Financial results for Q2 2018

Transcription

1 Financial results for Q Warsaw, 6th September 2018

2 Financial results for Q Q executive summary 2 PLN 934 m revenues (H1: PLN m) PLN 172 m Adj. EBITDA (H1: PLN 340 m) 18.4% Adj. EBITDA margin (H1: 18.7%) Growing prices of energy raw materials and furnace fuel, increase in prices of CO 2 certificates. Stable prices and demand on the soda ash market. Negative weather conditions - CPC market decline in Poland. Take-over of 100% of shares in the Spanish company Proplan. Start of construction for an evaporated salt production plant in Germany. Increase in production capacity of glassy sodium silicate. Recommendation for dividend payment. Adj. EBITDA adjusted for untypical one-off events

3 1. Most important events of Q Financial results for Q Outlook 4. Appendix

4 Most important events of Q Soda ash and sodium bicarbonate market 4 Global and European soda ash market remains balanced Increase in import of soda ash in the South-East Asia and on the Indian subcontinent Stable production of soda ash and demand in the USA Lower supply of soda ash in China and substantial price fluctuations High demand and stable prices of sodium bicarbonate in Europe Considerable improvement of the economic climate in the flat glass sector Source: IHS

5 Most important events of Q Situation on the market of other CIECH businesses 5 Continuous high demand for dry salt Increase in need of salt for electrolysis (new EU regulations - change of mercury and asbestos facilities for membrane technology) Stable demand for specialty resins on the global and European market CPC market decline in Poland (by 5.3% in the 2018 season - Q Q2 2018) Unfavourable weather conditions for CPC (short growing season, agricultural drought, especially unfavourable for application of herbicides) Increase in demand for silicates related to increase in production of silica Fall in demand for furniture and mattresses (among others lower demand in the Western Europe)

6 Most important events of Q Market environment: currency situation 6 4,5 4, EUR/PLN 4.22 Average value for Q The depreciation of PLN and RON, respectively in relation to EUR and USD, has a positive effect on the Group's financial results. 4,1 4,4 3,9 3, USD/RON 4.13 Average value for Q The Group applies natural hedging and instruments securing it against foreign currency changes, according to the adopted policy. Annual net exposure of the Group (revenues in foreign currency vs. costs in foreign currency) in 2017: EUR 100 m and USD 60 m.

7 Most important events of Q Market environment: raw materials Coking coal and coke prices [USD/t] 100 Coal prices [USD/t] Coking coal - spot* Coke - ARA ports ARA (cal. 25 GJ/t) PSCMI1 (cal. 25 GJ/t) German Gaspool (GLP) Natural Gas - 1M Forwards [EUR/MWh] CO 2 emission allowances [EUR/t] Source: Bloomberg, IHS, * Australia Premium Coking Coal Average value for Q Average value for Q2

8 Most important events of Q CO 2 certificate cost management 8 On-going and completed projects in the CIECH Group that have an impact on lower CO 2 emissions. Effective management of heat/technological steam cost Hedging policy in the Group within permits for CO 2 emissions and natural hedging (Germany) - mitigation of risks of rapid price fluctuations. Gas purchase CO 2 certificates purchase Most of energy produced within the Group - lower exposure to increase in energy prices on the market. Energy sales Free allocation of CO 2 certificates confirmed at the end of Poland Germany Natural hedging partially compensates the increase in prices of CO 2 - ensures long-term stability.

9 Most important events of Q Business: soda segment 9 Strengthening of presence on Asian soda ash markets Development of the product portfolio towards high-margin, specialty salt products Optimisation of the customer portfolio in sodium bicarbonate and increase in sales to the end customers Higher sales of salt used for electrolysis Optimisation of the customer portfolio Implementation of desulphurisation and denitrification projects Continuation of projects for the pharmaceutical-grade sodium bicarbonate production line in Germany Strengthening of the market position in salt products for water purification Continuation of works for the construction of an evaporated salt production plant in Germany

10 Most important events of Q Business: organic segment 10 In the resins business, development of new products (non-flammable resins, sanitary resins, flooring, laminates, glues) and production tests Start of cooperation with new customers in the resins area Completion of the transaction and preparation of business integration with Proplan Continuation of registration processes for new CPC products and active substances in Poland and abroad Extension of the foam product portfolio with high-margin products Increase in foam production capacity and further improvement of production effectiveness

11 Most important events of Q Business: silicates & glass segment 11 Increase in production capacity of glassy sodium silicate by 20% - effective placement of the volume from the new facility Use of new applications of silicates, particularly in the AGRO segment Use of demand for precipitated silica Preparation for the season of lantern sales Development of sodium water glass production

12 1. Most important events of Q Financial results for Q Outlook 4. Appendix

13 Financial results for Q Profit and loss account 13 [PLN m] H H yoy Q Q yoy Revenue % % Gross profit on sales % % Gross profit on sales margin 22.8% 24.7% -1.9 p.p. 22.2% 24.8% -2.6 p.p. EBITDA % % EBITDA margin 19.4% 21.2% -1.8 p.p. 20.2% 21.7% -1.5 p.p. Adj. EBITDA % % Adj. EBITDA margin 18.7% 21.3% -2.6 p.p. 18.4% 21.7% -3.3 p.p. EBIT % % EBIT margin 12.4% 14.5% -2.1 p.p. 13.3% 14.9% -1.6 p.p. Net result % % Net margin 9.5% 9.6% -0.1 p.p. 10.6% 10.5% 0.1 p.p. Adj. EBITDA adjusted for untypical one-off events

14 Financial results for Q Results vs. consensus 14 [PLN m] Q Consensus Q Range of forecasts Revenues EBITDA EBITDA margin 20.2% 18.6% - Adj. EBITDA Adj. EBITDA margin 18.4% 18.6% - EBIT EBIT margin 13.3% 11.6% - Net result Net margin 10.6% 8.3% - Consensus PAP based on 9 analyst s forecasts

15 Financial results for Q Geographical structure of sale markets - H Revenues H Revenues H % 7% 7% 5% 41% 39% 44% 43% 30% increase in revenue from sales to Asia by in H (yoy) Poland European Union (excluding Poland) Other European Countries Asia Africa Other regions

16 Financial results for Q Soda segment 16 Q1 Q2 Q3 Q4 Revenue [PLN m] +5.2% Adj. EBITDA [PLN m] -6.1% Q2: the upside yoy higher prices on Asian markets; high result on energy in CSD resulting from a higher (yoy) annual bonus for 2017 due to so-called avoided grid charges; higher sales and increase in prices of dry salt; fixed cost optimisation. Q2: the downside yoy higher prices of energy raw materials and furnace fuel, and CO 2 certificates; negative impact of exchange rates; production volumes of soda ash and salt lower than expected, caused, among others, by minor failures on production facilities. Comments yoy

17 Financial results for Q Organic segment 17 Q1 Q2 Q3 Q4 Revenue [PLN m] -4.4% Adj. EBITDA [PLN m] 20,2-22.8% 15,6 21,2 16, Q2: the upside yoy resins - increase in sales of specialty and high margin products (non-flammable resins, sanitary resins, flooring, laminates, glues) and sale to new customers. Q2: the downside yoy AGRO - lower sales of crop protection chemicals (drought - high temperatures do not encourage application of herbicides, shortened growing season, low profitability of agricultural production, and high stock levels on the customer side after pre-season sales); higher prices of raw materials; foams - lower demand on the furniture market; higher prices of basic raw materials (TDI, polyols). Comments yoy

18 Financial results for Q Silicates & glass segment 18 Q1 Q2 Q3 Q4 Revenue [PLN m] Adj. EBITDA [PLN m] Q2: the upside yoy silicates - higher volumes of sales - increase in demand, mainly related to development of precipitated silica industries; packagings - higher prices. Q2: the downside yoy packagings - lower sale amounts. -1.4% +23.6% 58,2 57,4 8,9 11,0 48,9 62,9 6,7 7, Comments yoy

19 Financial results for Q Transport segment 19 Q1 Q2 Q3 Q4 31,7 Revenue [PLN m] +18.6% 37,6 Adj. EBITDA [PLN m] 5,3-60.4% 2,1 Q2: the upside yoy focus on transport handling within the Group. Q2: the downside yoy lower volume of transport outside the Group due to moving of rolling stock to transport handling in the Group; the large amount of overhauls of railway infrastructure is reflected in low average speeds, and as a result into increase in costs per tonne kilometre. 29,5 34,8 2,2 4, Comments yoy

20 Financial results for Q Cash flow - H [PLN m] H H Adj. EBITDA Working capital Interest paid Taxes paid Others Cash flow from operating activities CAPEX Other Cash flow from investment activities Free cash flow 2 71 Debt financing -7-4 Operating activities: change of working capital mainly due to the reduced use of factoring in comparison to December 2017, increase in inventory in AGRO (finished goods) and in the soda segment (raw materials). Investment activities: expenditure related to the on-going investment programme in the CIECH Group at a higher level than last year. Financial activities: payments for financial leasing. Cash flow from financial activities -7-4 Total net flow Closing balance of cash Simplified

21 Financial results for Q CAPEX - H CAPEX* [PLN m] Development Environmental Stay in business R&D Other H *According to statement of cash flows

22 Financial results for Q Debt 22 Net debt/ Adj. EBITDA , , ,7 2, , , ,2 1,2 The Group systematically reduces its debt. At the end of Q net debt index / Adj. EBITDA amounted to Q2018 Net debt [PLN m] Net debt/adj. EBITDA [PLN m] At the end of Q At the end of 2017 Debt ratio 59.0% 53.0% Long-term debt ratio 33.9% 29.5% Equity capital debt ratio 144.0% 112.6% Equity to assets ratio 41.0% 47.0% Gross financial liabilities Net financial liabilities Methodology of calculated ratios consistent with the financial statement

23 1. Most important events of Q Financial results for Q Outlook 4. Appendix

24 Outlook Opportunities and challenges related to the environment (1) 24 Dynamically growing detergent segment on Asian, Latin American and South African markets Stable growth of the water treatment market in Europe Developing flat glass segment in CEE Dynamically increasing amount of hemodialysis and kidney transplantation procedures Expected market growth and increase in prices of salt for electrolysis Prices of energy raw materials, in particular coal and gas, significant increase in prices of CO 2 certificates Continuous uncertain situation on the Chinese soda ash market Growing European pharmaceutical salt market - expected perspectives of further growth

25 Outlook Opportunities and challenges related to the environment (2) 25 CPC is one of the fastest growing markets in comparison to other chemical segments globally Strong competition on the CPC market in Poland and CEE Growing demand for agriculture and natural products Dynamically growing market of specialty resins for developing industries Poland is the leader on the polyurethane long block market in Europe Long-lasting process of acquiring rights to active substances and product registration Slow-down of furniture production in Poland Growing precipitated silica market and demand in Europe Growing need for packaging glass

26 Outlook Business activities: soda segment 26 Effective management of energy raw materials and furnace fuel Start of soda price negotiations for 2019 Focus on sale of high-margin, specialty salt products Further expansion on international markets in soda ash (Asia, Africa, South America) Completion of projects in soda for dialysis in Germany Keeping cost competitiveness through process optimisation Introduction of new products for sale - salt licks and salt granules Continuation of works on construction of a new production plant in Germany - new product application, pharmaceutical salt

27 Outlook Business activities: silicates & glass segment 27 Preparation and execution of pre-season CPC sales Business integration with Proplan Development of products with the focus on composite materials for developing industries (specialty resins) Further development of the crop protection chemicals product portfolio Further exposure and increase in market shares on foreign CPC markets, including overseas markets Effective management of the raw material situation for production of resins, foams and CPCs Optimisation of foam production processes Strengthening of cooperation with the biggest customers

28 Outlook Business activities: organic segment 28 Effective use of synergy within the CIECH Group Development of liquid silicates Continuous foreign expansion, especially in the North America and Asia

29 1. Most important events of Q Financial results for Q Outlook 4. Appendix

30 Appendix Profit and loss account 30 [PLN thousand] H H yoy Q Q yoy Sales revenues % % Cost of sales ( ) ( ) 4.7% ( ) ( ) 9.4% Gross profit/(loss) on sales % % Other operating income % % Selling costs ( ) ( ) 3.6% (66 531) (67 852) -1.9% General and administrative expenses (79 349) (65 198) 21.7% (42 202) (30 435) 38.7% Other operating expenses (21 688) (18 786) 15.4% (10 530) (10 622) -0.9% Operating profit/(loss) % % Financial income > 100% (157) - Financial expenses (24 525) (44 089) -44.4% (13 268) (9 499) 39.7% Net financial income/(expenses) (3 209) (40 740) -92.1% (9 656) - Profit/(loss) before tax % % Income tax (50 272) (46 857) 7.3% (28 533) (29 249) -2.4% Net profit/(loss) on continuing operations % %

31 Appendix Results by segments - H1 31 [PLN thousand] Soda segment Organic segment Silicates and glass Transport segment Other operations Corporate functions Eliminations TOTAL H Total sales revenues ( ) Cost of sales ( ) ( ) (91 914) (64 167) (73 132) ( ) Gross profit /(loss) on sales (48 882) Operating profit /(loss) (31 510) Profit /(loss) before tax (21 809) Amortization/depreciation EBITDA (28 999) Adjusted EBITDA (31 448) H Total sales revenues (98 891) Cost of sales ( ) ( ) (85 995) (53 879) (44 115) ( ) Gross profit /(loss) on sales Operating profit /(loss) (22 824) (785) Profit /(loss) before tax (47 876) (785) Amortization/depreciation EBITDA (20 589) (785) Adjusted EBITDA (20 709) (785)

32 Appendix Results by segments - Q2 32 [PLN thousand] Soda segment Organic segment Silicates and glass Transport segment Other operations Corporate functions Eliminations TOTAL Q Total sales revenues (54 664) Cost of sales ( ) ( ) (45 319) (34 577) (47 428) ( ) Gross profit /(loss) on sales (29 159) Operating profit /(loss) (16 030) (1 066) Profit /(loss) before tax (95) (5 928) (1 066) Amortization/depreciation EBITDA (14 932) (1 066) Adjusted EBITDA (17 289) (1 066) Q Total sales revenues (50 878) Cost of sales ( ) ( ) (46 685) (26 515) (21 335) ( ) Gross profit /(loss) on sales (24 328) Operating profit /(loss) (11 005) (1 690) Profit /(loss) before tax (14 144) (1 690) Amortization/depreciation EBITDA (9 860) (1 690) Adjusted EBITDA (9 885) (1 691)

33 Appendix Abbreviated balance sheet 33 [PLN thousand] 30 June June 2017 ASSETS Total non-current assets Total current assets Total assets EQUITY AND LIABILITIES Equity attributable to shareholders of the parent Non-controlling interests (2 432) (2 951) Total equity Total non-current liabilities Total current liabilities Total liabilities Total equity and liabilities

34 Appendix Working capital 34 [PLN thousand] H Current assets. including: Inventory Trade receivables and services and advances for deliveries Cash and cash equivalents and short-term investments Adjusted current assets (1-2) Current liabilities. including: Trade liabilities and advances taken Short-term credits and other current financial liabilities* Adjusted current liabilities (4-5) Working capital including short-term credits (1-4) Working capital (3-6) ( ) * Other current financial liabilities include current bond liabilities. current finance lease liabilities + current derivative liabilities + factoring liabilities.

35 Modern and diversified chemical group on a stable path of growth CONTACT FOR INVESTORS: Małgorzata Młynarska Management Board Representative for Investor Relations , malgorzata.mlynarska@ciechgroup.com This document has been prepared solely for informational purposes. It includes only summary information, is not exhaustive, and may not be used as a sole basis for any assessment or analysis. CIECH S.A. makes no guarantees (explicit or implicit) regarding information presented herein and such information, including forecasts, estimates and opinions, should not be unduly relied upon. CIECH S.A. does not accept any responsibility for possible mistakes, omissions or irregularities found herein. The document is based on sources of information which CIECH S.A. deems to be reliable and accurate, however, it does not guarantee them to be exhaustive nor to fully reflect the actual situation. This document does not constitute an advertisement or a public offer of securities. It may include forward-looking statements that involve investment risks or uncertainties and may significantly differ from actual results. CIECH S.A does not accept any responsibility for consequences of decisions made based on this document. The responsibility lies exclusively with the party using the document. This document is protected by the Copyright and Related Rights Act. Copying, publishing or distributing it requires prior written consent of CIECH S.A.