Clariant Ag · SIX:CLN
Clariant — FY1999 Earnings Presentation
67 slides from Clariant's earnings presentation, March 2000
Slide 1: Dr Rolf W. Schweizer, Chairman and President
Dr Rolf W. Schweizer Chairman and President March 2000
Slide 2: Achievements 1999, part I
Achievements 1999, part I Strategic objectives l New corporate strategy: implemented, first positive results achieved l Strategic acquisition: contacts established, preparatory steps taken, acquisition of BTP in the meantime realized l Electronic chemicals: revitalization through innovation implemen
Slide 3: Achievements 1999, part II
Achievements 1999, part II Financial objectives l Growth targets not achieved due to unfavorable market conditions in the first half of the year. Previous year’s sales however maintained l EBITDA-ROS slightly improved from 17.5% to 17.8% l EBIT-ROS before GWA slightly increased from 11.5% to 11.7% l
Slide 4: Results 1999
Results 1999 CHF mio Sales Divisions 9 158 Discontinued operations 98 Group 9 256 EBITDA 1 646 EBIT Divisions 1 121 EBIT 1 030 Net Result 553 EBITDA ROS 17.8% EBIT ROS Divisions 12.2% EBIT ROS before GWA 11.7% Net ROS 6.0% RONA 16.5% 4
Slide 5: Expectations 2000 vs. 1999
Expectations 2000 vs. 1999 Market growth Sales EBIT TLP Textile, Leather & Paper Chemicals PA Pigments & Additives MB Masterbatches FUN Functional Chemicals CEP Cellulose Ethers & Polymerisates LSE Life Science & Electronic Chemicals Corporate 5
Slide 6: Dr Reinhard Handte, Chief Operating Officer
Dr Reinhard Handte Member of the Executive Committee of the Board of Management Chief Operating Officer March 2000
Slide 7: Divisional sales split
Results 1999 Divisional sales split in CHF mio Cellulose Ethers & Process & Polymerisates Performance Products Fine 1 026 2 259 (25%) Chemicals 1 087 (12%) (11%) 1 825 (20%) 1 896 (21%) 1 065 (11%) Pigments & Surfactants Additives Masterbatches Divisional sales total: 9 158 (100%) 7
Slide 8: Divisional operating profit
Results 1999 Divisional operating profit in CHF mio (margin) Process & Cellulose Ethers & Performance Products Polymerisates 121 (11.8%) 299 (13.2%) Fine Chemicals 85 (7.8%) 279 (14.7%) Pigments & Additives 212 (11.6%) 125 (11.7%) Surfactants Masterbatches Total of the divisions: 1 121 (12.2%) 8
Slide 9: Divisional EBITDA
Results 1999 Divisional EBITDA in CHF mio (margin) Process & Cellulose Ethers & Polymerisates Performance Products 162 (15.8%) 429 (19.0%) Fine 206 (19.0%) 358 (18.9%) Pigments & Chemicals Additives 318 (17.4%) 157 (14.7%) Surfactants Masterbatches Total of the divisions: 1 630 (17.8%) 9
Slide 10: Sales by region
Results 1999 Sales by region in CHF mio Asia / Africa / Europe Australia (incl. Germany: 1 464) 1 880 4 780 2 596 Americas (incl. US: 1 518) Total of the group: 9 256 10
Slide 11: Divisional performance overview
Results 1999 Divisional performance overview Sales EBIT margin EBITDA margin in CHF mio in % in % 1999 1998 ∆ 1999 1998 1999 1998 in CHF Process & Performance Products 2 259 2 345 – 4% 13.2 13.1 19.0 19.1 Pigments & Additives 1 896 1 882 + 1% 14.7 16.5 18.9 21.1 Masterbatches 1 065 977 + 9% 11.7 10.
Slide 12: Process & Performance Products
Results 1999 Process & Performance Products Sales – 4% in CHF EBIT margin 13.2% EBITDA margin 19.0% l Problems in US textile industry l Stagnating markets in South and Central Europe l Advanced recovery in Asia and South America l Volume and price reduction l Good development in Paper and Textile Ch
Slide 13: Textile, Leather & Paper Chemicals
Outlook 2000 Textile, Leather & Paper Chemicals l Situation in US unchanged l Improvement in South and Central Europe l Further recovery in Asia and South America l Volume increase and only slight price decline l More and quicker introduction of new products l Paper Chemicals strengthened l Strength
Slide 14: Pigments & Additives
Results 1999 Pigments & Additives Sales + 1% in CHF EBIT margin 14.7% EBITDA margin 18.9% l Successful integration of JV Songwon in Korea l Good development of JV in Tianjin l Excellent development of non-impact printing (NIP) l Pricing pressure in ink pigments and partly in specialties l Consolidat
Slide 15: Pigments & Additives Outlook 2000
Outlook 2000 Pigments & Additives l Reinforced marketing for Songwon pigments l Expansion of capacity in JV Tianjin l More resources allocated to NIP l Less pricing pressure, selective price increases l Extensive program in production optimization including consolidation of sites l Capacity expansio
Slide 16: Masterbatches
Results 1999 Masterbatches Sales + 9% in CHF EBIT margin 11.7% EBITDA margin 14.7% l Pleasing development in all regions l Acquisition, integration and expansion of Hydrocerol business successful l Positive JV with Song Ho in Korea l Clearly improved earnings thanks to restructurings and optimizatio
Slide 17: Masterbatches Outlook 2000
Outlook 2000 Masterbatches l Further improvement in sales and earnings in all regions l Expansion of capacity and development of new applications for Hydrocerol l Further optimization of locations l Turnaround of compounding l Introduction of a new production process for standard brands l Further ex
Slide 18: Surfactants
Results 1999 Surfactants Sales + 3% in CHF EBIT margin 11.6% EBITDA margin 17.4% l Good development in Western Europe and US l Stimulation in South America l Debottlenecking of production plants for specialties in Germany and US l Good businesses for new plant for Klebosol in US l Restructuring and
Slide 19: Functional Chemicals Outlook 2000
Outlook 2000 Functional Chemicals l New organization structure with clear focus on the important markets and growth in specialties to be implemented l Further positive business expected in Western Europe and US, internal focus on growth in NAFTA l Continuation of positive trend in South America expe
Slide 20: Fine Chemicals
Results 1999 Fine Chemicals Sales – 3% in CHF EBIT margin 7.8% EBITDA margin 19.0% l Volume reduction and pricing pressure in pigment intermediates and agro standard intermediates l Stimulation of demand in 2nd half for Specialty Intermediates l Good development – as planned – of new products for Li
Slide 21: Life Science & Electronic Chemicals
Outlook 2000 Life Science & Electronic Chemicals l Slight improvement in pigment intermediates and agro standard intermediates expected; reinforced marketing l Further improvement in LSI l Strong pipeline in LSI with more than 100 projects, increasingly for pharma l Rapid realization of new capaciti
Slide 22: Cellulose Ethers & Polymerisates
Results 1999 Cellulose Ethers & Polymerisates Sales + 6% in CHF EBIT margin 11.8% EBITDA margin 15.8% l Business in Europe restrained, improved towards year end l Asia clearly improved; full takeover of Clariant Polymers in Japan l Clear pricing pressure in all areas l Advantage through low raw mate
Slide 23: Cellulose Ethers & Polymerisates Outlook 2000
Outlook 2000 Cellulose Ethers & Polymerisates l Continued improvement in Europe l Trend in Asia to remain stable l Optimized Clariant Polymers to target business expansion l Raw material prices on significantly higher levels l Own price increases effective with time lag only l Planning process for s
Slide 24: E-commerce strategy
E-commerce strategy l E-commerce actively and aggressively promoted l Strategy supported and coordinated by group level, high- powered project teams at group and divisional level installed l Brand recognition will be a clear advantage n Quality products n Service orientation n Technical innovation l
Slide 25: Roland Lösser, Chief Financial Officer
Roland Lösser Member of the Executive Committee of the Board of Management Chief Financial Officer March 2000
Slide 26: EPS – Track since IPO
EPS – Track since IPO +7% in CHF +25% 38.77 l Steady EPS improvement since 36.25 Initial Public Offering +75% l Optimized cost structure as solid 29.03 basis l Continuous quality improvement of business portfolio +26% l Platform for growth successfully 16.63 established 13.25 l Earnings per share in
Slide 27: Profit & loss statement 1999, part I
Profit & loss statement 1999, part I 1999 1998 in CHF mio ROS in % in CHF mio ROS in % Group sales 9 256 9 535 Divisional sales 9 158 9 053 1 Cost of goods sold – 5 997 – 6 032 Gross profit 3 259 35.2 3 503 36.7 Marketing and distribution – 1 359 – 1 408 Research and development – 362 – 334 Income f
Slide 28: Volumes gained momentum
Volumes gained momentum Sales performance in local currencies Approximations + 7% l Dynamic sales development after disappointing start l Pricing effect approximately –2.5% to –3% on average l Add-on acquisitions in Pigments & Additives, – 1% – 2% Masterbatches and Cellulose Ethers & Polymerisates c
Slide 29: Challenging business year 1999 successfully mastered
Challenging business year 1999 successfully mastered l Gross margin declined from 36.7% to 35.2% despite cost savings, operations were challenged by price decreases l Investments in Research & Development of CHF 362 mio, reinforced by CHF 28 mio. R&D expenses now 3.9% of sales, up from 3.5% l Admini
Slide 30: Profit & loss statement 1999, part II
Profit & loss statement 1999, part II 1999 1998 Change in CHF mio ROS in % in CHF mio ROS in % in % Operating profit 1 030 11.1 1 057 11.1 – 3% Net financial result – 193 – 224 – 14% Taxes – 275 – 309 – 11% Minorities –9 –5 Net profit after minorities 553 6.0 519 5.4 + 7% Earnings per share 38.77 36
Slide 31: Taxes in 1999 and outlook
Taxes in 1999 and outlook Situation in 1999 l Tax rate reduced from 37.1% to 32.9% n Improved legal and financial structure n Loss carry-forwards were advantageous n One time contributions taxed at low rates Outlook l German tax changes offer advantages n Reduction of deferred tax liabilities will b
Slide 32: Balance sheet
Balance sheet As of December 31st, amounts in CHF mio 1999 1998 1999 1998 Tangible fixed assets 4 059 3 899 Equity 3 365 2 698 Intangible fixed assets 752 743 Minority interests 106 61 Investm. in assoc. comp. 471 417 Deferred taxes 480 570 Other financial assets 62 15 Total long-term assets 5 824 5
Slide 33: Balance sheet strengthened
Balance sheet strengthened Net working capital l Inventories reduced during year by CHF 71 mio, but up at year end only due to strong exchange rates l Collection period 66 days, up from 61 days à Net working capital shows potential for improvement Gearing reduced l Net debt reduced from CHF 3 156 mi
Slide 34: Cash flow considerations
Cash flow considerations Amounts in CHF mio 553 Net profit 519 616 Depreciation and amortization 615 -425 Capital expenditure -464 -131 Dividend -102 1999 Acquisitions, other investments -97 134 1998 less disposals -600 -400 -200 0 200 400 600 Strong cash flow allowed reduction of net debt by CHF 37
Slide 35: Net debt, gearing and interest coverage
Net debt, gearing and interest coverage Amounts in CHF mio, H1 1997 numbers are indications ~ 3 800 3 340 ~ 147% 3 156 2 779 9.0x Net debt Interest 5.6x coverage EBITDA Interest 80% coverage ~ 6.7x EBIT ~ 4.0x Gearing Mid 1997 End 1997 End 1998 End 1999 Strong financial position end 1999 l Balance s
Slide 36: Dr Rolf W. Schweizer, Chairman and President
Dr Rolf W. Schweizer Chairman and President March 2000
Slide 37: The concept of the new strategic plan I
The concept of the new strategic plan I Product categories Semispecialties Specialties Fine chemicals Business units Textile Dyes Textile Chemicals Electronic Materials Ink Pigments Leather, Paper Life Science Intermediates Emulsions Pigments, Additives Specialty Intermediates Detergents Masterbatch
Slide 38: The concept of the new strategic plan II
The concept of the new strategic plan II Product categories Semispecialties Specialties Fine chemicals Strategy l Shift from marketing to l Exploitation of new market l Low volume / high margin logistics / reduction of needs through products- / products headcounts service innovation l Flexible and i
Slide 39: Semispecialties
How do we define our strategic product categories? Semispecialties l The manufacturing process entails complex chemical syntheses in technically sophisticated equipment l The products offer customer advantages that cannot be achieved through other means l The market is diverse and cyclical, with a l
Slide 40: Specialties
How do we define our strategic product categories? Specialties l The potential for innovation of products and technologies determines their potential for growth l The dynamic pace of change of customer needs calls for creative marketing and an efficient and responsive research operation l Products /
Slide 41: Fine chemicals
How do we define our strategic product categories? Fine chemicals l Specialties that are unique on the market with a large degree of innovation, especially for life sciences and the electronic industry l The business is a combination of activities of a customer-exclusive nature (R&D / toll manufactu
Slide 42: Business structure of Clariant in combination with BTP
Business structure of Clariant in combination with BTP Sales 1999/2000 E (amounts in CHF mio) Fine chemicals BTP BTP BTP Specialties BTP Semispecialties 2 416 1 896 1 065 1 949 1 026 1 944 10 296 24% 18% 10% 19% 10% 19% 100% BTP 7% 157 0% – 0% – 6% 124 0% – 44% 857 11% 1 138 Clariant 93% 2 259 100%
Slide 43: Business structure of Clariant in combination with BTP
Business structure of Clariant in combination with BTP EBIT 1999/2000 E (amounts in CHF mio) Fine chemicals BTP Specialties BTP BTP Semispecialties BTP 313 279 125 224 121 226 1 288 24% 22% 10% 17% 9% 18% 100% ROS (12.5%) BTP 4% 14 0% – 0% – 5% 12 0% – 62% 141 13% 167 ROS (14.7%) Clariant 96% 299 10
Slide 44: Total business 1999 / 2000 E
Total business 1999 / 2000 E Amounts in CHF mio Sales EBIT (ROS) incl. BTP 747 1 488 incl. BTP 741 15% Fine chemicals 741 8% 281 127 187 60 60 15% 26 5% (12.6%) 5 794 (8.1%) 5 513 60% 5 513 Specialties 56% 824 824 850 74% 66% (14.9%) (14.7%) 110 3 014 251 Semispecialties 2 904 32% 2 904 29% 21% 14 1
Slide 45: Total business – Development
Total business – Development Amounts in CHF mio Sales EBIT (ROS) 2003 E 2003 E 1999 / 2000 E 20% 1999 / 2000 E (18%) 25% Fine chemicals 1 488 187 (12.6%) 15% 15% 5 794 54% 850 54% (14.7%) (15%) Specialties 56% 66% 3 014 Semispecialties 26% 251 21% 29% (8.3%) (12%) 19% 10 296 1 288 100% 100% 100% (12
Slide 46: Business structure
Business structure Textile, Pigments Masterbatches Functional Life Science & Cellulose Ethers Leather & Paper & Chemicals Electronic & Chemicals Additives Chemicals Polymerisates Dennefeld Sanahuja Hencken Meyer Hannam Mahler Cellulose Ethers/ Textile Electronic Pigments Europe Detergents Emulsion D
Slide 47: Dr Reinhard Handte, Chief Operating Officer
Dr Reinhard Handte Member of the Executive Committee of the Board of Management Chief Operating Officer March 2000
Slide 48: Fine chemicals: Non Impact Printing
Fine chemicals Division Pigments & Additives, BU Pigments Business area: “Non Impact Printing” à Development of new products, applications and customized solutions Starting point: • Strong growth of technology-driven market (> 15% p.a.) for color copying- machines, laser printers, ink jet inks and e
Slide 49: Fine chemicals: New detergent customized synthesis
Fine chemicals Division Functional Chemicals, BU Detergents Project: New detergent – customized synthesis à Selective growth in innovative segments Starting point: • Customer developed new detergent ready for rapid and broad application into new washing systems • Clariant offers the chemical and pro
Slide 50: Life Science Intermediates: Clariant & BTP combined
Life Science Intermediates Clariant & BTP combined l A leading supplier / partner to the pharma and agro industry globally l Strong customer basis in pharma and agro l A pipeline of more than 100 development projects l Well positioned with cGMP facilities in the relevant markets l Well positioned wi
Slide 51: Life Science Intermediates: Clariant & BTP combined
Life Science Intermediates Clariant & BTP combined CHF mio * * Sales 1999 / 2000 E 1 000 800 600 400 200 0 DSM Clariant & Lonza Catalytica Laporte BTP Rhodia Clariant Cambrex Bayer Great Siegfried Yule Chirex PPG Albemarle BTP Lakes Catto l A leading producer of life science intermediates (sales of
Slide 52: Global production network
Life Science Intermediates Global production network UK US France Germany Italy India Brazil 52
Slide 53: Relationships: An excerpt
Life Science Intermediates Relationships: An excerpt Aventis Abbott Dow Novartis BASF Roche Pfizer Clariant Astra- Zeneca Glaxo DuPont Wellcome American Bristol Home Myers Products Warner Squibb Lambert 53
Slide 54: Market / Market growth
Life Science Intermediates Market / Market growth Agro / 19991 Agro / 2002 E1 Pharma Pharma 63 USD bn 50 USD bn 6 9.5 Global market Out- Global market Out- (complex fine sourced (complex fine sourced chemicals) chemicals) ”Over the next 2 – 5 years the fine chemical market should experience growth r
Slide 55: Early cooperation
Life Science Intermediates Early cooperation e.g. drug development Preclinical Clinical research Registra- Commercial research I II III tion under patent Cooperation with Clariant starts here time 55
Slide 56: The value chain
Life Science Intermediates The value chain Base Intermediates & Advanced Active Formulation chemicals building blocks intermediates ingredients Clariant activities 1999: Trend until 2003: 56
Slide 57: Development of a two-tiered industry structure
Life Science Intermediates Development of a two-tiered industry structure Today Customer Suppliers Tomorrow Customer Partners of choice Other suppliers 57
Slide 58: Clariant's core competences
Life Science Intermediates Clariant’s core competences Broad core technology and product portfolio Integral service: • Strong R&D State of the art • Scale-up multipurpose production • Production facilities (cGMP) • Quality Mgmt Success • ESH • Engineering Capability to form strategic partnerships wi
Slide 59: Example I for a strategic relationship
Life Science Intermediates Example I for a strategic relationship Customer: Leading agrochemical company Product: Intermediate for a herbicide Investment: CHF 30 mio (incl. additional investment to expand capacity for core technology) Timeline: Initial Technology presentation 1993 Technical proposal
Slide 60: Example II for a strategic relationship
Life Science Intermediates Example II for a strategic relationship Customer: Leading pharmaceutical company Product: Intermediate for an anti HIV drug Description: Key starting material produced by Clariant 6 chemical steps, 2 purifications Timeline: May 1996 Inquiry August 1996 Laboratory sample Ja
Slide 61: Clariant & BTP combined
Life Science Intermediates Clariant & BTP combined Agro Pharma Agro Pharma ~40% 46% 54% + 55% ~60% Growth through contracted products Combined sales 1999 / 2000 E Combined sales 2002 E: (pro forma): ~ CHF 1 bn above CHF 1.5 bn 61
Slide 62: Summary
Life Science Intermediates Summary Ø Life science intermediates = Strategic growth area Ø Market: • Annual growth of 15% (growth in pharma market and outsourcing) • Structural change Ø Clariant will be a supplier of choice: • Strong core technology and product portfolio • Innovative R&D • From the r
Slide 63: Roland Lösser, Chief Financial Officer
Roland Lösser Member of the Executive Committee of the Board of Management Chief Financial Officer March 2000
Slide 64: Net debt, gearing and interest coverage
Net debt, gearing and interest coverage Amounts in CHF mio, H1 1997 numbers are indications ~ 6 000 ~ 3 800 ~ 170–180% Net debt 3 340 Interest ~ 147% 3 156 2 779 coverage EBITDA Interest coverage ~ 6.7x EBIT ~ 5.5–6.0x ~ 4.0x ~ 3.5–4.0x1 Gearing Mid 1997 End 1997 End 1998 End 1999 Mid 2000 Re-gearin
Slide 65: Financing BTP
Financing BTP Structure l BTP will be consolidated from Syndicated Loan March 1st, 2000 l Acquisition leads to goodwill of approximately 2.6 bn CHF l Goodwill will be stated in CHF Cash CHF Bond Bridge financing l Interest cost expected at 4.5% l 80% of indebtedness will be financed at fixed interes
Slide 66: BTP acquisition triggers synergies
BTP acquisition triggers synergies Strategic objective of BTP acquisition to fuel innovation and growth; but transaction also offers hard synergies / cost cutting elements as side effects: l Amalgamation of leather chemicals businesses offers opportunity to optimize operations and leverage Clariant‘
Slide 67: Acquisition will enhance earnings
Acquisition will enhance earnings Simplified consideration of earnings contribution from BTP Amounts in CHF mio 2001 E 2002 E 2003 E EBIT consensus estimates1 185 205 220 Incremental interest cost – 145 – 145 – 145 Synergies 50 50 50 Incremental cash earnings contribution 90 110 125 Goodwill amortiz