Solvay Sa · EURONEXT:SOLB
Solvay Sa — Q2 2014 Earnings Presentation
57 slides from Solvay Sa's earnings presentation, Jul 31, 2014
Slide 1: Q2 2014 results
Q2 2014 results FORENOTE All 2013 data are restated for comparison purposes for the Group’s application of IFRS 11 effective January 1st 2014. Furthermore, Solvay presents July 31, 2014 Adjusted Income Statement performance indicators that exclude non-cash Purchase Price Allocation (PPA) accounting
Slide 2: Sustained earnings growth momentum
Sustained Earnings growth momentum Solid demand dynamics Particularly at innovation-driven Growth engines Strong Chemlogics contribution Strong set of results Strong operating leverage offset forex headwinds and CER phase out • REBITDA +10% YoY Excellence programs momentum continued Sustaine
Slide 3: Q2 2014 financial highlights
Strong set of results Q2 2014 financial highlights € 2.6 bn +2% € 485 m +10% yoy yoy Net Sales REBITDA Organic volume growth, despite CER phase-out Solid demand dynamics further strengthened by Strong Chemlogics contribution excellence momentum Stable pricing Sustained pricing power Infl
Slide 4: Redeployment for Value
Strategic portfolio management pursued Initiated divestitures nearing completion Chlorovinyls exit Eco Services exit Inovyn™ JV creation by YE 2014 Sale to CCMP Capital • Conditional approval received from EU • Sulphuric acid virgin production and anti-trust authorities regeneration business in US •
Slide 5: Demand and excellence momentum underpinning solid REBITDA growth despite headwinds
Demand and excellence momentum underpinning solid REBITDA growth despite headwinds Net Sales REBITDA Net pricing in € m in € m 84 (101) €4m 19 (16) 9 485 81 (4) 2,640 9 5 24 (4) 2,582 Volume Others Conversion Price 440 Fixed forex Volume Conversion Price Variable costs (including Scope forex costs e
Slide 6: Broad performance delivery across businesses
Broad performance delivery across businesses in € m Strong Chemlogics and Record performance 16% 187 161 29% 119 volume growth largely underpinned by innova- 92 offset forex and weak tion-driven volume growth performance in Coatis and operational efficiency Q2 2013 Q2 2014 Q2 2013 Q2 2014 35% 22% Ad
Slide 7: Result from continued operations increased by 31%
Result form continued operations increased by 31% Adjusted Profit & Loss statement in € m Q2 2014 Q2 2013 Other elements Net sales 2,640 2,582 • € 13 m impact of Ruble evaluation on debt Rusvinyl REBITDA 485 440 • € (2) m holdback payments at Chemlogics Other elements 11 (1) Non-recurring costs Depr
Slide 8: Net debt increase in line with seasonal dividend and interest payment patterns
Net debt increase in line with seasonal dividend and interest payment patterns Net debt* evolution in € m (171) 91 8 (1,644) (158) FCF € 89 m (1,459) 359 Other Changes in (43) Dividends changes net debt (81) (9) in net debt attributable (181) to assets Net FCF of Aquisitions financial held for sale
Slide 9: Working capital needs in line with demand and industrial cycle
Working Capital needs in line with demand dynamics and industrial cycle Industrial working capital % of gross sales 16% 15.6% 15.4% 15.1% 15.0% 14.9% 15% Average 2014 Average 2013 15.2% 14% 14.6% 12.8% Target 13% 12.5% - 13.5% 12% 11% 10% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Historical fi
Slide 10: Selective investments for value
Selective investments for value Capex (continuing operations) Selective investments In € m focused on 765 ~850 700-800 superior growth areas 320 Q4 Q3 HDS Silica PVC 158 Q2 181 154 Specialty surfactants Vanillin HPPO Q1 133 166 Alkoxylation Fluoro-polymers 2013 2014 Guidance Bicarbonate 2014-2016 Al
Slide 11: Larger on-going investment projects
Larger on-going investment projects Novecare Specialty Surfactants plant in Germany Aroma Performance Vanillin plant in China Specialty Polymers Fluoro-polymers JV with 3F Silica HDS plant in Poland 2014 85 ktonnes/year PVC plant in Russia (in JV with Sibur) Expected commissioning Rusvinyl
Slide 12: A sound and more efficient balance sheet
A sound and more efficient balance sheet Capital structure Optimising Balance Sheet efficiency (30/06/2014) in € bn Total equity in € bn 6.9 Hybrid bond (3.6) 1.2 Other Gross debt (0.5) (2.8) (2.8) HY bonds (0.8) Other (0.8) Other Net debt (1.0) (1.0) (0.5) (1.6) Equity 5.7 (1.3) (0.5) Major Major L
Slide 13: Encouraging H1 underpins confidence
2014 outlook re-iterated Solvay expects Encouraging high single-digit REBITDA growth H1 underpins at current perimeter* confidence & prevailing forex exchange rates * Reflects eventual restatement in 2013 and 2014 reference periods for the discontinuation of Eco Services Q2 2014 results 13 31/07/201
Slide 14: 2014 Priorities
Transformation continues • Complete initiated portfolio upgrades 2014 • Grow with our customers • Sustain focus on excellence Priorities • Deliver profit growth Asking more from chemistry Q2 2014 results 14 31/07/2014
Slide 15: Take-aways
Take-aways Inflection point Progress on Poised in demand all fronts for growth On track towards REBITDA to reach CFROI to increase by € 2.3 – 2.5 bn* > 100 bp vs 2013** REBITDA margin to reach 18% 2016 2/3 of businesses in value-creation zone * At constant perimeter ** Prior to discontinued operatio
Slide 16: Safe harbour
Safe harbour To the extent that any statements made in Consequently, actual results may differ this presentation contain information that is materially from those expressed or implied by not historical, these statements are such forward-looking statements. Forward- essentially forward-looking. The a
Slide 17: Annexes
Annexes • Additional Q2 and H1 2014 financial data • Additional FY 2014 considerations • 2016 ambitions • Segment presentation Q2 2014 results 17 31/07/2014
Slide 18: Balance sheet and Q2 cash flow statement
Balance sheet Q2 Cash flow statement in € m 30/06/2014 31/12/2013 in € m Q2 2014 Q2 2013 Fixed assets 9,780 9,732 Cash flow from operating 293 212 activities Investment & shares 825 735 Cash flow from investing Loans & other non current (289) (163) activities financial receivables / 23 84 Cash flow
Slide 19: H1 income statement and cash flow statement
H1 Income statement H1 Cash flow statement (adjusted) in € m H1 2014 H1 2013 in € m H1 2014 H1 2013 Cash flow from operating Net sales 5,192 5,098 390 357 activities REBITDA 953 862 Cash flow from investing (511) (332) activities Other elements (5) - Cash flow from financing (738) (526) Depreciation
Slide 20: Demand and excellence momentum underpinning REBITDA growth
Demand and excellence momentum underpinning REBITDA growth Net Sales REBITDA in € m in € m Net pricing 56 (31) €9m 31 - 6 953 (22) 149 (209) 52 176 (22) 5,192 Fixed Others 5,098 Conversion costs (including 862 Volume forex Price Variable Volume Conversion equity Price costs Scope forex earnings) Sco
Slide 21: Net debt increase in line with seasonal patterns
Net debt increase in line with seasonal patterns Net debt* evolution in € m (282) 51 (5) (1,644) Other Changes in FCF € (8) m (211) changes net debt in net debt attributable Dividends to assets (338) 53 (46) (1,141) 625 held for sale Net FCF of Aquisitions financial (347) disc ops & divest- charges
Slide 22: Lower rates led to slight pension liability increase
Lower rates led to slight pension liability increase All presented figures are for continued operations only Pensions (30/06/2014) in € bn Net pension Net pension liability denominated liabilities for 76% in EUR (2.7) Pension liabilities (4.7) Discount rates* decreased Pension assets 2.0 31/12/2013
Slide 23: Annexes
Annexes • Additional Q2 and H1 2014 financial data • Additional FY 2014 considerations • 2016 ambitions • Segment presentation Q2 2014 results 23 31/07/2014
Slide 24: REBIT(DA) considerations for 2014
REBIT(DA) considerations for 2014 Forex impact Rusvinyl ramp-up FY YoY impact expected of € (60) – (65) m PVC JV in Russia at prevailing rates Pre-operational charges linked to impact on H1 YoY impact of € (53) m JV debt of ruble/euro fluctuation with H1 impact of € 2 m More than half conv
Slide 25: Financials considerations for 2014
Financials considerations for 2014 Cost of net indebtedness Discounting cost on provisions Debt repayments Recurring FY cost of € (120) – (130) m, € 1,300 m in H1 2014 (including HY bonds) provided no change in discount rates* € 500 m in June 2015 during year Lead to a reduction of net int
Slide 26: Other considerations for 2014
Other considerations for 2014 Depreciation & amortization Discontinued operations Recurring Depreciation & Amortization Expected to reach completion in 2014 H1 cost of € (321) m Indupa sale to generate ~ € (60) m* currency FY cost expected of ~ € (650) m translation adjustments at deal clo
Slide 27: Annexes
Annexes • Additional Q2 and H1 2014 financial data • Additional FY 2014 considerations • 2016 ambitions • Segment presentation Q2 2014 results 27 31/07/2014
Slide 28: Solvay, a major global chemical player
Solvay, a major global chemical player Based on strengths € 10.0 bn 117 Net Sales Industrial sites Well-balanced geographical spread and end-user markets € 1.7 bn 15 REBITDA Major R&I centers Leading player in 90% of our businesses 17% 29,400 REBITDA margin Employees (EFTEs) Strong R&I portfolio € 3
Slide 29: Well-balanced geographical spread and end-user markets
Well-balanced geographical spread and end-user markets Balanced Exposure to geographic exposure* higher growth end-markets* Aeronautics & Automotive North Europe 17% America 33% Consumer Goods & Healthcare 25% 25% Agro Food 12% Asia Pacific & RoW Energy & Environment 31% 11% Latin America Building 1
Slide 30: 90% of our business ranking among top 3 players
90% of our business ranking among top 3 players 1 ADVANCED FORMULATIONS Specialty surfactants Diphenols PERFORMANCE CHEMICALS Hydrogen peroxide Soda ash Phosphorus Bicarbonate chemistry ADVANCED High-performance Fluorinated Rare earth MATERIALS engineering polymers formulations polymers & compounds
Slide 31: Strong innovation portfolio aligned with global megatrends
Strong innovation portfolio aligned with global megatrends Focused innovation fields 2013 Climate change Advanced 15 Major R&I sites worldwide materials Resource scarcity 1,950 R&I staff Health € 280 m Advanced & well R&I efforts formulations being Renewable chemistry 22% New sales ratio Next billio
Slide 32: Converting vision into value
Converting vision into value Our vision Our strategy Our 2016 ambition REBITDA to reach € 2.3 – 2.5 bn* • Reinforcing business • Build a strong global profile through strategic REBITDA margin to reach 18% leader in the chemical portfolio changes industry • Striving for excellence across businesses C
Slide 33: Solvay's ability to execute strategic action plan
A business portfolio change Executing our strategic action plan 2010 2011 2012 2013 Pharma divestiture Rhodia acquisition INTEGRATION TRANSFORMATION To enhance our business profile Integration & definition Chlorovinyls Europe JV of new strategic priorities announcement to extract value Solvay’s abil
Slide 34: REBITDA growth supported by strong operational levers
REBITDA growth supported by strong operational levers REBITDA > 10% CAGR 2.3 – 2.5 in € bn Inflation Operational Organic Innovation Portfolio excellence growth 0.3 1.7 Chemlogics 0.3 (10 months) (0.3) 0.3 Market growth Manufacturing Variable Overall Excellence Innovation & fixed cost Equipment Excel
Slide 35: Enhanced quality of earnings across segments
Enhanced quality of earnings across segments with differentiated levers throughout our businesses REBITDA > 10% CAGR 2.3 – 2.5 in € bn Functional Corporate Polymers & Energy Performance Chemicals 1.7 Advanced Materials Chemlogics Advanced Restoring Formulations (10 months) profitability Mid-single d
Slide 36: Unlocking value by increasing CFROI and REBITDA margin
Unlocking value by increasing CFROI and REBITDA margin 2012 2016 WACC Premium WACC Premium REBITDA margin REBITDA margin return return 30% 30% CFROI to increase by 20% 20% 100bp 10% REBITDA margin 10% to reach 1/3rd of 2/3rd of total assets 18% total assets 0% 0% 0% 6% 12% 18% 0% 6% 12% 18% CFROI CF
Slide 37: Focused on being a model of sustainability
Focused on being a model of sustainability taking commitments Reach excellence in safety & health Deploy unmatched sustainable portfolio Planet management Reduce our impact on environment by 2020 Customers Energy consumption Water emissions** Investors Greenhouse gas emissions Groundwater cons
Slide 38: Targeting Sustainable Value Growth
Executing a clear value creation strategy Towards a higher growth, improved cash generation & enhanced returns Chemical Group Targeting Sustainable Value Growth Q2 2014 results 38 31/07/2014
Slide 39: Annexes
Annexes • Additional Q2 and H1 2014 financial data • Additional FY 2014 considerations • 2016 ambitions • Segment presentation Q2 2014 results 39 31/07/2014
Slide 40: Organization set-up
Organization set-up Executive Committee Strengthened Corporate Advanced Advanced Performance Functional & Business Formulations Materials Chemicals Polymers Services Strategic Growth Resilient cash Restoring Efficient priorities engines flow generation profitability Support REBITDA growth +++ +++ +
Slide 41: Organized in Global Business Units
Organized in Global Business Units Advanced Materials Performance Chemicals Functional Polymers Corporate & Business Services Advanced Formulations Novecare Specialty Soda Ash & Polyamide Solvay Energy Polymers Derivatives Services Aroma Silica Peroxide P&I Corporate Performance Functions Engineerin
Slide 42: Advanced Formulations
Advanced Formulations 2013 € 2,432 m € 369 m Figures Net Sales REBITDA 65% Aroma Novecare Novecare Coatis Performance Net sales Coatis by GBU Aroma Performance As one of Solvay’s growth engines, the 15% 20% businesses grouped under Advanced Formulations stand out for their innovation capacity and lo
Slide 43: Advanced Formulations 2014 Q2 performance
Advanced Formulations 2014 Q2 performance Strong Chemlogics and volume growth largely offset forex and weak performance in Coatis Net sales H1 2014 Novecare 71% • Good dynamics in Oil & Gas market through customer € 1,388 m 15% yoy recognition of Solvay’s product portfolio and capabilities Q2 2014 Q
Slide 44: Novecare
Novecare Cutting-edge technologies in diversified focused markets SELECTED MARKETS Home & Agro Oil & Gas Coatings Industrial TECHNOLOGY Personal Care 50% SURFACTANTS 30% POLYMERS PHOSPHOROUS 10% DERIVATIVES SPECIALTY 10% AMINES % of Novecare sales in 2013 (pro forma Chemlogics) Q2 2014 results 44 31
Slide 45: Advanced Materials
Advanced Materials 2013 € 2,551 m € 646 m Figures Net Sales REBITDA 50% Specialty Polymers Specialty Rare Earth Special Polymers Silica Systems Chemicals Silica Net sales by GBU Rare Earth Systems 22% 16% A leader in markets with high entry barriers Special Chemicals 12% and strong returns on invest
Slide 46: Advanced Materials 2014 Q2 performance
Advanced Materials 2014 Q2 performance Record performance beat underpinned by innovation-driven volume growth and operational efficiency Net sales H1 2014 Specialty Polymers 54% € 1,329 m • Volume growth across all regions and most end markets 2% yoy Q2 2014 Q2 • Demand momentum in Automotive, Indus
Slide 47: Specialty Polymers: focused on the most advanced products
Specialty Polymers Focused on the most advanced products Temperature resistance Chemical inertness Price Performance Weathering resistance Corrosion protection Water repellence Stain repellence Electrical inertness Non-flammability Fatigue resistance Biocompatibility Extractables Self-cleaning Trans
Slide 48: Specialty Polymers
Specialty Polymers Industry leader with the broadest product portfolio Cross- linkable Aromatics Fluoropolymers High-barrier polymers com- pounds LCP HPPA PEEK PAI PSU PTFE PVDF PFA FKM PFPE PVDC XLCP Broadest portfolio + Innovation leader = Best solution provider Q2 2014 results 48 31/07/2014
Slide 49: Silica
Silica Highly Dispersible Silica (HDS) delivers value to the tire industry Excellent technical performance … … growing across a number of applications Rolling Resistance In passenger car and light trucks 125 + 25% 120 • Energy-efficient tires 110 • Winter tires with HDS 100 • Sport tires 90 Carbon-B
Slide 50: Performance Chemicals
Performance Chemicals 2013 € 3,189 m € 766 m Figures* Net Sales REBITDA Soda Ash Emerging 53% Soda Ash& Eco Bio- Peroxides Derivatives Peroxides Acetow Services** chemicals Net sales Acetow 17% by GBU 18% 11% Eco-Services Operating on mature resilient markets, this 26% Emerging Biochemicals Segment’
Slide 51: Performance Chemicals 2014 Q2 performance
Performance Chemicals 2014 Q2 performance Pricing power and volume growth offset by fixed cost inflation and forex Net sales Soda Ash & Derivatives Net sales H1 2014 • Demand up in Europe and export market up 42% € 1,580 m • US production affected by logistics disruption 0% yoy • Prices up overall Q
Slide 52: Soda Ash & Derivatives
Soda Ash & Derivatives Cost is a key success factor in the soda ash industry Average FOB cash cost Natural Synthetic process process Freight & logistics costs Production costs EU 1st CIS North East Asia Turkey China Africa US “Green River” tier EU 2nd tier India Baltics (“Solvay” and “Hou” processes
Slide 53: European soda ash supply/demand to improve in next 3 years
Soda Ash & Derivatives European soda ash supply/demand to improve in next 3 years 2014-2016 2017-2019 Restructuration started with Kazan project closure announcements Potentially adding 2.5 mt/yr production capacity Solvay Povoa (0.2 mt/yr) Based on natural production process Tata Winnington
Slide 54: Functional Polymers
Functional Polymers 2013 € 1,763 m € 93 m Figures Net Sales REBITDA 88% Polyamides & Engineering PVC Intermediates Fibras Plastics Compounds Polyamide Net sales by GBU Chlorovinyls The key success factors of this Segment, 12% which primarily groups the Polyamide activities, are continuous manufactur
Slide 55: Functional Polymers 2014 Q2 performance
Functional Polymers 2014 Q2 performance Improved demand and strong manufacturing excellence program delivery Net sales Net sales H1 2014 € 896 m 91% Polyamide (6)% yoy • Volume growth in Europe and Asia Q2 2014 Q2 • Weakness of Fibras market in LatAm continues € 448 m 2014 (7)% yoy • Delivery on exc
Slide 56: Corporate & Business Services
Corporate & Business Services 2013 € 67 m € (169) m 2014 Q2 performance Figures Net Sales REBITDA Tight cost control partially offset phased-out CER sales REBITDA in € m Other Corporate & H1 2014 Energy Services Business Services (47) € (85) m (30) (12)% yoy Q2 2014 This Segment includes the Solvay
Slide 57: www.solvay.com
www.solvay.com SO LVAY asking more from chemistry®