Synthomer Plc · LSE:SYNT
Synthomer — FY2019 Earnings Presentation
28 slides from Synthomer's earnings presentation, Mar 5, 2020
Slide 1: Preliminary Results
Synthomer plc PRELIMINARY RESULTS 5 March 2020
Slide 2: Agenda
Agenda → Highlights → Financials → Building Global Differentiation → Outlook → Q&A FY19 Preliminary Results 5 March 2020 | 2
Slide 3: Resilient performance in a challenging environment
Resilient performance in a challenging environment → Resilient performance despite a challenging market → EBITDA growth in all areas excluding European SBR – 1.7% lower at £177.9m (2018: £181.0m) → Record innovation – 22% of sales from new products (2018: 21%) → Strong free cash flow – £92.8m (2018:
Slide 4: Strong record of progress delivered across the business
Strong record of progress delivered across the business Measuring Synthomer’s Progress Revenue from new products (%) Volumes (ktes) Unit Gross Margin (£/tonne)(2) 1,518 1,466 321 319 22% 1,444 316 20% 20% 21% 1,325 302 18% 1,191 1,251 16% 234 243 EBITDA (£m) 176.2 181.0 177.9 160.1 125.0 118.0 14 15
Slide 5: Our investment case
Our investment case → Leadership positions in attractive GDP plus end markets → Global footprint, including developed and emerging markets Global, differentiated 1 chemical company → → Broad industrial end market exposure Three core divisions → → Strong relationships with diverse, blue chip customer
Slide 6: Financials
Financials
Slide 7: EBITDA resilient in challenging markets
EBITDA resilient in challenging markets → EBITDA(1) decreased by 1.7% to £177.9m: Group EBITDA Bridge CY vs PY (GBP m) – Performance underpinned by our geographic, 190 181.0 - 12.2 + 6.1 + 1.3 + 1.4 + 0.3 177.9 - 52.1 - 9.6 116.2 product and end market diversity 170 – 2019 EBITDA includes the benefi
Slide 8: Performance Elastomers: Strong growth in NBR partly offset by SBR
Performance Elastomers: Strong growth in NBR partly offset by SBR PERFORMANCE ELASTOMERS EBITDA BRIDGE (in GBP m) CY vs PY → EBITDA down 10.8% with strong growth in NBR offset by SBR due to weaker market conditions in European 107.9 +8.7 -20.7 -0.2 +0.6 96.3 -24.8 71.5 paper market 140.0 → Volumes:
Slide 9: Functional Solutions: Robust performance
Functional Solutions: Robust performance FUNCTIONAL SOLUTIONS EBITDA BRIDGE (in GBP m) CY vs PY → EBITDA 9.0% ahead with growth in unit margins and cost reduction offset by impact of lower volumes 64.1 -8.2 +3.6 +10.7 -0.3 69.9 -17.6 52.3 → Volumes: 80.0 – Volumes down 5.0%(1) for ongoing businesses
Slide 10: Industrial Specialities: Leading position in selected niche markets globally
Industrial Specialities: Leading position in selected niche markets globally INDUSTRIAL SPECIALITIES EBITDA BRIDGE (in GBP m) CY vs PY → EBITDA 5.5% stronger with speciality areas underpinning performance 30.0 23.5 -1.7 -1.5 +4.5 +0.0 24.8 -8.8 16.0 → Volumes: 25.0 – Impacted by some of the more cha
Slide 11: Strong cash generation
Strong cash generation → Depreciation and amortisation: – Rising in line with recent capex investment £m 2019 2018 – IFRS 16 Leases depreciation £7.3m Underlying EBIT 125.8 142.1 → Working capital: JVs (0.9) (0.4) – Lower raw material prices Underlying EBIT (excluding joint ventures) 124.9 141.7 – R
Slide 12: Robust balance sheet with focus on deleveraging
Robust balance sheet with focus on deleveraging → Substantial liquidity: £m 2019 2018 – Existing facilities remain in place until OMNOVA acquisition Cash and cash equivalents 103.6 96.9 – New facilities commence on completion of OMNOVA Overdrafts in current borrowings - (20.7) acquisition Net Cash 1
Slide 13: Building Global Differentiation
Building Global Differentiation
Slide 14: Our investment case
Our investment case Global, Growing Strong organic Sustainable and differentiated proportion of Resilient Attractive and inorganic responsible chemical speciality demand financial metrics growth drivers operator company chemicals Urbanisation + Ageing Population Energy Green Population growth Increa
Slide 15: Synthomer portfolio dynamics
Synthomer portfolio dynamics Diverse product portfolio and geographic footprint, established as part of Synthomer’s plant expansion program with capex largely spent Business Segment FY19 Performance Long Term Market trends → Continued growth in NBR supported by NBR: additional 90ktes capacity additi
Slide 16: SBR Network Review
SBR Network Review Positioning and footprint: SBR: Blue chip customer base → Synthomer is the No1 Producer of SBR in Europe → SBR is supplied into paper, carpet, foam, footwear and construction markets → Synthomer manufactures at 4 sites in Germany, Italy, Finland and Austria → SBR volume in 2019 ~5
Slide 17: Impressive track record and pipeline of new product development
Impressive track record and pipeline of new product development through customer focused R&D Strong return on investment New products (% of sales) £17m 16 11 of R&D Product Patent fillings(1) FY19A 22% Investment(1) launches(1) FY18A 21% FY17A 20% FY16A 20% Always Innovating FY15A 18% FY14A 16% 186
Slide 18: OMNOVA Transaction - Strong strategic rationale
OMNOVA Transaction - Strong strategic rationale 1 Strong strategic fit through adjacent chemistries 2 Expands and diversifies Synthomer product portfolio and end-market exposure 3 Increased international presence in North America and Asia 4 Strong synergy potential with c. $29.6m target annual run-r
Slide 19: OMNOVA: Integration priorities
OMNOVA: Integration priorities Well defined plans in place Good co-operation between the teams Strong cultural overlap provides confidence for smooth integration Operations integration will drive common standards on SHE and ‘Value Gap’ opportunities Business integration will drive opportunities for
Slide 20: ESG is at the core of our business
ESG is at the core of our business Continuing progress on our 6 pillar framework in 2018 and 2019 ✓ Sustainability Committee established, reporting to the executive team ✓ World leading supplier of sustainable water-based polymers – driving down the use of VOC containing solvent Future goals based p
Slide 21: Outlook
Outlook → Global uncertainty continues to impact the commercial environment – Industrial end-markets remain challenging – Potential impact of Coronavirus on demand and supply chains – Foreign exchange rates and strengthening of Sterling → Confident of making further progress in 2020 – Recently commi
Slide 22: Back up
Back up FY19 Preliminary Results 5 March 2020 | 22
Slide 23: Transaction is consistent with conservative capital policy
Transaction is consistent with conservative capital policy Building Growth Momentum Balance Sheet Investment Opportunities Shareholder Returns • Not to move structurally below 1x Net • Capex for growth projects • Ordinary dividend cover 2.5x underlying debt / EBITDA • Capex hurdle rate: payback less
Slide 24: OMNOVA snapshot
OMNOVA snapshot Description Key Performance Indicators(1) • OMNOVA develops, manufactures and markets emulsion polymers, specialty chemicals and decorative products • Headquartered in Ohio, US, with c. 1,850 employees globally Group Revenue (FY19A)(2) Adj. EBITDA (FY19A)(2) • OMNOVA operates through
Slide 25: Expands and diversifies Synthomer portfolio
Expands and diversifies Synthomer portfolio Synthomer + OMNOVA Synthomer End-Market Revenue(1) OMNOVA End-Sector Revenue(2) Revenue by End-Market (1,2,3) Oil & Gas, Compounds, 3% 2% Specialities, Construction & 19% Coatings, 31% Health and Specialities, 15% Protection, 8% £2.1bn Construction & Paper
Slide 26: OMNOVA's end-market growth expectations
OMNOVA’s end-market growth expectations Laminates + Coated Coating Adhesives Sealants Elastomers Nonwovens Oil and gas Fabrics OMNOVA’s → Masonry → Tapes → Caulking → Transportation → Diapers → Drilling → Retail Display Targeted → Inturnescent (fire → Release Coatings → Casting → Industrial → Adult
Slide 27: Increased international presence in North America and Asia
Increased international presence in North America and Asia Revenue by Geography Synthomer(1) Asia & RoW, 26% Europe, 69% £1.5bn N. America, 5% EMEA Synthomer: 18 Synthomer OMNOVA: 2 North + OMNOVA: America 20 OMNOVA(2) Synthomer: 1 OMNOVA: 8 Synthomer: 1 Synthomer OMNOVA: 8 + OMNOVA: Asia Asia & RoW
Slide 28: OMNOVA offers strong synergy potential
OMNOVA offers strong synergy potential: Conservative synergy estimates (3% of Revenue) with strong upside potential De-listing and Head Office Operational Performance Improvement Cost Savings Regional and Property Efficiencies and Procurement (Approx. 50% of synergies) (Approx. 20% of synergies) (Ap