441 1281 1303 441 1722 ChemIntermed 366 389 320 406 686 795 416 373 1102 1168 3
Slide 44: Antitrust Proceedings in Bayer AG's former Rubber Business Group
Antitrust Proceedings in Bayer AG‘s former Rubber Bussiness Group With respect to all liabilities arising out of the antitrust proceedings relating to the former Bayer rubber business, LANXESS bears 30% of such liabilities to a limit of €100 million (excl. legal defence costs and tax disadvantages).
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