Synthomer Plc · LSE:SYNT

Synthomer — Investor Day (November 2013)

60 slides from Synthomer's investor day presentation, Nov 19, 2013

1. Slide 1: Synthomer Investor Day Presentation Slides

   SYNTHOMER INVESTOR DAY PRESENTATION SLIDES NOVEMBER 19TH 2013

2. Slide 2: Investor Day: Agenda

   2 Investor Day : Agenda  Synthomer Strategy Adrian Whitfield, Chief Executive  Innovation Robin Harrison, Global Innovations Director  Europe : Centre of Excellence Christoph Breucker, VP-EMEA  Asia and RoW : Focus on Growth Derick Whyte, Chief Operating Officer

3. Slide 3: Synthomer Strategy

   Synthomer Strategy Adrian Whitfield – Chief Executive

4. Slide 4: Transforming Synthomer

   4 Transforming Synthomer SYNTHOMER IN 2006 SYNTHOMER IN 2012 Diversified portfolio Cohesive portfolio Multiple regional brands 7 divestments Single global brand 3 acquisitions £560 Million revenues generating £1.1 Billion revenues generating £31 M PBT# £ 98 Million of PBT# ROCE* 39% ROCE* 65% FCF (1

5. Slide 5: Delivering On Our Strategy

   Delivering On Our Strategy 5 Optimisation, Alignment and Scale + Free Cash Leverage “Capital” to Drive Net Debt Debt Reduction Flow Growth EBITDA PBT  Focus on aqueous  Acquired 4.0 Polymers PolymerLatex PBT - £98m (FCF - £55m)  Turnaround +  £402M disposal  7 x EBITDA 3.0  Synergy extraction

6. Slide 6: A global supplier with excellent market positions

   6 A global supplier with excellent market positions Geography Market Position  No.1 Globally Nitrile Latex  No.1 Globally speciality PVOH for PVC  No.1 European Carpet XSBR  No.2 European Paper XSBR  No.1 Dispersion supplier Malaysia  No.1 Dispersion supplier in Saudi Arabia Sales by Geography

7. Slide 7: Cohesive and complementary portfolio of businesses

   7 Cohesive and complementary portfolio of businesses  Aqueous Polymers (Except Performance Polymers) Relative Growth Potential  Formulated products  Bind and/or barrier layer Heath & Protection (HP)  Proximity to customers Construction and Coatings (CC) Performance  Natural barrier to “out of r

8. Slide 8: Global Megatrends underpin opportunities for growth

   8 Global Megatrends underpin opportunities for growth

9. Slide 9: Capital Deployment

   9 Capital Deployment  Anticipated through cycle capital expenditure to be in line with depreciation  Post PL acquisition Capex peaked as predicted to support synergy extraction and address existing capacity shortfalls  Capex hurdle rate is payback less than 5 years, or 12% IRR  Will maintain eff

10. Slide 10: Building On Our Strengths For Future Growth

    Building On Our Strengths For Future Growth 10 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

11. Slide 11: Synthomer Strategy

    11 Synthomer Strategy STRONG MARKET POSITIONS 1 • Demonstrates technical and commercial strength • Aligns Synthomer and market needs LEVERAGE EUROPE TO DRIVE EMERGING MARKET GROWTH • “Centre of Excellence” provides strong base to drive the rest of the 2 business • Re-invest European “Know How”, mark

12. Slide 12: Critical Actions in Europe & North America

    12 Critical Actions in Europe & North America  Medium Term Objective: Organic through cycle growth that is at least in line with regional GDP  Critical Actions: - Global centre for product and process innovation - No.1 or No.2 position in target markets - Synthomer’s “Centre of Excellence” - Safet

13. Slide 13: Critical Actions in Asia & RoW

    13 Critical Actions in Asia & RoW  Medium Term Objective: Organic through cycle growth that is ahead of regional GDP PLUS “Bolt-On” acquisitions  Critical Actions: - Leverage European IP and “know how” - Build highly competent Asian management team - Local Engineering resource to build, expand and

14. Slide 14: Innovation

    14 Innovation  Lifeblood of the business  High quality R+D is essential for supporting today’s products and processes AND those for the future  Our product range needs to be based on global megatrends and Synthomer’s own strengths  We will continue to develop and support a broad range of aqueous

15. Slide 15: Innovation

    Innovation Dr. Robin Harrison NOVEMBER 2013

16. Slide 16: How Innovation Enables the Synthomer Vision

    16 How Innovation Enables the Synthomer Vision  Support our target customers by providing solutions that add value to their formulations and products  Drive growth by delivering a pipeline of value enhancing new products  Actively manage our project portfolio to balance product line enhancement,

17. Slide 17: Strategic Environment: Global Megatrends and Innovation Opportunities

    17 Strategic Environment: Global Megatrends and Innovation Opportunities  Continued move to water-based systems Demo- graphic change  Environmental legislation adoption in Asia Sustainability Health awareness and other emerging markets, e.g., emissions Climate Increasing  New building technology

18. Slide 18: Defining and Delivering Innovation Through Market Intelligence and Technology

    18 Defining and Delivering Innovation Through Market Intelligence and Technology Market Intelligence Innovative Applications Products Know-how Emerging Customer Needs Intellectual Technology Property Trends Technology Development

19. Slide 19: Global Technology Organisation

    19 Global Technology Organisation  Centres of Excellence – Marl, Germany – Harlow, UK – Kluang, Malaysia – Shanghai, China  ca. 200 Technology Staff – R&D Leadership team with 100+ years’ experience and strong track record of delivery – 20% of R&D staff with PhD  R&D co-located with applications

20. Slide 20: Extensive External Network for Next Generation Technology and IP

    20 Extensive External Network for Next Generation Technology and IP Collaborative Projects in a range of Polymer Technologies Corporate partner of Europe's biggest Building links in South East Asia chemical society

21. Slide 21: Innovation Pipeline Focused on Adjacent Market Segments and Technologies

    21 Innovation Pipeline Focused on Adjacent Market Segments and Technologies New Higher Existing Technologies New Markets for Markets Risk New Technologies for Existing Markets Existing New Technologies

22. Slide 22: Rigorous Cross-Functional Stage Gate Process

    22 Rigorous Cross-Functional Stage Gate Process Enhancing Performance through  Strong business case Innovation in Europe  Best technology solution of coatings sales from  Continued customer engagement 21% products <5 years old  Fast delivery of value added solutions Driving Growth through  Mana

23. Slide 23: Innovation Projects Pipeline Overview

    23 Innovation Projects Pipeline Overview Go / Kill Go / Kill Concept Develop Launch Profitability 2-3 years 12 to 18 months 1 to 6 months Today Q K E A L G Mars Pluto J C P F Jupiter Earth N B I D H O M Based on current active project portfolio (Top 20 projects) Bubble size banded according to proje

24. Slide 24: Latex/Bio-polymer Hybrids for Sustainable Business Growth

    24 Latex/Bio-polymer Hybrids for Sustainable Business Growth Pluto Business Opportunity  Mega-trend towards renewable raw materials New  Wide range of applications / market opportunities Markets  Optimise Cost ↔ Performance balance Existing New Technologies Concept  Extension of core emulsion po

25. Slide 25: Lithene Ultra Environmental and Applications Performance

    25 Environmental and Applications Performance in Speciality Polymers - Lithene Ultra® Earth Business Opportunity  Increased legislation to reduced emissions New  Automotive trend towards lighter materials Markets  Range of high value segments become accessible Existing New Technologies Concept 

26. Slide 26: High Performance Binders for Chopped Strand Mat

    26 High performance Binders for Chopped Strand Mat Polyester Composites Mars Business Opportunity  Increased use of composite materials in many end uses New  Strong manufacturing growth in emerging markets Markets  New market segment for Synthomer Existing New Technologies Concept  Use of core V

27. Slide 27: Next Generation of NBR Latex for Examination Gloves

    27 Next Generation of NBR Latex for Examination Gloves Jupiter Business Opportunity  Significant growth in examination glove market New  Continued trends towards thinner, softer gloves Markets  Glove dipping process changing and running faster Existing New Technologies Concept  Step change perfo

28. Slide 28: Delivering Growth Through Technology Development and Product Innovation

    28 Delivering Growth Through Technology Development and Product Innovation  Dynamic global organisation with extensive innovation network  State of the art equipment and high calibre staff  Effective management of the product development pipeline  Excellent core technology with next generation p

29. Slide 29: Europe: Centre of Excellence

    EUROPE : CENTRE OF EXCELLENCE Christoph Breucker NOVEMBER 2013

30. Slide 30: Europe

    30 Europe  Medium Term Objective: Organic through cycle growth that is at least in line with regional GDP  Critical Actions: - Global centre for product and process innovation - No.1 or No.2 position in target markets - Intimate customer service - Lowest possible production and delivery costs - Sy

31. Slide 31: Europe: Synthomer's Engine Room

    31 Europe : Synthomer’s Engine Room Turnover 58 % 59 % People 81* % EBIT *H1 ENA 2012 by origination

32. Slide 32: Europe: Key Statistics

    32 Europe : Key Statistics  Market Positions - No.1 XSBR supplier to the Carpet Market - No.1 HSSBR producer (Carpet and Foam) - No.2 XSBR supplier to the Paper Market - No.1 Speciality PVOH producer to the PVC Market - No.3 Dispersions producer  General - 13 plants - 1100 employees (~170 Technica

33. Slide 33: Europe: Key Enablers

    33 Europe: Key Enablers Active Margin Management  Market intelligence  Improved forecasting and planning  Active management of pricing High Customer Service Levels Safety – Health - Environment  Zero-defect mentality  Best in class Recordable Case Rate  Service oriented mind set &  High level

34. Slide 34: How do we deliver excellence?

    34 How do we deliver excellence?  A broad range of incremental improvements across ALL parts of our business  Impossible to talk about every change  BUT we can show a number of examples

35. Slide 35: Safety Health and the Environment (SHE) – Our Licence to Operate

    35 Safety Health and the Environment (SHE) – Our Licence to Operate Energy Consumption (GigaJoules used per production tonne) 6,00 5,57 5,09 4,76 5,00 4,50 4,24 4,194,13 4,00 4,76 4,52 4,52 4,12 3,91 3,64 3,00 3,33 2,83 2,94 2,00 2,63 2,54 (187%) (510%) 1,00 0,00 2000 2001 2002 2003 2004 2

36. Slide 36: Cost Leadership and Future Planning: Re-aligning the Asset Base

    36 Cost Leadership and Future Planning : Re-aligning the Asset Base  Minimise unit production cost  Optimise logistics  Plant flexibility AND capability improvement  Flexible raw material supply base  Ongoing drive to World Class performance

37. Slide 37: Energy Efficiency: New Stripping Process in Marl

    37 Energy Efficiency: Target 25 % reduction by 2020 (~ €5M) Example: New “Stripping” process in Marl/Germany Development of specific steam consumption 1,0 Specific steam consumption 0,9 0,8 0,7 0,6 Old method 0,5 New method 0,4 Dez 11 Apr 12 Jul 12 Okt 12 Jan 13 Mai 13 Aug 13 Nov 13

38. Slide 38: Material Efficiency: Saving raw materials and increasing output

    38 Material Efficiency: Saving raw materials and increasing output Example : Langelsheim (Germany)  Special task force with external support  Target: yield increase from 97,8% to 99,5%  Already planned for 2014: - + 400.000 €/a Yield increase (98,1%) - + 100,000 €/a Styrene recovery - + 200,000 €

39. Slide 39: Business Excellence: Distribution Management

    39 Business Excellence : Distribution Management Improved Service with Reduced Costs + Working Capital  Dedicated distribution management installed  Hand over C-customers – reduce service costs and focus “in-house” resources  Established a network of ~ 40 Distributors across EMEA  Only AAA rated

40. Slide 40: Business Excellence: Customer Intimacy in the Paper Industry

    40 Business Excellence: Customer Intimacy in the Paper Industry  Situation: - Just in time - Short term orders - Ad hoc changes in deliveries - Production problems – forwarder issues  Service offer: - 24/7 logistic hotline for paper customers - Emergency cell phone - Special procedure agreed with

41. Slide 41: Innovation: Transfer Ideas into Cash

    41 Innovation: Transfer Ideas into Cash Bio-Polymers in Oulu/Finland  Lab trials: Q2/2012  Pilot trials from production material: Jan 2013  Investment approved/started: 03/2013  First batch produced: 10/2013  Full mill trials at customer: Q4 /2013  Continuous deliveries: Q1/2014  Investment:

42. Slide 42: Europe: Summary

    42 Europe: Summary  Centre of Excellence  Synthomer‘s engine room  Good track record of improvements  The hub to support Asia and Middle East with • Products • Technology • Expertise

43. Slide 43: Asia & RoW: Focus on Growth

    ASIA & ROW: FOCUS ON GROWTH Derick Whyte NOVEMBER 2013

44. Slide 44: Emerging Markets are driving growth

    Emerging Markets are driving growth 44  Asia is home to 58% of the world’s population - 4 billion people and growing ~2%pa - GDP growth significantly outpaces the developed markets  Urbanisation continues and middle classes grow - 12 of the world’s 23 megacities(>10 M) are in Asia, growing to 21 b

45. Slide 45: Asia driving chemicals demand

    Asia driving chemicals demand 45 Chemical Sales in Asia 2010 3500 7% 19% Asia 3000 Europe 49% NAFTA 2500 Row 25% Sales $ Billion Market €2.353 Trillion 2000 1500 2030 7% 1000 12% Asia Europe 500 15% NAFTA 66% 0 Row 1985 2010 2030FC Market €4.637 Trillion Source: AT Kearney Chemical Industry Vision 2

46. Slide 46: Synthomer's markets will grow driven by demand

    46 Synthomer’s markets will grow driven by demand Region Synthomer Markets 9.0  All Asian markets are forecast 9.0 to grow overall at 9% but at +9% different country rates +9% Others 7.0  Synthomer SBU’s are aligned 7.0 +15% to take advantage of the Dipping priority growth segments +8% - Health &

47. Slide 47: Synthomer's ability to leverage the growth

    47 Synthomer’s ability to leverage the growth ESTABLISHED PRESENCE IN KEY MARKETS  Geography-SEA and Middle East based for many decades, growing presence in China  Leadership positions in key geographic and products markets - Saudi/ S E Asia /Gloves/ Coatings/Adhesives  Proximity to customers – b

48. Slide 48: Synthomer Capability in Asia

    Synthomer Capability in Asia 48  Long heritage- established in South East Asia late 1800’s in Natural Rubber  Today we employ over 600 people in 6 locations in Malaysia, Vietnam & China  We have significantly expanded Dispersions and Latex since 2007 Malaysia  Technical Centres established in Ma

49. Slide 49: Dipping market driving NBR latex growth

    Dipping market driving NBR latex growth 49 Global Glove Market Billion Pieces 170  World Demand for examination gloves 165 Billion pieces growing at an average 8% pa 150 130  Driven by - Increased healthcare requirements 110 o greater protection & hygiene o aging population 90 o regulation 70 50 2

50. Slide 50: NBR demand has strong drivers for long term growth

    NBR demand has strong drivers for long term growth 50  Today - Total glove consumption in the developed Per capita consumption* markets are the core 160 o Asia<5 pcs, US ~149 pcs F o Future- underlying consumption is secure with 140 demographics and increasing healthcare driving glove usage in emer

51. Slide 51: NR switch to NBR trend continues

    NR switch to NBR trend continues 51  Globally NR remains the larger segment  In the US, the most developed market, 74% is NBR  EU will continue to move towards NBR but today at < 50% World US 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% NBR 50% NBR NR NR 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 201

52. Slide 52: Synthomer's locational benefit

    52 Synthomer’s locational benefit Glove Producers  >60% of global glove production is located in Malaysia Thailand  Synthomer has the only NBR production in 18% China/Taiwan Malaysia delivering logistical and locational 11% benefits Indonesia Malaysia 3% 62% Sri Lanka 3% USA +Mexico 2% India/Pakis

53. Slide 53: Meeting customer needs through expansion and innovation

    Meeting customer needs through expansion and innovation 53  Meeting Needs – Delivering Confidence Synthomer Capacity - Strong Market growth drives customers capacity 350 expansions - Demands for innovation to meet market challenges e.g. thickness, additive etc. 300  Investing to meet demand 250 -

54. Slide 54: Driving Dispersions

    Driving Dispersions 54  Asia - 2013 accounts for 35% of world market for dispersions & latex, set to grow to 39% by 2016 Dispersions & Latex Asia - Many diverse applications but 64% of Dispersions & Latex in Asia o Coating & Construction 24% o Adhesives Construction & 36% - Segments growing 6-7% Co

55. Slide 55: Core Dispersions markets continue to grow

    Core Dispersions markets continue to grow 55  Coatings** Consumption per capita (kg)* - Asia now represents 40% of global coating 25 market 20 - China >60% of demand in Asia but low 15 consumption per capita versus developed 10 markets 5 - Deco/Wood/Industrial ~40% 0 - Global and Regional Players g

56. Slide 56: Dispersions Success Factors

    Dispersions Success Factors 56  Proximity o Water content favours local production and proximity to customers o Volume aligned to meet local requirements to underpin customer growth  Customer Development o Leverage of strong MNE & Regional customers o Intimacy & relationships  Technology o Local

57. Slide 57: Dispersions platforms for growth

    Dispersions platforms for growth 57  Proximity - Established clear No1 position in SEA Capacity Development - Capacity supported customer and market 80 growth - Saudi capacity has expanded by over 60% 70 - Expansion has allowed development in new territories – Vietnam, and SEA Exports to seed 60 ne

58. Slide 58: Driving Dispersions growth through Product & Innovation transfer

    58 Driving Dispersions growth through Product & Innovation transfer FIRE PROTECTION COATINGS LOW VOC PREMIUM DECO PAINT ANTI CORROSIVE DECO PAINT Emultex FR 728 Revacryl R 4370 Revacryl R 5530 Meeting needs and delivering performance FLEXIBLE CEMENT MEMBRANE UV RESISTANT COATINGS Plextol D 549 Plext

59. Slide 59: Strengthening Human Capital

    59 Strengthening Human Capital  Building organisational competence Dennis McCullough VP SEA o Increased Leadership experience and depth (Bayer) o Functional specialist recruits to drive functional excellence Andrew Lanham Nora Ismail SBU Director H&P HR Director o Engineering and Operations to supp

60. Slide 60: Synthomer positioned for growth

    Synthomer positioned for growth 60  Emerging Markets offer growth opportunities - Demographics & Megatrends support our market expertise and chemistry capability  Synthomer is well positioned to take advantage of the growth - Building on strong regional foundations in SEA to bridge into other mark

Synthomer — Investor Day (November 2013) on 6ix