Solvay Sa · EURONEXT:SOLB
Solvay Sa — Investor Day (November 2019)
47 slides from Solvay Sa's investor day presentation, Nov 7, 2019
Slide 1: Q3 2019 Results & Strategic Review
Q3 2019 RESULTS & STRATEGIC REVIEW November 7, 2019
Slide 2: Karim Hajjar, Chief Financial Officer
Karim Hajjar Chief Financial Officer 2
Slide 3: Forenote and Safe Harbor
FORENOTE IFRS 16 has been implemented in the Group’s financial Safe harbor statements since January 1, 2019. Comparative information This document may contain forward-looking information. for the first quarter of 2018 in the business review is presented Forward-looking statements describe expectatio
Slide 4: Financial Results: Focus on cost, cash and customers
FINANCIAL RESULTS Focus on cost, cash and customers in a challenging macro environment Net Sales Underlying EBITDA Free Cash Flow to Solvay shareholders €7.8B €1,796M €345M 9 months -0.7% Y/Y organically -2.6% Y/Y organically +€217M Y/Y +1.6% including forex & scope -0.2% including forex & scope fro
Slide 5: Advanced Materials 9M 2019 Performance
ADVANCED MATERIALS 9M 2019 PERFORMANCE Net Sales EBITDA EBITDA Margin +1.8% -8.4% 26% Y/Y organic Y/Y organic MARKET DRIVERS PERFORMANCE HIGHLIGHTS • Aerospace market growth trends • Double-digit aerospace volume growth continue offset continued weakness in auto & electronics • Automotive market hea
Slide 6: Advanced Formulations 9M 2019 Performance
ADVANCED FORMULATIONS 9M 2019 PERFORMANCE Net Sales EBITDA EBITDA Margin -7.9% -10% 18% Y/Y organic Y/Y organic MARKET DRIVERS PERFORMANCE HIGHLIGHTS • Shale oil and gas significantly • Oil & gas materially impacted by market deteriorating conditions and erosion of competitiveness • Overall resilien
Slide 7: Performance Chemicals 9M 2019 Performance
PERFORMANCE CHEMICALS 9M 2019 PERFORMANCE Net Sales EBITDA EBITDA Margin +3.4% +8.7% 30% Y/Y organic Y/Y organic MARKET DRIVERS PERFORMANCE HIGHLIGHTS • Resilient demand in soda ash and • Pricing up in soda ash and peroxides on peroxides markets stable volumes • Operational efficiency and higher pri
Slide 8: Significant Free Cash Flow Generation & YoY Growth
SIGNIFICANT FREE CASH FLOW GENERATION & YOY GROWTH Free Cash Flow to Solvay Shareholders €345M +€217M Y/Y Continuing operations, 9M 2019 • Strong Q3 delivery with €313M • Strict focus on costs and working capital • Maintained Capex discipline Delevered [1] by €140M in 9M 2019 +€241M Y/Y [1] Operatio
Slide 9: Full Year Guidance
FULL YEAR GUIDANCE Underlying EBITDA Free Cash Flow to Solvay shareholders -2% to -3% ~€490M organically from continued operations ~€2,330M ~€300M Flat Y/Y, at current forex total operational cash deleveraging [1] [1] Operational deleveraging is free cash flow to Solvay shareholders after dividend p
Slide 10: Ilham Kadri, Chief Executive Officer
Ilham Kadri Chief Executive Officer 10
Slide 11: Actions Taken Since March 2019
ACTIONS TAKEN SINCE MARCH 2019 Redefined structure and responsibilities of executive leadership team Focused and incentivized organization on cost improvement and cash generation Initiated comprehensive strategic review of every business Mobilized organization to redefine a new sense of purpose as w
Slide 12: Initial Insights
INITIAL INSIGHTS We have a strong foundation … Attractive end Leading market Proven technology Passionate and markets aligned with positions with further and innovation talented people key megatrends growth potential expertise … with significant opportunity to accelerate value creation Clear busines
Slide 13: Our Value Proposition
OUR VALUE PROPOSITION Sustainable Solutions Aligned to Unmatched Depth of Capabilities Significant Megatrends • Leadership positions in >75% of our portfolio Opportunity Ahead • Advanced materials and specialty chemicals • Leverage technologies across businesses to meet offer sustainable solutions a
Slide 14: Solvay by the Numbers
SOLVAY BY THE NUMBERS €10.3B €2.2B >50% net sales underlying EBITDA revenue in 50% sustainable 22% margin faster growing solutions economies EVENLY 24,500 people BALANCED 61 countries 125 sites revenue across Europe, the Americas >100 nationalities and Asia & RoW €350M in R&I 264 new patents in ’18
Slide 15: Well-Positioned to Benefit from a More ESG-Focused World
WELL-POSITIONED TO BENEFIT FROM A MORE ESG-FOCUSED WORLD Sustainable Products Sustainable Employer Sustainable Planet • Deliver financial growth and profitability through • Offer a safe, engaging and diverse workplace to • Reduce environmental impact through lower materials and compounds that help a
Slide 16: Our Leading Market Positions Are Supported By Megatrends
Our Leading Market Positions Are Supported By Megatrends 16
Slide 17: Our Businesses Are Aligned to Powerful Megatrends
OUR BUSINESSES ARE ALIGNED TO POWERFUL MEGATRENDS Megatrends Electrification Lightweighting Resource Healthcare IoT / Eco-friendly efficiency Digitalization based solutions Macro • Resource scarcity • Responsible mobility • Safeguard ecosystem • Aging population • People connecting • Health and well
Slide 18: We Help Customers Lower Total Cost of Ownership & Increase Sustainability
WE HELP CUSTOMERS LOWER TOTAL COST OF OWNERSHIP & INCREASE SUSTAINABILITY Megatrends Electrification Lightweighting Resource Healthcare IoT / Eco-friendly efficiency Digitalization based solutions Our Solutions Bio-based High-performance polymer technology portfolio & Value ingredients Proposition •
Slide 19: Market Positions Analyzed to Determine Portfolio Playbook
WE ANALYZED MARKET POSITIONS IN EACH BUSINESS TO DETERMINE PORTFOLIO PLAYBOOK Technology Market Business Units Leadership Positions Track Record Growth Potential Penetration Consolidation Specialty Polymers #1 high-performance polymers High growth and Low High High margin Composite Materials #1 aero
Slide 20: Our New Strategy: G.R.O.W.
Our New Strategy: G.R.O.W. 20
Slide 21: Our G.R.O.W. Strategy
OUR Accelerate Growth G.R.O.W. STRATEGY We will prioritize investments in high margin Materials businesses with high growth potential, which are also our most sustainable solutions GGROWTH Distinct business Deliver Resilient cash mandates with capital and resource discipline to maximize profitable W
Slide 22: Differentiated Business Mandates
GGROWTH DIFFERENTIATED BUSINESS MANDATES MATERIALS CHEMICALS SOLUTIONS R RESILIENCE Extend position as #1 pure-play advanced materials business Become #1 cash conversion chemical player Unlock value Accelerate growth Deliver resilient cash Optimize returns OOPTIMIZE • Specialty Polymers • Composite
Slide 23: Materials
GGROWTH MATERIALS #1 pure play advanced materials business Unique high-performance polymers Strategic intent Track & composite technologies Accelerate growth record R RESILIENCE Strong growth opportunities • • Sustainable automotive Sustainable aerospace INNOVATION Research, digital and technical CU
Slide 24: Chemicals
GGROWTH CHEMICALS #1 cash conversion chemical player World-leaders in essential Strategic intent Track chemicals to daily life Deliver resilient cash record R RESILIENCE Mono-technology businesses • • Soda ash Peroxide INNOVATION Focus on process innovation CUSTOMERS Leverage best-in- class global I
Slide 25: Solutions
GGROWTH SOLUTIONS Unlock value Unique formulation & Strategic intent Track application expertise Optimize returns record R RESILIENCE Selective opportunities to grow • • Natural food ingredients Crop care INNOVATION Focus on eco- friendly solutions CUSTOMERS Digitalization, focus on key INVESTMENT S
Slide 26: Solvay ONE: New Group Operating Model to Win
GGROWTH SOLVAY ONE: NEW GROUP OPERATING MODEL TO WIN LEGACY SOLVAY NEW SOLVAY Multiple cultures Single purpose R RESILIENCE • Solvay + Rhodia + Cytec + … Decentralized operating model Enterprise leadership with strong performance management • Strategic enterprise customer engagement • Significant em
Slide 27: Solvay ONE: Customer Engagement Model
GGROWTH SOLVAY ONE Organic growth fueled by differentiated customer engagement model CUSTOMER CENTRICITY R RESILIENCE • • Tailor service and approach based on customer segmentation to drive innovation Deploy talent to new strategic account roles ~50% of growth opportunities <50 accounts Strategic ke
Slide 28: Solvay ONE: Disciplined Centrally Allocated Resources
GGROWTH SOLVAY ONE Disciplined centrally allocated resources CAPEX R&I R RESILIENCE • • • Contain Group Capex at 7-8% sales Prioritize at Group vs GBU level Redirect resources from ~40% to ~60% to • • • Contain Group R&I at ~€350M/year Prioritize at Group vs GBU level Redirect resources from ~35% to
Slide 29: Solvay ONE: Cost Reductions of €300 to €350M
GGROWTH SOLVAY ONE Cost reductions of €300 to €350M SIMPLIFICATION €100-150M PRODUCTIVITY €200M & SYNERGIES MEASURES R run-rate by 2024 run-rate by 2024 €100 -150M Complete Current Simplification Continued operational cost reductions Program • Yield improvements RESILIENCE MATERIALS CHEMICALS • Anno
Slide 30: Solvay ONE: Cash Management
GGROWTH SOLVAY ONE Cash management REDUCING PENSIONS €75M REDUCING WORKING €150M & INTERESTS CAPITAL NEEDS R run-rate by 2024 cumulative by 2024 Lower pension cash service by >€40M run-rate as Order-to-cash program from 2020 • A leaner enterprise-wide supply chain RESILIENCE • Deploy ~€0.5B of proce
Slide 31: Financial Commitments
31 \ Financial Commitments
Slide 32: Committed to Delivering Enhanced Value: Mid-Term Financial Targets
GGROWTH COMMITTED TO DELIVERING ENHANCED VALUE MID-TERM FINANCIAL TARGETS 2019 estimate 2020 – 2024 R RESILIENCE Underlying EBITDA growth -2% to -3% Mid-single digit / year average GROWTH MATERIALS CHEMICALS SOLUTIONS More than FCF Around Exceed 30% ~€150M FCF [2] OOPTIMIZE conversion [1] 22% Around
Slide 33: Our Capital Deployment Priorities
OUR CAPITAL DEPLOYMENT PRIORITIES Disciplined approach to Capex and R&I Reduce liabilities (net financial debt and pensions) Portfolio opportunities Maintain stable and growing dividend Maintain investment grade rating 9 Months 2019 Results & Strategy Review 33 November 7, 2019
Slide 34: Why Invest?
WHY INVEST? Attractive secular trends drive long term growth Leadership positions >75% of portfolio Strong ESG credentials Best-in-class marginsG.R.O.W. strategy to enhance shareholder value Resilient cash, investment-grade Growth and cash generation to drive stable and growing dividends G.R.O.W. st
Slide 35: Appendix
Appendix 35 \
Slide 36: Automotive
AUTOMOTIVE MARKET DRIVERS HOW WE WIN Fuel efficiency / lightweighting Broadest portfolio of advanced materials We make cars regulations driving CO2 reductions • Greater use of high-performance polymers to meet more efficient • EU target 95g CO2/km by 2020 more critical applications • US target 50% r
Slide 37: Aerospace
AEROSPACE MARKET DRIVERS HOW WE WIN 4.3% annual growth in passenger traffic Broad customer base We make aircraft • Positions with major global OEMs in US, Europe, China lighter & more 10% ➝ 50% by weight & Russia • efficient • Significant increase of composites on new aircrafts vs. legacy aircrafts
Slide 38: Thermoplastic Composites
THERMOPLASTIC MARKET DRIVERS HOW WE WIN COMPOSITES Why Thermoplastics? Investments • Capacity expansions in aero (Sept 2019) For aerospace, Fast cycle time • New capacity for oil & gas (Oct 2019) • Enabling increased build rates automotive and • Two innovation center openings (Oct 2019) • More effic
Slide 39: Healthcare
HEALTHCARE MARKET DRIVERS HOW WE WIN +5-7% CAGR Patient care: World leader in thermoplastics used for We improve comfort high performance membrane • Health care coverage in developing markets for others • The growing care needs of elderly populations (ageing and growing populations and increasing li
Slide 40: Electronics
ELECTRONICS MARKET DRIVERS HOW WE WIN Double digit growth expected We target advanced technology markets driven Beyond by strong long-term trends with a portfolio of • The growing demand for hyper-connectivity and the fast smartphones development of 5G solutions • Exponential growth of data, leading
Slide 41: Home & Personal Care
HOME & MARKET DRIVERS HOW WE WIN PERSONAL Attractive market potential: GDP+ We provide our customers with portfolio of CARE • Request for more natural and bio based solutions innovative polymers and surfactants • Growing customer base • Homecare and I&I: solutions & ingredients for fabric • Enhanced
Slide 42: Soda Ash & Bicarbonate
SODA ASH & MARKET DRIVERS HOW WE WIN BICARBONATE Resilient growing soda ash demand We offer security of supply • Mix of consumer and industrial-driven demand • Global network of world-class and local assets Resilient demand & • Capacity addition of 1.4 Mt capacity in soda ash and Environmental stand
Slide 43: Peroxides
PEROXIDES MARKET DRIVERS HOW WE WIN Resilient & growing H202 & (HP)PO markets We partner with our customers Resilient demand & • Diversity of markets decreases cyclicality • Offering a global footprint for security of supply strong cash • Applications in Agro / Food, Consumer Goods, • Building long
Slide 44: Our Newly Realigned Business Segments
OUR NEWLY REALIGNED BUSINESS SEGMENTS Allow a differentiated management approach Former New Segments Segments Announced November 7, 2019 ADVANCED PERFORMANCE ADVANCED MATERIALS CHEMICALS FORMULATIONS MATERIALS CHEMICALS SOLUTIONS Specialty Polymers Soda Ash Novecare Specialty Polymers Soda Ash Novec
Slide 45: Digitalization as Key Enabler for Further Value Creation
DIGITALIZATION DIGITALIZATION OF PLANTS DIGITALIZATION FOR CUSTOMERS AS KEY ENABLER FOR • Increase asset performance − Leveraging data analytics • Real-time data analysis FURTHER VALUE • Improve reliability of equipment • Technical recommendations CREATION − Monitoring and predictive modeling for fa
Slide 46: Scale and Diversity Advantage
SCALE AND DIVERSITY ADVANTAGE Leveraging the power of Solvay Financial Strength Identify New Opportunities Balance of high margin growth and strong cash- We can extend opportunities with generating businesses existing customers by weaving together solutions and technologies Diverse Portfolio from mu
Slide 47: Sources for Megatrends
SOURCES FOR MEGATRENDS • ~50% of global car production in EV or hybrid in 2030 (Source: Roland Berger) • Global battery demand growth at 20%+ CAGR over the 2018-2030 period (Source: World Material Forum, Global Battery Alliance) • Composites in aerospace to grow 2x in next 10 years (Source: Bain - B