Arkema Sa · EURONEXT:AKE
Arkema Sa — FY2009 Earnings Presentation
41 slides from Arkema Sa's earnings presentation, Mar 4, 2010
Slide 1: 2009 full year results
2009 full year results Thierry Le Hénaff Chairman and CEO Paris, March 4, 2010
Slide 2: FY'09 results: Emerging stronger
FY’09 results Emerging stronger
Slide 3: Quick adaptation combined with in-depth transformation
Quick adaptation combined with in-depth transformation 2009 achievements ● Unprecedented market conditions • Significant drop in demand Fixed cost savings (€m) • Massive destocking by customers in 1H’09 • Strong recovery of Asia starting in 2Q’09 171 110 ● Quick adaptation with two priorities • Rein
Slide 4: Unprecedented downturn in 2009
Unprecedented downturn in 2009 YoY volume development YoY volume variation by quarter +0.8% +2.3% +8% 10 2005 2008 2009 0 2006 2007 -1.5% -10 -20 -5.9% -30 -27% -13.9% 1Q’ 2Q’ 3Q’ 4Q’ 1Q’ 2Q’ 3Q’ 4Q’ 2008 2009 2H’09 substantially better than 1H’09 4
Slide 5: Uneven regional situations
Uneven regional situations North America Asia Excellent financial performance Strong demand recovery despite low volumes ● 2009 volumes > 2008 ● Gradual volume recovery after ● Start-up of H2O2 plant in Shanghai 1H’ customer destocking ● New businesses in performance ● 4Q’09 volumes significantly hi
Slide 6: Strong cash generation
Strong cash generation Raw materials in €m & finished goods inventories (€m) EBITDA 310 943 - 30% 660 Working capital reduction +384 Recurring capex (262) Tax & cost of debt (82) 2008 2009 Restructuring outflows (78) Recurring capex (€m) Others (44) 301 41 262 - 13% Free cash flow* +228 51 In Asia:
Slide 7: Full year 2009 key figures
Full year 2009 key figures in €m (except EPS) 2008 2009 Variation Sales 5,633 4,444 (21.1)% EBITDA 498 310 (37.8)% EBITDA margin 8.8% 7.0% Recurring operating income 250 40 (84.0)% NR items (53) (109) - Net income (group share) 100 (172) - Adjusted EPS (diluted) 2.41 (0.81) - Positive recurring oper
Slide 8: Sales analysis
Sales analysis Sales in €m Price Volume (7.7)% -21% (13.9)% FX rate - translation Scope of vs 2008 effect business +1.1% (0.7)% reflects lower raw materials in Vinyls and Acrylics 5,633 4,444 2008 2009 8
Slide 9: Fixed cost savings partly offset volume drop from challenging markets
Fixed cost savings partly offset volume drop from challenging markets EBITDA in €m Inflation & Fixed cost volume New savings loss* businesses Environment (39) +36 +171 (343) Including ~€ 50 m volume-related Others (13) Including 498 € (40) m inventory effect 310 2008 2009 +€132m EBITDA from producti
Slide 10: Vinyl Products: Trough market conditions
Vinyl Products Trough market conditions Sales (€m) EBITDA (€m) Caustic Soda Prices (in €/t) 600 1,443 1,005 14 2009 200 2008 2009 2008 (31) Jan-09 Apr-09 Jul-09 Oct-09 ● Low level of PVC unit margins ● Caustic soda prices sharply down from peak in 1Q’ to low in 3Q’ ● Sharp contraction of demand in c
Slide 11: Industrial Chemicals: Record EBITDA margin since spin off
Industrial Chemicals Record EBITDA margin since spin off Sales (€m) EBITDA & EBITDA margin ● 14.5% EBITDA margin despite very 14.5% 13.2% challenging macro environment 2,582 ● Significant fixed cost savings 2,109 341 306 ● Benefits from expansion in Asia 2008 2009 2008 2009 % of segment sales by BU
Slide 12: Performance Products: Significant improvement in 2H'09
Performance Products Significant improvement in 2H’09 Sales (€m) EBITDA & Sales by region EBITDA margin North America 25% 11.0% 7.7% Europe 39% 1,602 1,318 28% Asia 177 102 2008 2009 2008 2009 RoW ● -16% volumes vs 2008 ● Resilience of pricing ● Fixed cost savings in Technical Polymers & Functional
Slide 13: 4Q'09 results: Volume and EBITDA growth year-on-year
4Q’09 results Volume and EBITDA growth year-on-year Sales (€m) ● +8% volumes and -13% price variation YoY (pricing reflects low raw material costs in Vinyls and Acrylics) ● +74% EBITDA vs 4Q’08 1,182 1,082 ● Positive recurring operating income at €14m ● Positive free cash flow* 4Q’08 4Q’09 EBITDA (€
Slide 14: 4Q'09 results by segment
4Q’09 results by segment EBITDA (€m) & Sales (€m) EBITDA margin Vinyl Products: adverse market conditions • Traditional weaker seasonality in December 281 234 4Q’08 4Q’09 • Low caustic soda prices 4Q’08 4Q’09 (24) (18) • US PVC imports on lower ethylene and US$ 14.6% 11.5% Industrial Chemicals: exce
Slide 15: Low gearing at 19%
Low gearing at 19% Net debt in €m Financing secured until March 2013 with Free Cash a €1bn syndicated credit** line bearing Flow* short term interests at 32.5 b.p. Others M&A (228) +12 Dividend +26 +36 495 Mainly €0.60 / share Geo’s organic 341 peroxides 2008 2009 Net debt at 1.1x EBITDA * Free cash
Slide 16: Strong balance sheet
Strong balance sheet 31 Dec. 31 Dec. In €m 2008 2009 ● Provisions include: Net debt 495 341 • €111 m restructuring • €234 m pensions (stable amount) Shareholders’ equity 2,018 1,813 • €139 m environment • €201 m others Net provisions 701 685 ● €446m unrecognized deferred tax assets Non-current asset
Slide 17: 2005-2009: A reshaped Arkema
2005-2009 A reshaped Arkema
Slide 18: Fixed cost savings
Fixed cost savings Cumulated gross fixed cost savings since 2005 (in €m) Spin Spin off off target target €500m €500m in in 2010 2010 508 337 Headcount 18,377 230 120 -25% 13,803 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 18
Slide 19: Working capital
Working capital Working capital 23.6% as % of sales Spin Spin off off target target 18% 18% end end 2010 2010 16.2% 2005 2009 19
Slide 20: Gearing
Gearing Net debt as % 31%* Spin Spin off off target target of shareholders’ equity below below 40% 40% 19% 2005 2009 20 * Net debt computed as 12/31/2005 proforma net debt after €532m capital increase + €580m NR pre spin-off items
Slide 21: Portfolio management
Portfolio management Main acquisitions €550m* Spin Spin off off targets targets Acquisitions: Acquisitions: €500m €500m to to €800m €800m sales sales Divestments: Divestments: €300m €300m to to €400m €400m sales sales ● Acrylic assets from Dow ● Coatex ● Organic peroxides from Geo Main divestments €
Slide 22: Better positioned on growing regions & products
Better positioned on growing regions & products Asia Innovation €130m capex spent since spin off Focus on sustainable development and high performance polymers Bio-based Range for photovoltaic polymers Spin Spin off off target target % of total sales 20% 20% of sales in of sales in 2012 2012 achieve
Slide 23: 2010: Well prepared and positioned
2010 Well prepared and positioned
Slide 24: Assumptions for 2010 environment
Assumptions for 2010 environment ● More positive market trends of 4Q’09 expected to continue in 1H’10 ● Contrasted view by region: • Strong demand in Asia • Some recovery in the US • More limited visibility in Europe ● Strong growth in renewable energies (photovoltaic, batteries…) ● Market condition
Slide 25: Our priorities for 2010
Our priorities for 2010 ● Maintain focus on costs and cash • €90m fixed cost savings versus 2009 • Recurring capex below €300m • Working capital at ~16% of sales ● Integrate newly acquired acrylic assets from Dow ● Grow in Asia and in “green” markets • Leverage new manufacturing assets in China • Ac
Slide 26: 2010 EBITDA significantly above 2009
2010 EBITDA significantly above 2009 ● What is given • No customer destocking as in 1H’09 • Absence of negative inventory effects (€-40m in 2009) ● Other factors • €90m additional fixed cost savings (€40m net EBITDA impact) • Business developments in Asia and from innovation (renewable energies) • I
Slide 27: 2010-2014: A new roadmap
2010-2014 A new roadmap
Slide 28: Leverage on newly acquired acrylic assets
Leverage on newly acquired acrylic assets #2 in US acrylic acid ● Attractive asset deal • US$ 450m sales in 2009 • US$ 50m enterprise value • Acquisition in low-cycle conditions ● Perfect fit with Arkema’s strategy in Acrylics Dow Arkema BASF StoHaas • Build a strong position in the US in monomers (
Slide 29: Site of Clear Lake (acrylic monomers)
Site of Clear Lake (acrylic monomers) 29
Slide 30: Site of Saint-Charles (UCAR acrylic polymers)
Site of Saint-Charles (UCARTM acrylic polymers) 30
Slide 31: Ambition for Acrylics
Ambition for Acrylics Strategy Key initiatives ● In Europe ● Develop world-scale competitive • Optimization plan in Carling (Fr) monomer production sites • New 50 kt/yr 2EHA production unit • Continue to optimize in Europe in Carling (Fr) in 1Q’10 • Strengthen presence ● In the Americas in the Ameri
Slide 32: Industrial Chemicals' performance since 2005
Industrial Chemicals’ performance since 2005 EBITDA margin (monomers Acrylics = Acrylics BU + Coatex + polymers) Peak Integration Strong 20% of Coatex upside potential from monomer 20% Industrial Chemicals 10% Low cycle 2005 2006 2007 2008 2009 14.5% 15% 13.2% Industrial Chemicals w/o Acrylics* 10%
Slide 33: Enhanced portfolio
Enhanced portfolio 2005 2009 5-year proforma* target Strategy Contributors Focus on 14% Cost and partnerships competitive assets Vinyl 21% Products 24% Emergence of a global New acrylic assets 20% integrated player acquired from Dow Acrylics & Coatex 17% 4 first-class Industrial growth platforms 42%
Slide 34: Balanced geographic position
Balanced geographic position Sales by region 2005 2009 proforma* 5-year target 5% 4% 5% 13% 17% 22% 57% 50% 41% 25% 29% 32% Europe North America Asia RoW 34 * Including the acrylic assets acquired from Dow
Slide 35: Vinyls
Vinyls ● Initiatives taken since spin off • Necessary shutdowns of several old loss-making units • Downstream PVC strengthened • Optimization of fixed and variable costs + €60m EBITDA gain, break-even lowered by 5 points ● Oversupply situation in Europe end 2009 • Contraction of construction in Euro
Slide 36: Vinyls
Vinyls ● Strong market position in a still fragmented market • N°3 in PVC in Europe • Unique position in Southern Europe / Mediterranean area • Strong marketing and industrial partnership in Qatar (QVC) • Competitive scale of production units (Fos, Lavéra, Balan, Berre) ● Long-term strategic orienta
Slide 37: Fuelling the innovation pipeline
Fuelling the innovation pipeline ● Keep strong momentum on • Solutions for sustainable development Outlook for rechargeable battery • High performance polymers market worldwide (in mUS$) ● 6 priorities 25,000 • Bio-resourced materials 20,000 • New energies: • Photovoltaic: +20% avg. growth / year 15
Slide 38: Reinforce presence in Asia
Reinforce presence in Asia ● Successfully achieve current projects in China • Partnership with Daikin in fluorogases: HFC-125 HFC-125 & new generation blends Kynar® • Construction of Kynar® (fluoropolymers) and Coatex Coatex (acrylic polymers) production plants 2010 2011 2012 ● Longer-term thoughts
Slide 39: 5-year (2014) mid-cycle targets
5-year (2014) mid-cycle targets 5 year (2014) EBITDA margin mid-cycle target* Performance Products 15% Industrial Chemicals w/o Acrylics 17% Acrylics 14 to 15% Vinyls 8 to 9% Corporate (1)% Arkema >13.5% 39 * Normalized environment
Slide 40: Conclusion
Conclusion ● Emerged stronger from 2009 crisis ● Confidence on significant improvement of 2010 earnings while reasonably cautious on market conditions ● High potential to further increase profitability in coming years • Continue repositioning of Arkema through geographical expansion, innovation on g
Slide 41: Disclaimer
Disclaimer The information disclosed in this document may contain forward-looking statements with respect to the financial condition, results of operations, business and strategy of Arkema. Such statements are based on management’s current views and assumptions that could ultimately prove inaccurate