Lanxess Ag · XETR:LXS
Lanxess — Q2 2010 Earnings Presentation
51 slides from Lanxess's earnings presentation, August 2010
Slide 1: LANXESS – Q2 2010 Results Roadshow
LANXESS – Q2 2010 Results Roadshow Strategic positioning yields strong results Matthias Zachert, CFO
Slide 2: Safe harbour statement
Safe harbour statement This presentation contains certain forward-looking statements, including assumptions, opinions and views of the company or cited from third party sources. Various known and unknown risks, uncertainties and other factors could cause the actual results, financial position, devel
Slide 3: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q2 2010 Outlook Chart 3
Slide 4: A leading specialty chemicals company based on three powerful segments
LANXESS – A leading specialty chemicals company based on three powerful segments LANXESS – Energizing Chemistry Performance Polymers Advanced Intermediates Performance Chemicals Globally No. 1-3 Europe No. 1-2 No. 1-4 in niches Global technology leader in synthetic Leading suppliers of custom sy
Slide 5: Consistent delivery of our strategy
Consistent delivery of our strategy 2004 2005 2006 2007 2008 2009 2010 Acquisition EBITDA* margin target Acquisition of Gwalior/India – a strategic fit in a growing market Acquisition of Jiangsu Polyols Chem. Co/China Purchase of Petroflex/Brazil, strengthening worldwide presence in synthetic
Slide 6: Headcount reduced by ~1,000 employees versus FY 2008
Excluding acquisitions, headcount reduced by ~1,000 employees versus FY 2008 Headcount development since 2003 Including ~800 HC LANXESS from Petroflex Headcount Including ~400 HC from Gwalior and Jiangsu Polyols 22000 20,423 20000 19,659 18,282 18000 16,481 16000 15,420 14,797 14,610 14,604 14,338 1
Slide 7: Portfolio management has continuously strengthened the company
Portfolio management has continuously strengthened the company - €1.5 bn of sales divested Divested Date Leadership Cyclicality Profitability Acquired Position Expectation Fibers 2005 Weak High Low Paper 2005 Moderate Moderate Medium Textile Processing Chem. 2006 Weak Moderate Medium Lustran Polymer
Slide 8: Improvement trend of financials, based on strategy implementation
LANXESS – Improvement trend of financials, based on strategy implementation In € m 2003 2004 2005 2006 2007 2008 2009 * pr o EBITDA 311 447 581 675 719 722 465 form Net financial debt 1,429 1,135 680 511 460 864 794 * a da Net fin. debt / EBITDA 4.6x 2.5x 1.2x 0.8x 0.6x 1.2x 1.7x ta o Gearing 128% 1
Slide 9: Latin America with strongest momentum in Q2 2010
Latin America with strongest momentum in Q2 2010 Sales by region [%] Sales trend by region [%] Germany EMEA (w/o Ger) North America LatAm Asia Asia Germany 18 40 23 20 Ø 2008 LatAm 13 -20 EMEA (without Germany) -40 North 29 America -60 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 17 Chart
Slide 10: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q2 2010 Outlook Chart 10
Slide 11: Mobility trend remains intact - global vehicle park continues to grow
Mobility trend remains intact - global vehicle park continues to grow Global light vehicle park shows sustained growth trend Increasing vehicle park: Global growth expected APAC around 3% Americas EMEA APAC with highest growth rates (approx. 5-7%) Americas and EMEA with lower 1 bn vehicles gro
Slide 12: Increasing radialization rate for truck tires in Asia
Transportation and mobility in Asia lead to an increasing radialization rate for truck tires All radial tyres contain a Halobutyl inner-liner Due to increasing transportation Radialization rate in Asia, truck tires gain more for truck tyres importance 80% China’s focus on improvement 70% of road
Slide 13: Planned capacity expansions of selected tire producers
Planned capacity expansions of selected tire producers- companies focus on BRIC markets Bridgestone Increase capacity in Thailand ~€75 m investment/ ~2.0 m tires/year Increase capacity in China ~€67 m investment/ ~1.3 m tires/year New plants in China and India ~€1.300 m investment New plant
Slide 14: World-wide rubber manufacturing network
Serving global markets with world-wide rubber manufacturing network Butyl Rubber Zwijndrecht, Belgium Sarnia, Canada Singapore (planned) Performance Butadiene Rubbers Port Jerome, France Dormagen, Germany Orange TX, USA Technical Rubber Products La Wantzenau, France Cabo, Brazil Dorm
Slide 15: New EU tire legislation will increase transparency of tire performance
New EU tire legislation will increase transparency of tire performance and thus reinforce high performance tire trend Labeling regulations Tire producers preparing for new requirements EU: as of November 2012, new tires will be labeled for - fuel efficiency Rolling resistance - wet grip Fuel effic
Slide 16: BU SCP's new technology reduces weight and improves performance of cars
BU SCP’s new technology reduces weight and improves performance of modern cars Durethan offers new design opportunities combined with reduced fuel consumption New components used in Durethan Citroen Picasso based on structural inserts Durethan with exceptional structural performance in tandem with
Slide 17: Investing in mega trend clean water for ION
Investing in mega trend “clean water” ensures long-term growth for ION Growing demand trend for clean water Population growth in Asia Purification of available water is Increasing urbanization mandatory to satisfy future demand Rising energy consumption New plant in Germany New plant in India
Slide 18: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q2 2010 Outlook Chart 18
Slide 19: Highlights Q2 2010: strong performance
Highlights Q2 2010: strong performance Business Update LANXESS benefits from strategic Strong sales growth at 48% year over year positioning: - Focus on premium products serving EBITDA pre at €269 m in Q2 2010 mega-trends - Flexible and competitive cost structure EBITDA pre margin at 14.7% -
Slide 20: Substantial volume and price increase – in tandem
Substantial volume and price increase – in tandem Q2 yoy sales variances Price Volume Currency Portf. Total Performance Polymers 37% 28% 7% 0% 71% Pricing power enables pass- through of raw material cost Advanced Intermediates 8% -3% 2% 7% 14% inflation: - Butadiene: >200% yoy Performance Chemical
Slide 21: Q2 2010 financials: another set of strong figures
Q2 2010 financials: another set of strong figures [€ m] Q2 2009 Q1 2010 Q2 2010 yoy in % Further yoy and sequential Sales 1,238 1,613 1,828 47.7% EBITDA increase, with demand EBITDA pre except. 112 233 269 >100% momentum driven by LatAm; margin 9.0% 14.4% 14.7% Asia with continued growth, offsetti
Slide 22: Strong demand meets a flexible and adjusted cost structure
Strong demand meets a flexible and adjusted cost structure [€ m] Q2 2009 Q2 2010 yoy in % Sales 1,238 (100%) 1,828 (100%) 48% Substantial sales increase driven Cost of sales -977 (79%) -1,354 (74%) 39% by both, prices (+19%) and volumes (+22%), supported by Selling -137 (11%) -162 (9%) 18% foreign
Slide 23: Performance Polymers: strong sales with very good margins
Performance Polymers: strong sales with very good margins [€ m] Q2 2009 Q1 2010 Q2 2010 Strong price and volume driven sales increase in all BUs Sales 559 828 958 Leadership positions of businesses lead to attractive margins EBIT 18 108 133 Significantly strengthened demand for rubber in LatAm
Slide 24: Advanced Intermediates: solid performer with good quarter
Advanced Intermediates: solid performer with good quarter [€ m] Q2 2009 Q1 2010 Q2 2010 SGO with stable prices while BAC increased prices Sales 285 320 324 substantially EBIT 27 31 46 Agro customers with ongoing high levels of inventory trigger volume decline Depr. / Amort. 11 13 14 Continued
Slide 25: Performance Chemicals: volume driven recovery of specialty chemicals
Performance Chemicals: volume driven recovery of specialty chemicals [€ m] Q2 2009 Q1 2010 Q2 2010 Volume driven sales improvement in all BUs as markets Sales 385 455 537 recover EBIT 29 62 67 Every business achieved higher earnings, with LEA, IPG and RUC being the strongest absolute contributor
Slide 26: Items to remember on IPG - market leader in inorganic pigments
Items to remember on IPG - market leader in inorganic pigments Excellent global market positions Construction Market (high double digit % market share) view True global player with global production and distribution network Mega trend urbanization: Long-term need for new housing Paint & Coatin
Slide 27: Strong balance sheet
Strong balance sheet [€ m] Dec 31, 2009 June 30, 2010 Dec 31, 2009 June 30, 2010 Non-current Assets 2,382 2,575 Stockholders’ Equity 1,445 1,622 Intangible assets 196 214 thereof minority interest 13 14 Property, plant & equipment 1,809 1,921 Non-current Liabilities 2,504 2,554 Equity investments 26
Slide 28: Improved business momentum reflected in healthy cash flow
Improved business momentum reflected in healthy cash flow [€ m] Q2 2009 Q2 2010 Profit before Tax 22 172 Significantly better profit before Depreciation & amortization 65 69 tax on stronger business activity Gain from sale of assets -11 0 Cash outflow for working capital Result from equity inves
Slide 29: Agenda
Agenda Strategy recap LANXESS – positioned to benefit from global growth trends Business and financial review Q2 2010 Outlook Chart 29
Slide 30: LANXESS is optimistic for 2010
LANXESS is optimistic for 2010 Current macro view Global markets have further stabilized, growth momentum in emerging markets while other regions improve with less momentum Positive business environment will continue, however the macroeconomic recovery remains fragile Raw material prices are e
Slide 31: LANXESS Energizing Chemistry
LANXESS nergizing Chemistry
Slide 32: Appendix
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Slide 33: Portfolio management allows regrouping of businesses along chemical segmentation
Portfolio management allows for regrouping of LANXESS businesses along chemical segmentation Performance Polymers Performance Polymers Advanced Intermediates Performance Chemicals Butyl Rubber Basic Chemicals Material Protection Products Performance Butadiene Rubbers Saltigo Inorganic Pigments Techn
Slide 34: Broad customer portfolio with varying demand patterns
LANXESS has a broad customer portfolio with varying demand patterns LANXESS sales distribution by industry, 2009 Others Agro Tire Construction Consumer Automotive Goods Chemicals Chart 34
Slide 35: Additional financial guidance
Additional financial guidance Additional financial information for 2010 Capex : ~€450-470 m Hedging 2010 : ~40% at 1.30-1.40 USD / EUR 2011 : ~25% at 1.30-1.40 USD / EUR Exceptionals : ~€20 m P&L expenses / one time costs Cash outs : ~€40 m for restructuring Challenge : additional expenses
Slide 36: Strong pick up in business activity
Strong pick up in business activity H1 yoy sales variances Price Volume Currency Portf. Total Performance Polymers 28% 49% 1% 0% 77% Strong pick up in volumes in tandem with prices Advanced Intermediates 4% 8% 0% 7% 19% Prices increase in line with increasing input costs Performance Chemicals -2
Slide 37: Strong demand meets a flexible and adjusted cost structure
Strong demand meets a flexible and adjusted cost structure [€ m] H1 2009 H1 2010 yoy in % Sales 2,292 (100%) 3,441 (100%) 50% Significant sales increase driven Cost of sales -1,834 (80%) -2,573 (75%) 40% by positive volumes (+35%) and price increases (+13%), Selling -251 (11%) -304 (9%) 21% suppor
Slide 38: Improved business activity reflected in healthy cash flow
Improved business activity reflected in healthy cash flow [€ m] H1 2009 H1 2010 Profit before Tax 1 316 Significantly better profit before Depreciation & amortization 128 135 tax on stronger business activity Gain from sale of assets -18 0 Cash outflow for working capital Result from equity inve
Slide 39: Performance Polymers: strong sales with very good margins
Performance Polymers: strong sales with very good margins [€ m] H1 2009 H1 2010 Strong price and volume driven sales increase in all BUs Sales 1,007 1,786 Leadership positions of businesses lead to attractive margins EBIT -6 241 Significantly strengthened demand for rubber in LatAm Depr. / Amo
Slide 40: Advanced Intermediates: solid and stable performer
Advanced Intermediates: solid and stable performer [€ m] H1 2009 H1 2010 SGO with stable prices while BAC increased prices Sales 543 644 substantially EBIT 62 77 Agro customers with ongoing high levels of inventory weigh on volume recovery Depr. / Amort. 22 27 Continued improved demand of non-
Slide 41: Performance Chemicals: volume driven recovery of specialty chemicals
Performance Chemicals: volume driven recovery of specialty chemicals [€ m] H1 2009 H1 2010 Volume driven sales improvement in all BUs as markets Sales 723 992 recover EBIT 50 129 Every business achieved higher earnings, with LEA, IPG and RCH being the strongest absolute contributors to Depr. / A
Slide 42: Raw material prices continued their rise in Q2 2010
Raw material prices continued their rise in Q2 2010 Global raw materials index* Since Q3 2009, raw material prices have consistently been [%] rising 170 160 LANXESS increased selling prices 150 140 Further raw material price increase is expected 130 120 110 100 90 80 70 Continuous rise of raw
Slide 43: Exceptional items incurred in Q2 2009 and Q2 2010
Exceptional items incurred in Q2 2009 and Q2 2010 [€ m] Q2 2009 Q2 2010 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 1 0 1 0 Advanced Intermediates 0 0 0 0 Performance Chemicals -1 0 0 0 Reconciliation 7 3 3 0 Total 7 3 4 0 Chart 43
Slide 44: Exceptional items incurred in H1 2009 and H1 2010
Exceptional items incurred in H1 2009 and H1 2010 [€ m] H1 2009 H1 2010 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers 1 0 2 0 Advanced Intermediates 0 0 0 0 Performance Chemicals 0 0 0 0 Reconciliation 10 3 5 0 Total 11 3 7 0 Chart 44
Slide 45: No major refinancing needs until 2012
No major refinancing needs until 2012 Long term financing secured Liquidity and maturity profile Maturity profile extended 2010 2011 2012 2013 2014 2015 2016 No major refinancing needs 600 Bond Bond until 2012 400 Dependency on banks further Short-term Bond 200 reduced facilities 0 -200 Synd.
Slide 46: Is LANXESS a swing producer?
Is LANXESS a swing producer? Tire manufacturers produce insufficient synthetic rubber for their captive use Rubber producing capabilities of selected tire manufacturers: Importance in LANXESS Michelin Goodyear Bridgestone Continental Pirelli Hankook portfoIlio major BTR none none none none none none
Slide 47: Does natural rubber cannibalize synthetic rubber?
Does natural rubber cannibalize synthetic rubber? Risk of substitution Low substitution risk High substitution risk BTR PBR1 S-SBR E-SBR NBR EPDM Overall, very limited substitution possibility 1 Nd-PBR Chart 47
Slide 48: Similar tire labelings are being proposed in several countries
Similar tire labelings are being proposed in several countries Proposed tire labels Europe U.S. Japan For fuel efficient tires For fuel efficient tires Chart 48
Slide 49: Abbreviations
Abbreviations Performance Polymers Advanced Intermediates BTR Butyl Rubber BAC Basic Chemicals PBR Performance Butadiene Rubbers SGO Saltigo TRP Technical Rubber Products SCP Semi-Crystalline Products Performance Chemicals MPP Material Protection Products IPG Inorganic Pigments FCC
Slide 50: Upcoming events 2010
Upcoming events 2010 Upcoming events Capital Markets Day September 15/16, 2010 Q3 Results 2010 November 10, 2010 Chart 50
Slide 51: Contact detail Investor Relations
Contact detail Investor Relations Oliver Stratmann Verena Simiot Head of Investor Relations Assistant Investor Relations Tel. : +49-214 30 49611 Tel. : +49-214 30 23851 Fax. : +49-214 30 959 49611 Fax. : +49-214 30 40944 Mobile : +49-175 30 49611 Mobile : +49-175 30 23851 Email : Oliver.Stratmann@la