Synthomer Plc · LSE:SYNT
Synthomer — H1 2012 Earnings Presentation
31 slides from Synthomer's earnings presentation, Aug 28, 2012
Slide 1: Interim Results
Interim Results 28th August 2012
Slide 2: Highlights
Highlights 2 Solid performance in a challenging and volatile market • PBT up 7% to £56m Western Europe and North American operations deliver strong performance • EBIT up 22% on volumes down 12% Asia and ROW mixed • Nitrile Latex seeing very competitive trading • Other businesses performed stro
Slide 3: Financial Review
3 FINANCIAL REVIEW David Blackwood - Finance Director
Slide 4: H1 Results
H1 Results 4 2012 2011 % Change Revenue (1) (£m) 603.3 664.3 (9.1) EBITDA (1) (£m) 71.6 69.8 2.6 EBIT (1) (£m) 62.1 59.0 5.3 PBT (1) (£m) 56.0 52.4 6.9 EPS (2) 12.3p 9.5p 29.4 DPS 2.2p 1.2p 83.3 (1) Underlying pro forma (2) Underlying (not pro forma) Revenues impacted by 10% decline in volumes U
Slide 5: Europe & North America
Europe & North America (73% Sales, 84% EBIT) 5 2012 2011 % Change Sales (£m) 438.2 479.0 (8.5) EBIT (£m) 55.7 45.8 21.6 Volumes (Ktes) 433.8 490.3 (11.5) Strong performance in a difficult environment - £9.9m EBIT increase (+ 21.6%) • Synergy contribution of £9m • Adverse currency translation of £2
Slide 6: Asia & RoW
Asia & RoW (27% Sales, 16% EBIT) 6 2012 2011 % Change Sales (£m) 165.1 185.3 (10.9) EBIT (£m) 11.0 19.0 (42.1) Volumes (Ktes) 172.0 179.5 (4.2) As highlighted, difficult trading conditions in Nitrile Latex Nitrile volumes and unit cash margins lower than strong H1 2011 Balance of segment (50%
Slide 7: Cash Flow
Cash Flow 7 2012 H1 2011 H1 Underlying Operating profit (£m) 62.1 45.7 Depreciation (£m) 9.5 9.3 Movement in working capital (£m) (33.4) (30.6) Capital expenditure (net) (£m) (16.5) (10.1) Tax, interest, pensions* (£m) (20.4) (22.0) Free cash flow (£m) 1.3 (7.7) Acquisitions and other (£m) (11.2) (1
Slide 8: Capital Structure / Debt
Capital Structure / Debt 8 2012 2011 Net Cash (£m) 13.8 2.9 Term Debt (£m) (189.0) (243.5) Net Debt (£m) (174.2) (240.4) Undrawn Revolver (£m) 60.0 60.0 Net Debt: EBITDA (LTM) 1.4 1.9 Interest Cover (LTM) 10.2 7.5 Cash £61.7m, current borrowings £47.9m Term Debt matures 2014 (£39m) , 2015 (£138m
Slide 9: Synergy Delivery
Synergy Delivery 9 Forecast Delivery / Cash Spend 2011 2012 2013 Cumulative benefit (£m) 3 19 25 Year on year P+L benefit (£m) 3 16 6 Cash spend (£m) 6 11 3 Synergy delivery on track to meet increased target of £25m £9m delivered in H1 Cumulative cash cost to end June £14m Revenue costs book
Slide 10: Dividend
Dividend 10 Board has now concluded on the implementation of the Group’s progressive dividend policy Target for dividend of three times covered by 2015 Total dividend for 2012 (interim plus final) will be 5.5p per share, a 57% increase year-on-year Dividend cover to be improved progressively
Slide 11: Business Review
11 BUSINESS REVIEW Adrian Whitfield - Chief Executive Officer
Slide 12: Building On Our Strengths For Future Growth
Building On Our Strengths For Future Growth 12 Key Strengths Strategy STRUCTURAL STRONG MARKET POSITIONS Exposed to global mega trends No. 1 or 2 position in our markets High water content excludes “out of • No.1 Global Nitrile Latex producer region” competitors • No.2 Aqueous Polymer producer
Slide 13: Delivering On Our Strategy
Delivering On Our Strategy 13 Optimisation, Alignment and Scale + Free Cash Leverage “Capital” to Drive Net Debt Debt Reduction Flow Growth EBITDA PBT 4.0 * PBT - £96m # (FCF - £50 - £60m) 3.0 Synergy extraction Investing for growth PBT - £47m (FCF - £10m) Innovation 2.0 1.0 PBT - £31m (FCF -
Slide 14: Strategy - Synergy Delivery
Strategy - Synergy Delivery 14 140 140000 120 120000 100 100000 Operating 80 80000 Profit £’m 60 60000 40 40000 20 20000 0 0 2006 2007 2008 2009 2010 2011 *2012 Restated Underlying Group Operating Profit Europe and North America EBIT Asia and RoW EBIT * Underlying Group Operating profit Analyst cons
Slide 15: Strategy - Investing For Growth
Strategy - Investing For Growth 15 For the first time in its history the Group has the financial capability to drive aggressive organic growth Initial focus is to enlarge and optimise current assets Next steps will be to further expand geographic reach within Asia Strong customer pull for bo
Slide 16: Strategy - Investing In Innovation
Strategy - Investing In Innovation 16 One of the “soft” benefits of the PL acquisition was product / process “know how” AND state of the art R+D facilities Further enhanced R+D capability in Malaysia New high performance Nitrile grades in the pipeline as well as Functional Polymers and Constru
Slide 17: Europe and North America
Europe and North America 17 H1 2012 Excellent result in a very difficult environment Good margin management Full delivery of synergies despite weaker Euro H2 2012 Complete rationalisation of European network • Expansion of Stallingborough Dispersions • Anticipate closure of Batley (UK) Q1 20
Slide 18: Asia and Rest Of World
Asia and Rest Of World 18 H1 2012 Difficult trading within the Nitrile business • Period of slower demand growth • New latex capacity at competitors Non-Nitrile businesses continue to trade well • EBIT+18% H2 2012 Expansion of PG facility on schedule • NBR capacity available Q4 2012 • SBR capa
Slide 19: Nitrile Latex Market Development
19 NITRILE LATEX MARKET DEVELOPMENT Adrian Whitfield - Chief Executive Officer
Slide 20: Total Glove Market Growth Rate Of 9%
Total Glove Market Growth Rate Of 9% 20 Average annual growth 2000 - 2010 = 9% Source: Bank Negara Malaysia
Slide 21: Total Glove Market Growth Rate Of 9%
Total Glove Market Growth Rate Of 9% 21 Source: Top Glove
Slide 22: Geographic Glove Usage Trends – Strong Potential For Future Growth
Geographic Glove Usage Trends – Strong Potential For Future Growth 22 % 68% 32% USA and EU27, with only 11% of world population, consumed 68% of global glove usage Other regions, with 89% of world population, consumed only 32% of global glove usage Non EU/US grows from 25% to 32% 2000 - 2009 S
Slide 23: Nitrile Grows At The Expense Of Natural Latex
Nitrile Grows At The Expense Of Natural Latex 23 9000 8000 7000 6000 Million Pairs export from Malaysia 5000 4000 3000 2000 1000 0 USA/Canada Europe East Oceania South ASEAN West Asia Africa CIS Asia/South America Countries Asia 2011 Natural Rubber 2011 Synthetic Rubber Source: Malaysian Rubber Expo
Slide 24: Yule Catto Quarterly Market Survey – Subdued Growth 2011
Yule Catto Quarterly Market Survey – Subdued Growth 2011 24 700 600 500 Total NBR (Kwtes ) Annualised 400 N o 300 S u 200 r v e 100 y 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 Source: Company data NB: Excludes circa 30Kwtes per
Slide 25: Customers Planning For Future Growth
Customers Planning For Future Growth 25 "The NGC (Hartalega Next Generation Integrated Glove Manufacturing Complex ) project is set to begin in 2013 and is targeted for completion by 2021. Rolled out in two four-year phases, the first phase will run from 2013 to 2017 and we aim to commission 40 prod
Slide 26: Nitrile Latex Manufacturing Capacity
Nitrile Latex Manufacturing Capacity (annualised Kwtes) 26 Estimated 2011 consumption = 550 Kwtes Estimated 2012 consumption = 620 Kwtes Capacity (Kwtes) 2011 2012 Remark Synthomer 240 273 Zeon 92 92 Outsourcing? Nantex 119 136 Swing Capacity LG 36 130 Swing Capacity Kumho 60 70 Swing Capacity Hebei
Slide 27: Nitrile Latex Summary
Nitrile Latex Summary 27 The overall dynamics of the glove market have been positive for a sustained period of time and the major glove producers expect this to continue Nitrile latex has gained market share at the expense of natural rubber Yule Catto is the global market leader We have trie
Slide 28: Summary
Summary 28 In a challenging environment, most businesses performed well in H1 Europe achieved strong growth despite slower demand and weaker Euro Significant acquisition synergies being delivered, in line with increased target Nitrile Latex experienced reduced margins and volumes due to comp
Slide 29: Outlook
Outlook 29 Remain cautious on macro outlook and continue to manage business accordingly Nitrile market dynamics remain unchanged-still expected to be tough through 2013 Group continues to trade in line with guidance to deliver 2012 underlying PBT ahead of 2011 pro-forma Longer term, our cons
Slide 30: Interim Results
Interim Results 28th August 2012
Slide 31: Strategic Rationale For PolymerLatex Acquisition (December 2010)
Strategic Rationale For PolymerLatex Acquisition (December 2010) 31 Slide extracted from PolymerLatex Acquisition presentation in December 2010 Acquiring a leading emulsion polymers producer An excellent strategic fit Attractive returns and growth opportunities Accelerating our future strategy for g