Solvay Sa · EURONEXT:SOLB
Solvay Sa — Q1 2019 Earnings Presentation
47 slides from Solvay Sa's earnings presentation, May 7, 2019
Slide 1: First Quarter 2019 Results
First Quarter 2019 Results May 7, 2019 Investor relations
Slide 2: Forenote
Forenote IFRS 16 has been implemented in the Group’s financial statements since January 1, 2019. Comparative information for the first quarter of 2018 in the business review is presented on an unaudited pro forma basis as if the implementation had taken place on January 1, 2018. This information is
Slide 3: Realigned executive committee
Realigned executive committee Built on extensive experience and business leadership Augusto Di Donfrancesco New Executive Committee Specialty Polymers, Composite Materials Simplified to 4 business leaders and the CEO and Thermoplastic Composites Human Resources Officer (to be hired) Vincent De C
Slide 4: Results in line with expectations amid challenging macro conditions
Results in line with expectations Amid challenging macro conditions EBITDA Margin EPS FCF underlying EBITDA / net sales underlying to Solvay shareholders [1] from cont. ops. from cont. ops. largely stable organic growth maintained at largely stable -0.6% 22% +1.0% €(91)m Volumes impacted by headwi
Slide 5: Financial Highlights
Q1 2019 RESULTS FINANCIAL HIGHLIGHTS
Slide 6: Advanced Materials: exposed to markets with different dynamics
Advanced Materials Polymer & Composite Exposed to markets with different dynamics Technologies Market drivers Our markets Our delivery Automotive 29% Automotive market down Organic sales growth -0.1% Electricals Aerospace -5.3%(1) global production decline in & 22% 1Q19 Electronics Volume and mix
Slide 7: Advanced Formulations: lower volumes mitigated by higher prices
Advanced Formulations Surface & Liquid Lower volumes mitigated by higher prices Chemistry Market drivers Our markets Our delivery Mining & Environmental 13% Agro, Feed Organic sales growth -4.4% Oil & gas & Food Oil and gas 19% 15% Volume and mix impact -7.9% Lower volume in North America Advance
Slide 8: Performance Chemicals: solid demand and higher pricing
Performance Chemicals Soda ash & Peroxide Solid demand and higher pricing chemicals Market drivers Our markets Our delivery Building & Construction 13% Consumers Industrial Organic sales growth +7.4% goods & Solid demand Healthcare applications Good demand in soda ash and 27% 27% Volume and mix i
Slide 9: Positive net pricing offsets volume decline
Positive net pricing offsets volume decline Leading to sustained EBITDA margin Underlying EBITDA Underlying EBITDA largely stable organically (in € million) Lower volume in core markets including automotive, Margin Margin electronics and oil & gas; strong performance in 22% 22% aerospace 558 (4) 2
Slide 10: Working capital and inventory weighed on free cash flow generation
Working capital and inventory weighed on free cash flow generation Cash generation FCF to Solvay shareholders (in € million) from continuing operations at € (91) million 571 (179) Working capital phasing Higher inventories due to slowdown in automotive, (294) electronics and oil & gas markets
Slide 11: 2019 outlook adjusted to current market context
2019 outlook adjusted to current market context EBITDA Free growth Cash Flow Underlying to Solvay shareholders excluding scope and forex conversion from continuing operations Organic growth [1] €490 million [2] flat to modest decline exceeding dividend pay-out Q2 down versus 2018 Allowing fo
Slide 12: Additional Information
Q1 2019 RESULTS ADDITIONAL INFORMATION
Slide 13: Organic sales flat with lower volumes offset by higher prices
Organic sales flat with lower volumes offset by higher prices Net sales (in € million) Volume growth Advanced Materials strong decline in demand from automotive and electronics as well as some destocking, 2,492 (8) 75 (68) 80 2,571 partially offset by double-digit growth in aerospace Advanced
Slide 14: Underlying EBITDA €571m
Underlying EBITDA Positive net pricing offsets volume headwinds organic growth -5.7% organic growth -1.7% 47% 20% Advanced Materials Advanced Formulations Higher prices and volume growth in aerospace did not offset lower demand €571m Positive net pricing offset only partially lower oil & gas vol
Slide 15: EPS supported by higher contribution from discontinued operations
EPS supported by higher contribution from discontinued operations Underlying EPS (in €) 2.80 Underlying EPS from continuing operations up 1% 2.38 disc • Positive impact from forex conversion on EBITDA +0.13 -0.09 ops. disc. +0.03 -0.01 -0.04 • Higher tax rate offset by lower net financial charges +0
Slide 16: Net debt seasonally up
Net debt seasonally up Movements in net debt (in € million) (148) (32) (20) (27) (5,797) (5,538) (32) Remeasu- In/outflow Changes FCF to Dividends Hybrid rements from M&A in scope Hybrid Solvay to Solvay bonds (forex) & other bonds share- share- (2,500) (2,500) holders holders Operational impact (18
Slide 17: Provisions slightly up with actuarial assumptions
Provisions slightly up with actuarial assumptions (31/12/2018) Movements in provisions (in € million) (3,820) 96 (71) (20) (113) 14 (3,913) Operational deleveraging 6 31/12/2017 Payments Net new Discounting Remeasure Changes in 31/12/2018 provisions costs -ments[1] scope & other Employee benefits (2
Slide 18: Efficient capital structure leading to reduced cost of debt
Efficient capital structure leading to reduced cost of debt Underlying financial debt [1] evolution in € billion DELEVERAGING CONTINUES (8,720) (7,626) (2,200) (6,426) (6,310) (2,200) (828) (464) (2,200) (2,500) EUR perpetual hybrid bonds (2,142) (2,212) (961) (849) Other debt (1,633) (1,711) US$ bo
Slide 19: Debt profile: balanced maturities allowing flexibility
Debt profile: Balanced maturities allowing flexibility Major financial debt [1] in million $163m 3.95% €300m $196 4.25% 3.50% To be repaid in €700m $800m €750m $800m May 2019 4.20% 3.40% 1.63% 4.45% €500m €500m €500m €500m 5.19% 5.43% 5.87% 2.75% 2019 2020 2021 2022 2023 2024 2025 2026 2027 December
Slide 20: 2019 P&L Considerations
2019 P&L Considerations UNDERLYING FCF TO SOLVAY FOREX EBITDA SHAREHOLDERS SENSITIVITY EBITDA to be flat to modestly down Deleveraging of the balance sheet with Mostly exposed to the U.S. dollar, with the organically and to be back-ended compared continued solid operational free cash flow main sensi
Slide 21: IFRS 16 to affect EBITDA, P&L & debt
IFRS 16 to affect EBITDA, P&L & debt 2018 key figures (in € m) published IFRS 16 pro forma EBITDA 2,230 +100 2,330 • IFRS 16 implementation Advanced Materials 1,197 +28 1,225 Advanced Formulations 521 +12 533 Capitalizes leases, previously considered as operating leases Performance Chemicals 729 +
Slide 22: Solvay Profile
SOLVAY asking more from chemistry”
Slide 23: Solvay ID
Solvay ID >70% >50% ~33% specialty in GDP+ in each products markets region Created by Ernest Solvay in 1863, Solvay is today all Advanced Materials Automotive & aerospace Europe Advanced Formulations Electrical & electronics North America about advanced materials and Performance Chemicals Resources
Slide 24: Growth engines deliver 70% of EBITDA
Growth engines deliver 70% of EBITDA Advanced Materials Advanced Formulations Performance Chemicals 49% Providing solutions for sustainable Customized specialty Lead in chemical intermediates 21% through scale & technology, mobility, light weighting, CO2 and formulations for surface chemistry energy
Slide 25: A unique portfolio to answer megatrends
A unique portfolio to answer megatrends ADVANCED MATERIALS ADVANCED FORMULATIONS PERFORMANCE CHEMICALS Polymer & Surface & Soda ash & Composite Liquid Peroxides technologies chemistry Electronics Healthcare Aerospace Automotive Oil & Gas Mining Agro Food Consumer goods Industrial Construction Next g
Slide 26: Because our planet requires more sustainable mobility
Because our planet requires more sustainable mobility Doing more with less AUTOMOTIVE AEROSPACE BATTERIES Cleaner and more Enhanced Higher performance MORE energy-efficient lightweighting & fuel and energy storage mobility efficiency Reduce impact Reduce CO2 Reduce cost LESS to environment emissions
Slide 27: Aircraft fundamentals support higher growth in composites
Aircraft fundamentals support higher growth AERO in composites 4.5% >8,000 50% 2X Annual growth Record high Weight of composites Number of aircrafts expected in passenger traffic order backlog on new aircrafts vs <15% on legacy to double in 20 years SURFACE BONDING & COATINGS MULTIFUNCTIONALITY PRIM
Slide 28: We make cars lighter & more efficient
We make cars lighter & more efficient AUTO Increased materials usage drives growth 2.4% ~30% CAGR light vehicles CAGR hybrid & plug-in production in 5 years electric vehicles in ten years STRUCTURAL & SEMI-STRUCTURAL PARTS INTERIORS THERMAL & AIR INSULATION MANAGEMENT SYSTEMS ENGINE ENERGY-EFFICIENT
Slide 29: Technology leader for mission critical battery materials
We are a technology leader AUTO for mission critical battery materials Li-ion battery Solvay technologies enable key F1EC, F2EC, SA functionalities of the Fluorinated Li-ion battery additives for electrolytes Safer Better energy density Solef® PVDF Binder Better power Lower cost Solef® PVDF
Slide 30: Solvay positioned in all auto platforms
Solvay positioned in all auto platforms AUTO outpacing the industry growth by 3X [1] ICE+ (P)HEV EV Increasing loading per car [2] ~ 6kg ~ 12kg 8kg ~ Internal combustion engine Transmission Performance drives value proposal Electrical engine Battery Opportunity for composites Chassis / functional pa
Slide 31: Broadest portfolio of advanced materials
Broadest portfolio of advanced materials differentiating Solvay from Fluoropolymers Aromatics competition High Perf Composites Adhesives & Thermo- Out-of- Thermoset Resin HPPA PPS PAEK PSU PTFE PVDF PFA FKM PFPE Carbon Fiber Surfacing plastic Autoclave Prepreg Infusion films prepreg prepreg ( ) Firs
Slide 32: Because resource constraints require more efficient solutions
Because resource constraints require more efficient solutions Doing more with less MINING OIL & GAS AGRO Higher throughput Maximize cost Targeted use MORE and yield of metals performance and of ingredients for & minerals fracturing efficiency seeds & crops Reduce impact Reduce Less clean LESS to emp
Slide 33: Innovation at our core with strong connections to advance science
Innovation at our core with strong connections to advance science Steering open innovation & collaboration 3.4% €352 m effort 264 patent applications R&I intensity 2,200 talents 21 R&I sites +100bp vs 2012 Ernest Solvay established first 1911 prestigious meetings of top scientists* Establishing worl
Slide 34: …in a sustainable way
…in a sustainable way Contribute to society Among many initiatives, we Act worked with WBCSD to identify responsibly the SDGs most impacted by our industry Innovate sustainable solutions 2018 highlights 50% -1 Mt Sustainable Solutions GHG emissions absolute value > Higher volume growth on average, h
Slide 35: Integrating sustainability into decision-making
Integrating sustainability into decision-making drives superior financial value growth M&A > higher social and > Higher volume growth environmental contribution on average from Manufacturing Footprint SUSTAINABLE to customer performance sustainable solutions SOLUTIONS > lower environmental impact in
Slide 36: In 2019, we open a new chapter led by a new CEO
In 2019, we open a new chapter in Solvay’s history led by a new CEO Customer intimacy Operational Simplification excellence Ilham Kadri, CEO Excellence center Customer experience Employee Experience Since March 1, 2019 First Quarter Results 36 May 7, 2019
Slide 37: Delivered solid organic growth in 2018
Delivered solid organic growth in 2018 vs 2017 Underlying figures + 5.7% + 5.3% + 12% Organic growth Organic growth Continuing operations Net Sales EBITDA Earnings per share + 6% + 4.2% Continuing operations Free Cash Dividend Flow First Quarter Results 37 May 7, 2019
Slide 38: Not at the expense of the planet
Not at the expense of the planet vs 2015 -24% 50% -30% intensity GHG Sustainable Occupational emissions solutions accidents What is beneficial for 76% 33% Employees involved in business must also be beneficial for our planet Employee Societal engagement actions First Quarter Results 38 May 7, 2019
Slide 39: Constantly focused to respect our commitments
Constantly focused to respect our commitments 2016 - 2018 Delivery 2016 - 2018 -20% GHG Intensity -24% kg CO2 eq. Emissions / € EBITDA +7.5% Mid-to-high single digit EBITDA growth Underlying % yoy 40% Sustainable solutions 50% % Group Sales -10 % Accident rate -30% Acc. with medical treatment / m wo
Slide 40: While creating value for Solvay's shareholders
WHILE CREATING VALUE FOR SOLVAY’S SHAREHOLDERS Underlying EPS Free cash flow to Solvay Dividend shareholders (in €) 3.75 (in €) 725 3.60 (in € m) 3.45 3.30 10.57 9.08 527 8.19 466 2016 2017 2018 2016 2017 2018 2015 PF 2016 2017 2018 [1] +13% CAGR +70% CAGR +4.4% CAGR 2018 Results 40 February 27, 201
Slide 41: Strong track record of continued shareholders' distribution
Strong track record of continued shareholders’ distribution Gross dividend Committed to €3.75 in €/share[1] stable / growing 4.00 dividend ~5.5% CAGR 3.00 2.00 2018 gross dividend per share Interim €1.44 Payment Jan. 17 2019 1.00 Final[1] €2.31 Payment May 23 2019 Total[1] €3.75 + 4.2 % - 1982 1983
Slide 42: Why invest in Solvay?
Why invest in solvay? Leading Advanced Innovative and Customer Solid Financial Consistent Materials and sustainable obsession Performance Shareholders Specialty Chemicals solutions to the Reward company market of the future Top-notch chemistry that Innovation towards Answers to fast-pacing One of th
Slide 43: Solvay Share
SOLVAY asking more from chemistry”
Slide 44: Solvay share
Solvay share Share data Solvay (BRU) Market capitalization € 9 bn Listing Euronext Brussels & Paris Additional Ticker SOLB.BE Share information Currency EUR ISIN code BE0003470755 ADR program for US investors Contact CITI ADR symbol SOLVY Benefits of ADR’s to create Solvay ADRs Platform OTC • Clear
Slide 45: Investor relations
Investor relations Upcoming Geoffroy Raskin events +32 2 264 1540 geoffroy.raskin@solvay.com Bisser Alexandrov +32 2 264 3687 bisser.alexandrov@solvay.com Jodi Allen +1 609 860 4608 jodi.allen@solvay.com Latest news First Quarter Results 45 May 7, 2019
Slide 46: Disclaimer
Disclaimer This presentation may contain forward-looking information. Forward-looking statements describe expectations, plans, strategies, goals, future events or intentions. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties relating t
Slide 47: www.solvay.com
Investor Relations Shareholders Services Rue De Ransbeek, 310 Rue des Champs Elysées, 43 1120 Brussels, Belgium 1050 Brussels, Belgium T +32 2 264 3025 T +32 2 639 6630 M investor.relations@solvay.com M shareholders@solvay.com www.solvay.com FOLLOW US ON QUESTIONS? Contact us investor.relations@solv