Investor Presentation. May 2016

Transcription

1 Investor Presentation May

2 Forward-Looking Statements In addition to historical information, this presentation contains "forward-looking" statements that reflect management's expectations for the future. The words anticipate, believe, expect, hope, have the intention of, might, plan, should and similar expressions generally indicate comments on expectations. The final results may be materially different from current expectations due to several factors, which include, but are not limited to, global and local changes in politics, the economy, business, competition, market and regulatory factors, cyclical trends in relevant sectors; as well as other factors that are highlighted under the title Risk Factors on the annual report submitted by Mexichem to the Mexican National Banking and Securities Commission (CNBV). The forward-looking statements included herein represent Mexichem s views as of the date of this press release. Mexichem undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law. Mexichem has implemented a new Code of Ethics that rules its relationships with its employees, clients, suppliers and general groups. Mexichem s Code of Ethics is available for consulting in the following link: Additionally, according to the terms contained in the Securities Exchange Act No 42, Mexichem Audit Committee established a mechanism of contact, which allows that any person that knows the un-fulfilment of operational and accounting records guidelines and lack of internal controls of the Code of Ethics, from the Company itself or from the subsidiaries that this controls, file a complaint which is anonymously guaranteed. The whistleblower program is facilitated by a third party. The telephone number in Mexico is The website is: and contact is: mexichem@ethic-line.com. Mexichem s Audit Committee will be notified of all complaints for immediate investigation. 2

3 Strategic Highlights: First Quarter 2016 First Quarter 2016 was in line with our expectative The Company demonstrated substantial resilience to major headwinds facing global industrials: Currency Fluctuations Volatility in Oil Prices Both, Vestolit (Vinyl) and Fluent Europe performed above projections Joint Venture the Ethylene Cracker (with OxyChem) remains on schedule and on budget bringing Mexichem significant vertical integration ROE and ROIC on track 3

4 Company Overview: Mexichem by the Numbers Major Transformation Over Last 13 Years Countries Facilities R&D centers Employees Revenues EBITDA Market Cap (2) MEXICHEM IN MEXICHEM TODAY >30 > ,800 >18, (1) 18x 5,529 18x 50 (1) x (2) >5,100 Notes: 1. Reported figures under Mexican GAAP and converted into dollars using an FX of 10.8 MXN/USD market cap figures as of 12/31/2003; Market cap as of 03/31/2016 4

5 Mexichem at a Glance Global Leader in the Chemicals and Plastics Markets Mexichem Energy Fluor Value Chain Ethylene Value Chain Fluor Fluorspar Hydrofluoric acid Refrigerants Joint Venture with Aluminum fluoride Joint Venture with Vinyl PVC & Specialty resins Compounds & plastifiers Derivatives Fluent Pipes and fittings Irrigation systems Datacom Revenues: $583 mm EBITDA margin: 40% Revenues: $2,099 mm EBITDA margin: 15% Revenues: $3,001 mm EBITDA margin: 14% Note: Revenues and EBITDA margin correspond to LTM 1Q16; Figures before intercompany eliminations 5

6 Company Overview Track Record of Strategic Acquisitions Market performance Shareholders return 5yrs: 38.4% 10yrs: 1,750.0% Fluorita de Mexico Specialty PVC resins Camesa trade name becomes Mexichem 43% of Mexichem (Camesa subsidiary) Quimica Fluor EBITDA (US$mm) Fluorita de Rio Verde LTM1Q16 Source: Company filings, public information 6

7 Company Overview: Mexichem by the Numbers Major Transformation Over Last 5 Years From Chemicals To Pipes and End-Products Sales 49% 55% 56% 53% 53% 16% 12% 11% 10% 10% 34% 33% 33% 36% 37% LTM 1Q16 Vinyl Fluor Fluent EBITDA 33% 41% 43% 45% 45% 36% 26% 31% 27% 27% 31% 33% 26% 35% 35% LTM 1Q16 7 Vinyl Fluor Fluent Holding

8 Company Overview: Mexichem by the Numbers Mexichem s EBITDA 2015 was highly affected by $202 million in comparison with 2011, due to FX and market conditions on Fluor (downstream), Brazil and Venezuela. $350 EBITDA 2011 vs 2015 ($m) $300 $250 $200 $150 $26 $70 - $202m Fluor Downstream Brazil $100 $196 $50 $- $3 $38 $ % from Mexichem EBITDA 35% 10% Venezuela Source: EBITDA as reported 2011 and 2015 figures 8

9 Highlights 1. Vertical Integration: Ensuring Supply of Raw Material + Building Specialty Product Portfolio 2. Margin Versus Volume Driven 3. Mexichem s Growth Model: Presence by Industry and Specific Markets 4. Strong Financial Position 5. Focused Leadership Through Collaboration & Simplicity 9

10 1. Vertical Integration Ensuring Supply to Mitigate Volatility & Increase Cost Competitiveness Ethylene Chain Overview - One of the largest PVC resin and one of the leading piping player worldwide 1A - Cost and Supply 1B - Margin/Value Added Salt Chlorine & Caustic VCM PVC Resin Compounds Fluent Ethane Ethylene Specialty Resin + Mexichem products On-going joint ventures / announced acquisitions VOLATILITY VERTICAL INTEGRATION THROUGHOUT THE VALUE CHAIN 10

11 1.Vertical Integration: Ethylene Ethylene is our Most Important Raw Material Ethylene Price Components 1A - Cost and Supply 1B - Margin/Value Added December 2014 Ethane 27% Others 10% Ethylene Margin 63% December 2015 Ethane 57% Others 10% Ethylene Margin 34% Ethylene Cracker + PMV Joint Venture = * 65% of the Vinyl Group s Ethylene Supply Source: Company fillings, *Once Ethylene cracker is fully operational. 11

12 1.Vertical Integration: Ethylene 1A - Cost and Supply 1B - Margin/Value Added Source: Mexichem s Internal analysis. Each point of the curve represents a plant of global PVC production. 12

13 1.Vertical Integration: Ethylene Worldwide Ethylene Cash Costs: Amid Oil Price Declines, North America is The Most Profitable Region to Produce Ethylene. 1A - Cost and Supply 1B - Margin/Value Added Source: IHS Chemical 13

14 1. Building Specialty Products Portfolio Acquisition of Vestolit (in Vinyl) RATIONALE Integrate higher value-added products Synergies with PolyOne acquisition and Pemex JV Salt Ethane Chlorine & Caustic Ethylene VCM 1A Cost and Supply 1B Margin/Value Added PVC Resin Specialty Compounds Fluent Vestolit Overview Europe s 6 th largest PVC manufacturer Focused on specialty products Europe s only manufacturer of High Impact Suspension PVC for weather-resistant windows Europe s second-largest producer of paste PVC for floors and wallpapers, among others Total installed PVC capacity is 415K Ton / yr Vertical integration from Salt, Chlorine and VCM through Specialty PVC resin 14

15 CAPACITY (Kmt) 1. Building Specialty Products Portfolio Specialty PVC Resins Producers Worldwide (Kton) 1A Cost and Supply 1B Margin/Value Added Vinnolit Mexichem Inovyn FCP LG Chem Tianjin Chem. Kem one Shenyang Blue Star Kaneka SCAC Source: IHS

16 1. Building Specialty Products Portfolio Acquisition of Dura-Line (in Fluent) Rationale Integrate high value-added polyethylene products Enter growth markets Dura-Line Overview Global leader in high-density polyethylene (HDPE) conduit, duct and pressure-pipe solutions Applications: telecom / data communications, energy and infrastructure industries Manufacturing facilities: North America (US & Mexico), India, Oman, Europe, and South Africa Benefits from Dura-Line s product segments and global footprint: Technology, market position and blue-chip customers will allow Mexichem s expansion in these segments Platform for Mexichem s products in new geographies Salt Ethane Chlorine & Caustic Ethylene VCM 1A Cost and Supply 1B Margin/Value Added PVC Resin Specialty Compounds Fluent 16

17 Highlights 1. Vertical Integration: Ensuring Supply + Building Specialty Product Portfolio 2. Margin Versus Volume Driven 3. Mexichem s Growth Model: Presence by Industry and Specific Markets 4. Strong Financial Position 5. Focused Leadership Through Collaboration & Simplicity 17

18 2. Margin Growth vs Volume Growth In May 2012, Mexichem acquired Wavin The leading supplier of pipe systems and solutions in Europe Complete portfolio for Above Ground and Below Ground Systems Business drivers: energy efficiency, material & resources, climate change Successful restructuring of operations in less than two years Cost rationalization strategy: closed 11 plants to focus on most profitable operations EBTIDA margin improvement from 2.5% in 2012 to 10% in 2015 (>4.0x increase) amid virtually flat revenue growth Fluent Europe Revenues in USD and in EUR ($MM) 2,000 1,500 1, ,582 1,544 1,594 1,232 1,164 1,197 1,310 1,180 Fluent Europe EBITDA Margin (1) (% of Total Revenue) 14.5% 12.4% 12.0% 11.2% 10.3% 7.6% 7.6%* 6.1% 5.5% 4.3% Sequential improvement 2.8% 5.7% 9.4% USD EUR Note: (1) EBITDA figures exclude restructuring costs and a benefit of US$17MM in 4Q13 Q1 Q2 Q3 Q

19 2. Margin Growth vs Volume Growth Fluor Business Group is focus to increase its presence on: Cement industry in upstream Medical applications in downstream Largest fluorspar mine in the world in one site Production of ~20% of global fluorspar needs and proven reserves for the next 40 years Mexichem has developed Fluorine-based solutions for the cement industry to optimize clinker production Only non-chinese, fully vertical integrated producer of refrigerant gases The leading manufacturer and supplier of medical propellants: Around 100 million people uses propelled with Zephex Propellant for 85% of the world s metered dose inhalers Sulphuric Acid Fluorspar HF Aluminum Fluoride Refrigerant Gases Fluor EBITDA by Segment (2015) Metallurgic Fluorspar Sales Volume (% of total contribution) Gases 134a Gases Medical 8% 12% 100% 80% 60% 40% 20% 15% 30% 80% Fluorspar, HF & ALF3 0% Cement Steel & Others 19

20 2. Focus on Profitability Note: ROE: Net income over average equity R ROIC: NOPAT/ Equity + Liabilities with cost cash NOPAT: (EBIT-taxes) Net income and NOPAT consider trailing twelve months. 20

21 Highlights 1. Vertical Integration: Ensuring Supply + Building Specialty Product Portfolio 2. Margin Versus Volume Driven 3. Mexichem s Growth Model: Presence by Industry and Specific Markets 4. Strong Financial Position 5. Focused Leadership Through Collaboration & Simplicity 21

22 3. Mexichem s Total core Sales Distribution by Region (all in USD terms) USA 16% Europe 36% MEX & Cent Ame 25% AMEA 4% South America 19% 22 Note: Figures as of LTM 1Q16

23 3. Mexichem s Growth Model Mexichem has over 30 avenues for growth worldwide Our presence in >30 countries (mainly through our Fluent business) can be used as a growth platform for all our products 23 Given our existing presence and potential future growth opportunities, Mexichem has identified 5 countries and 3 regions where our growth strategy will be uniquely focused: Countries India United States Brazil Turkey Colombia Regions Southeast Asia Africa ME

24 3. Mexichem s Growth Model Global Experts will foster and prioritize for growth in their categories, based on the strategic plan Role Translate the strategy in Business Case + Commercial Execution Accountabilities Develop Business Case with Country Head + Know How Results P&L will be rolled up under both parties to incentivize businesses and tracking Business Group Category Global Expert 1 Vinyl Compounds General Resins Specialty Resins (Mexico) (Colombia) 2 Fluor Fluorspar (Met) Chemicals Refrigerants Medical (Mexico) (México) (UK) (UK) 3 Fluent Hot & Cold Datacom Geotextiles Irrigation (Netherlands) (USA) (Colombia) (Guatemala) 24

25 3. Mexichem s Growth Model 25

26 Highlights 1. Vertical Integration: Ensuring Supply + Building Specialty Product Portfolio 2. Margin Versus Volume Driven 3. Mexichem s Growth Model: Presence by Industry and Specific Markets 4. Strong Financial Position 5. Focused Leadership Through Collaboration & Simplicity 26

27 4. Strong Financial Position Summary of First Quarter 2016 Results On a constant currency basis: Revenues would have decreased 4%, and EBITDA increased 16% First Quarter Consolidated (mm US$) %Var. Net Sales 1,262 1,442-12% Operating Income % Net Maj. Income % EBITDA % Operating cash flow before Capex N/A Total CAPEX (organic & JV) % Free Cash Flow % 27

28 4. Manageable Debt Profile and Long-Term Maturity Profile Comfortable Debt Amortization Profile US$MM, as of March 31, 2016 Bank debt Debt Securities 922 More than 98% of debt is long term Fitch Ratings S&P Moody s 400 BBB BBB- Baa Most Debt at HoldCo Level Debt by Division (2016) Holding Vinyl Fluor Fluent 5% 4% 1% Alignment of Debt to Revenue Currency Debt by Currency (2016) US$ Euro Others 9% 34% 57% Conservative Leverage Ratios Self Imposed target of 2.0x over medium term Total Debt / EBITDA 1.8x 1.1x 2.4x 2.4x 0.7x 1.0x Net Debt / EBITDA 2.7x 2.6x 2.0x 1.9x Source: Company filings 90% US$1.5B revolving credit facility (100% available)

29 4. Stable Financial Performance Consistent Revenue Growth; and EBITDA Resilience Despite Industry Cyclicality (US$MM) 6,000 4,768 5,177 5,549 5,708 5,528 4,000 2, LTM 1Q16 29

30 4. Consistent Investment in New Projects Capex (US$MM) $495 $322 $977 $725 $808 $532 $1,292 $1,061 $173 $252 $276 $231 $ e Non M&A M&A CAPEX (incl. JV's) $666 $390 $600 JV with Oxychem to Build an Ethylene Cracker JV with PEMEX (1) to Produce Ethylene and VCM Capture the shale gas opportunity as a competitive advantage of NA ~56% ~44% Ingleside Cracker Ethylene OxyChem Ingleside VCM Facility VCM Mexichem PVC Facilities Salt Chlorine Caustic Ethylene + = VCM 50%/50% Note: (1) PEMEX s contribution corresponds to part of Complejo Pajaritos Market PVC Ethane 30

31 4. Strong Cash Flow Conversion Operating Cash Flow before CAPEX / EBITDA 99% 78% 86% 65% * 2015* Source: Company filings, * Including discontinued operations in UK and Romania 31

32 4. Working Capital Cycle Cash Conversion Cycle (Days) Inventory Accounts Receivable Accounts Payable dec-14 mar-15 apr-15 may-15 jun-15 sep-15 dec-15 mar-16 Source: Company filings 32

33 Highlights 1. Vertical Integration: Ensuring Supply + Building Specialty Product Portfolio 2. Margin - Versus Volume Driven 3. Mexichem s Growth Model: Presence by Industry and Specific Markets 4. Strong Financial Position 5. Focused Leadership Through Collaboration & Simplicity 33

34 5. Focused Leadership Through Collaboration More than >18,000 employees USA +2,000 Europe +6,000 MEX & Cent.Am +3,000 AMEA +30 South America +7,000 34

35 5. Focused leadership Through Collaboration A. Carrillo CEO R.Guzmán CFO A. Soto General Counsel A. Rodríguez Corporate VP, HR A. Mugica President, Fluor Business Group C. Manrique President, Vinyl Business Group >30 >25 >20 >20 >25 >30 P. Chari President, Fluent Business Group M. Roef President, Fluent Europe V. Aguilera President, Fluent LatAm G. Álvarez VP Energy Business Group JL. Guzmán VP Corporate Internal Audit Pedro Martínez VP IT >35 >25 >35 15 >20 >18 ~20 years of professional experience 35

36 36 Thank You

37 37 APPENDIX

38 Jan-2010 Mar-2010 May-2010 Jul-2010 Sep-2010 Nov-2010 Jan-2011 Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012 Mar-2012 May-2012 Jul-2012 Sep-2012 Nov-2012 Jan-2013 Mar-2013 May-2013 Jul-2013 Sep-2013 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Vertical Integration: Tested in 4Q14 Prices of oil and ethylene falling rapidly USD/ ton 2,000 USD/ barrel 120 Salt Ethane Chlorine & Caustic Ethylene VCM PVC Resin Specialty Compounds Fluent 1, , Source: IHS (formerly CMAI) Ethylene-Spot USA (Left) PVC Export USA (Left) Crude Oil WTI (Right) Vinyl Business Group * EBITDA USD$MM 14% 10% 64 66% 5% ~30M USD Fluent Business Group * EBITDA USD$MM 59% 8% 66 4Q13 4Q14 4Q13 4Q14 * EBITDA without FX in 4Q14, and non recurrent effects of 4Q13 38

39 Jan-2010 Mar-2010 May-2010 Jul-2010 Sep-2010 Nov-2010 Jan-2011 Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012 Mar-2012 May-2012 Jul-2012 Sep-2012 Nov-2012 Jan-2013 Mar-2013 May-2013 Jul-2013 Sep-2013 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Vertical Integration: Margin Expansions in 4Q15 Prices of oil, ethylene and PVC resins USD/ ton 2,000 1,500 1, USD/ barrel Salt Ethane Chlorine & Caustic Ethylene VCM PVC Resin Specialty Compounds Fluent 100 Ethylene-Spot USA (Left) PVC Export USA (Left) Crude Oil WTI (Right) Vinyl Business Group Source: IHS (formerly CMAI) Positive performance on PMV + Resins, compounds & derivatives EBITDA USD$MM 244% 5% 15% Fluent Business Group Amid FX fluctuations, EBITDA margin expansions EBITDA USD$MM 12% 100 8% 66 26% Q14 4Q15 0 4Q14 4Q15 39

40 Ethylene Prices Worldwide Monthly World Ethylene Price US$ per Metric Ton Last Update Date -31/03/2016 USD/ ton 1,800 FORECAST 1,600 1,400 1,200 1, Ethylene, Contract-Net Transaction Pipeline, Delivered US Gulf Coast Ethylene, Contract-Market Pipeline, Delivered W. Europe Ethylene, Spot, Average, CFR SE Asia Ethylene, Spot Pipeline, Average, Delivered US Gulf Coast Source: IHS 40

41 Mexichem s Markets and Product Categories Business units Fluor Markets Served Refrigeration & Technical Aluminum propellants Medical 6% 9% 6% 4% Chemicals 4% 57% 13% Air Conditioning Product Categories Fluorspar Met Grade Fluorspar Acid Grade Hydrofluoric Acid Anhydrite Aluminum Fluoride Refrigerants Technical propellants Medical propellants Examples Vinyl Paints Industrial Base Chemicals Wire and Cable Specialty Resins 13% 1% Medical 7% 3% 4% Automotive Home. lawn & garden 4% PVC Resins Compounds PA & Plasticizers 67% Phosphates Building & Construction Other Chemicals Fluent Oil & Gas Telecom 13% 8% Agricultural 5% Housing 38% 37% Infrastructure Pipes & Fittings (PVC, Polyethylene, Polypropylene) Geosynthetics (woven & non-woven) Irrigation systems Datacom & Infrastructure 41 Source: Company fillings, Markets as % of revenues of 2015

42 Mexichem s Markets and Product Categories Salt Ethane Chlorine & Caustic Ethylene VCM PVC Resin Specialty Compounds Fluent Specific Markets: Sales by Distribution Channel Governmental LatAm Institutions 2% Other 4% End Users 4% Retail 27% Wholesalers 46% Retail 4% Building Contractors 12% Europe Governmental Institutions End Users 0% 2% Other 4% Wholesalers 78% Building Contractors 17% 42 Source: Company fillings, Information as of

43 Vertical Integration: Fluor Chain Sulphuric Acid 40% Sold to Market 100% Sold to Market HF Refrigerant Gases Fluorspar 60% Sold to Market Aluminum Fluoride 100% Sold to Market Strategy: Downstream integration to higher value added products + VOLATILITY VERTICAL INTEGRATION THROUGHOUT THE VALUE CHAIN Source: Company filings 43

44 Summary of 1Q16 Results Income Statement USD in thousands INCOME STATEMENT % Net sales 1,262,383 1,442,178-12% Cost of sales 903,023 1,075,614-16% Gross profit 359, ,564-2% Operating expenses 250, ,405-10% Operating income 109,272 90,159 21% Financial cost 43,411 67,925-36% Equity in income of associated entity (927) 727 N/A Income from continuing operations before income tax First Quarter 66,788 21, % Cash tax 39,951 36,587 9% Deferred taxes (22,563) (28,644) -21% Income tax 17,388 7, % Income from continuing operations 49,400 13, % Discontinued operations % Consolidated net income 49,983 14, % Minority stockholders (610) (4,837) -87% Net income 50,593 18, % EBITDA 200, ,081 1% 44

45 Summary of 1Q16 Results Balance Sheet USD in thousands Balance Sheet Mar 2016 Dec 2015 Total assets 8,840,463 8,669,676 Cash and temporary investments 586, ,274 Receivables 896, ,779 Inventories 660, ,984 Others current assets 150, ,816 Long term assets 6,546,281 6,417,823 Total liabilities 5,040,949 4,990,895 Current portion of long-term debt 61,405 43,653 Suppliers 1,239,836 1,201,021 Other current liabilities 528, ,887 Long-term debt 2,280,001 2,291,422 Other long-term liabilities 931, ,912 Consolidated shareholders'equity 3,799,514 3,678,781 Minority shareholders'equity 816, , Majority shareholders'equity 2,983,171 2,902,362 Total liabilities & shareholders' equity 8,840,463 8,669,676

46 Summary of 1Q16 Results Operating Cash Flow Highlights First Quarter %Var. EBITDA % Cash Tax % Net Interest % Bank Commissions % Monetary position and Exchange loss % Change in Trade Working Capital % Operating cash flow before Capex N/A CAPEX (organic) % CAPEX (Total JV) % CAPEX JV (OXY SHARE) % NET CAPEX JV % Total CAPEX (organic & JV) % Cash Flow % Dividends % 46 Free Cash Flow %

47 Operating Results by Business Group VINYL Business Group (38% and 39% of Mexichem s sales before eliminations and EBITDA, respectively, in 1Q16) First Quarter Vinyl %Var. Volume (K Tons) % Total Sales* % Operating Income** % EBITDA** % *Intercompany sales were $40 million and $52 million in 1Q16 and 1Q15, respectively. **Includes Ingleside expenses of $2 million (1Q16). 47

48 Operating Results by Business Group VINYL Business Group (38% and 39% of Mexichem s sales before eliminations and EBITDA, respectively, in 1Q16) *Intercompany sales were $49 million and $66 million in 1Q16 and 1Q15, respectively. Of these amounts $9 million and $14 million were invoiced to PMV in 1Q16 and 1Q15. **Includes Ingleside expenses of $2 million (1Q16). First Quarter PMV %Var. Total Sales* % Operating Income 2-12 N/A EBITDA 11 0 N/A *Intercompany sales invoiced to Resins, Compounds and Derivatives were $23 million and $24 million in 1Q16 and 1Q15, respectively 48

49 Operating Results by Business Group FLUENT Business Group (51% and 41% of Mexichem s sales before eliminations and EBITDA, respectively, in 1Q16) First Quarter Fluent %Var. Sales % Fluent LatAm % Fluent Europe % Fluent US/AMEA % Intercompany Eliminations (1) (2) -26% Operating Income % EBITDA % 49 1Q15 1Q15 1Q16 Sub16 Sub16/1Q15 Sub16/1Q15 * In million dollars EBITDA EBITDA* EBITDA FX Total % Var Comp % Var Comp Fluent LatAm % 35% Fluent Europe % 18% Fluent US/AMEA % 9% Total % 26% *EBITDA includes $9 million of restructuring costs and non-recurring expenses

50 Operating Results by Business Group FLUOR Business Group (11% and 24% of Mexichem s sales before eliminations and EBITDA, respectively, in 1Q16) First Quarter Fluor %Var. Sales % Operating Income % EBITDA % 50