LANXESS FY 2011 Results Conference Call Price-before-volume key to a successful year

Transcription

1 LANXESS FY Results Conference Call Price-before-volume key to a successful year Axel C. Heitmann, CEO Bernhard Duettmann, CFO Safe harbor statement This presentation contains certain forward-looking statements, including assumptions, opinions and views of the company or cited from third party sources. Various known and unknown risks, uncertainties and other factors could cause the actual results, financial position, development or performance of the company to differ materially from the estimations expressed or implied herein. The company does not guarantee that the assumptions underlying such forward looking statements are free from errors nor do they accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the company or any of its parent or subsidiary undertakings or any of such person s officers, directors or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. Chart 2 1

2 Agenda Executive overview Business and financial review Outlook Chart 3 : The most successful year ever since EBITDA * [ million] , Growth Growth Transformation Crisis * Pre exceptionals Chart 4 2

3 : Outstanding performance Business Substantial increase in raw material prices offset Value generation with company ROCE at 17.2% Good pricing power Growth EBITDA at bn with 25% yoy growth All organic growth projects on schedule Five value-adding acquisitions successfully completed Well on track for bn EBITDA target Guidance EBITDA above guidance EBITDA = EBITDA pre exceptionals Chart 5 Net income up by 34% in Sales [ million] +23% 8,775 7,120 EBITDA* [ million] +25% 1, Net income [ million] +34% EBITDA* margin EPS 12.9% 13.1% * Pre exceptionals Chart 6 3

4 Successful pricing strategy for 7 years support Raw material effects offset year-by-year change in input costs change in selling prices sequentially Premium high-tech products Price-before-volume strategy Customer-orientation Focused and experienced team Seven years track record of managing volatile input costs Effective pricing is a key element of LANXESS strategy Price-before-volume intact even in Q4 with decreasing raw material prices burden Q1 Q2 Q3 Q4 Pricing strategy effective with both rising and falling raw material costs Chart 7 Dividend increase of 21% reflects strong performance Dividend per share [ ] * Dividend of 0.85 per share proposed Total payout of 71 million Dividend increase of 21% yoy LANXESS dividend policy LANXESS aims to ensure that its stockholders benefit appropriately and sustainably from its business performance * Proposal to the Annual Stockholders Meeting Chart 8 4

5 Strong growth in all regions Asia first time above 2 bn sales by region [%] Regional development of sales [ million] Operational 8,775 development* Asia/Pacific 23 LatAm 14 North America 16 Germany 18 EMEA (excl. Germany) 29 Asia/Pacific LatAm North America EMEA (excl. Germany) Germany 7,120 2, % 1,633 1, % 955 1,458 1, % 2, % 2,546 1, % 1, % +26% +24% +18% +16% * Currency and portfolio adjusted Chart 9 All three segments contribute to growth Performance Polymers Advanced Intermediates Performance Chemicals EBITDA* [ million] EBITDA* [ million] EBITDA* [ million] EBITDA* margin EBITDA* margin EBITDA* margin 14.8% 15.2% 18.4% 17.1% 14.2% 13.6% * Pre exceptionals Chart 10 5

6 A year of targeted investments and acquisitions ONGOING Butyl Singapore In construction with start-up in Q1 2013; 100kt (BTR) Nd-PBR Singapore Greenfield planning ongoing (PBR) Nd-PBR Brazil and USA Debottlenecking 20kt (ready in Q1 12) + 20kt product mix optimization (PBR) Organic growth Compounds India and Brazil 20kt beginning 2012 in India and 20kt mid 2013 in Brazil (SCP) Compounds USA Groundbreaking in March; 20kt to be completed in 2012 (SCP) NBR China 30kt in JV with TSRC on stream in H (TRP) Menthol Germany Groundbreaking in July; capacities on stream in H (AII) Leather China Groundbreaking in July; up to 50kt on stream H (LEA) COMPLETED Nd-PBR Germany and USA 30kt debottlenecking completed (PBR) Caprolactam Belgium Additional 10% capacity implemented (SCP) Compounds China Increased capacity up to 60kt in mid (SCP) Membrane filtration Germany New plant on stream since September (ION) Butyl Belgium Expansion work at year end with 14kt capacity increase (BTR) Formalin Germany New plant +150kt on stream since end (AII) External growth PORTFOLIO Darmex Vulcanization bladders and release agents for tire industry (RCH) Syngenta Material protection business (MPP) DSM EPDM rubber business (TRP) UNITEX Phthalate-free plasticizers business (FCC) Verichem Biocide business in material protection (MPP) Organic growth: selected projects Chart 11 Agenda Executive overview Business and financial review Outlook Chart 12 6

7 FY financial overview: A year of substantial profit increase FY 2010 FY yoy in % Sales EBITDA pre except. margin EPS EPS pre Capex* 7, % * Net of projects financed by customers, finance lease and capitalized borrowing costs 8,775 1, % Strong growth and performance improvement Chart % 24.8% 33.5% 36.2% 35.5% % vs. YE Net financial debt 913 1, % Net working capital Employees 1,372 14,648 1,766 16, % 11.9% Strong top-line improvement Price-before-volume strategy supports EBITDA Capex above guidance due to acceleration of projects, maintenance and purchase of intangible assets Net debt rises on growth projects, acquisitions and working capital Working capital increase driven by raw material inflation and portfolio Headcount increase due to R&D, organic and external growth Strict price-before-volume pays off FY yoy sales variances Price Volume Currency Portf. Total Perf. Polymers 27% 4% Adv. Intermediates Perf. Chemicals 8% 7% 3% 0% -4% -2% -2% 11% 0% 2% 37% 9% 8% Price increases and external growth main drivers for top line increase Volume and currency effects offset each other LANXESS 17% 3% -3% 6% 23% FY yoy EBITDA pre bridge ,146 FY 2010 Volume Price Input costs Others FY Price increases drive EBITDA; input costs offset Others contains currency, turnaround costs and higher labor agreements almost offset by portfolio Chart 14 7

8 Stable EBITDA pre in Q4 compares to strong 2010 base Q Q4 yoy in % Sales 1,832 (100%) 2,123 (100%) 16% Cost of sales -1,421 (78%) -1,705 (80%) 20% Selling -176 (10%) -192 (9%) 9% G&A -101 (6%) -104 (5%) 3% R&D -27 (2%) -39 (2%) 44% EBIT 78 (4%) 52 (2%) -33% Net Income 26 (1%) 5 (0%) -81% EPS % EBITDA 157 (9%) 144 (7%) -8% thereof exceptionals -15 (1%) -30 (1%) 100% EBITDA pre exceptionals 172 (9%) 174 (8%) 1% Operational cost items under control Solid sales increase due to strong pricing (+13%), portfolio effects (+10%) and slight support by currency (+1%), burdened by volume decrease (-8%) due to customer destocking ~ 35 m inventory devaluation weigh on gross margin and earnings Exceptionals increase due to pharma realignment in SGO (~ 20 m) Chart 15 Performance Polymers: Excellent EBITDA performance despite challenging environment in Q4 Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * Q Q , % 10.1% Sales increase due to strong pricing and portfolio contribution, mitigated by volume decreases (customer destocking) Higher prices in all BUs offset input cost inflation yoy BUs BTR, PBR and SCP with maintenance and customer destocking leading to respective volume decline Inventory devaluation (Butadiene) mainly in BU PBR weighs on segment margin Capex increase reflects growth plans as selected projects were accelerated Sales by BU Sales bridge yoy PBR TRP % -9% 1% 17% 1,261 BTR SCP Q (approximate numbers) Price Volume Currency Portfolio Q4 * Net of capitalized borrowing costs Chart 16 8

9 Advanced Intermediates: Solid quarter of a resilient business Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * Q Q % 15.4% Stable sales as higher prices balance lower volumes Pricing again offsets higher raw material costs Ongoing strong demand from agro business in both BUs while other end markets softened (e.g. paints and coatings) Realignment initiated in business line Pharma of BU SGO; exceptional expenses of ~ 20 m weigh on EBIT Menthol expansion and softening in polyols (BU AII) lead to increased idle costs and burden margin Capex increase due to organic growth (e.g. Formalin plant) Sales by BU SGO Sales bridge yoy 6% -7% 0% 0% AII Q (approximate numbers) Price Volume Currency Portfolio Q4 * Net of projects financed by customers, capitalized borrowing costs and finance lease Chart 17 Performance Chemicals: Weak construction business burdens EBITDA Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * Q Q % 5.9% Higher sales due to higher price level and portfolio contribution; partly offset by lower volumes (customer destocking) Higher raw material prices successfully passed on Volume increase in BU ION from new plant in India BU IPG (construction) and BU LEA (supplier s outage) with strongest EBITDA declines Lower capacity utilization leads to higher idle costs and weighs on margins RUC Sales by BU ION MPP IPG 471 Sales bridge yoy 5% -5% 0% 4% 490 RCH LEA FCC Q (approximate numbers) Price Volume Currency Portfolio Q4 * Net of capitalized borrowing costs Chart 18 9

10 Solid balance sheet amid increasing business activity Dec 10 Sep 11 Dec 11 Dec 10 Sep 11 Dec 11 Non-current assets 2,738 3,130 3,489 Intangible assets Property, plant & equipment 2,131 2,345 2,679 Equity investments Other investments Other financial assets Deferred taxes Other non-current assets Current assets 2,928 3,614 3,389 Inventories 1,094 1,491 1,386 Trade accounts receivable 942 1,237 1,146 Other financial & current assets Near cash assets Cash and cash equivalents Total assets 5,666 6,744 6,878 Stockholders equity 1,761 2,081 2,074 Non-current liabilities 2,454 2,571 2,715 Pension & post empl. provis Other provisions Other financial liabilities 1,302 1,385 1,465 Tax liabilities Other liabilities Deferred taxes Current liabilities 1,451 2,092 2,089 Other provisions Other financial liabilities Trade accounts payable Tax liabilities Other liabilities Total equity & liabilities 5,666 6,744 6,878 Working capital development in line with increased raw material prices, portfolio effects and higher business activity Inventory reduction visible from September to December ; working capital strictly managed Net debt to EBITDA ratio at comfortable ~1.3x Chart 19 Strong business platform generates excellent operating cash flow FY 2010 FY Profit before tax Depreciation & amortization Gain from sale of assets Increased business performance leads to higher profit before tax Grown asset base drives D&A Result from equity investments Higher cash outflow for working Financial (gains) losses capital due to raw material Cash tax payments / refunds inflation Changes in other assets and liabilities Capex acceleration, extended Operating cash flow before changes in WC & CTA maintenance and acquisitions Changes in working capital increase investing cash flow CTA funding * Operating cash flow m bond in financing cash flow partly offset by dividends, Investing cash flow interest and settlement of thereof capex ** acquisition-related debt Financing cash flow Growth mode reflected in cash flow * CTA (Contractual Trust Arrangement) funding formerly shown in investing cash flow ** Net of projects financed by customers, capitalized borrowing cost and finance lease Chart 20 10

11 Agenda Executive overview Business and financial review Outlook Chart 21 LANXESS is confident for 2012 Current macro view Growth in emerging markets remains at solid levels Green Mobility with increasing importance Solid agro end market trend to continue Gradual recovery of construction market expected Ongoing uncertainties: high national deficits, volatile FX, raw material price volatility and some cautiousness among European customers LANXESS well positioned for growth Several capacity expansions to come on stream Tire labeling regulation in EU and South Korea as of end 2012 Promising start in 2012 Q1 EBITDA pre expected above Q1 ( m) Chart 22 11

12 Detailed business outlook provides confidence Performance Polymers Customers order more cautious, however, demand for Butyl rubber strong in Q1 Increasing demand for high-performance rubber Strong contribution from EPDM Solid start to the year in high-tech plastics Advanced Intermediates Strong agro demand trend expected to continue in both BUs with usual seasonality after solid start to the year Realignment of SGO s pharma business in 2012 Performance Chemicals Ongoing weak demand for colorants in E&E Strong demand in Ion Exchange Resins and start of membrane production to support 2012 performance Moderate improvement of construction market expected Chart 23 New plant for Butyl in Singapore fully on track Key points Construction of 100kt butyl rubber plant on schedule Start-up in Q m investment Installation of infrastructure completed major assets on site All major vessels installed Currently more than 2,000 workers active on site Chart 24 12

13 Chart 25 Appendix 13

14 2012 financial expectations Additional financial expectations for 2012 Capex: ~ 600 m D&A: ~ m Tax rate: ~22% Hedging 2012: ~40% at USD / EUR Hedging 2013: ~15% at USD / EUR Chart 27 Growth mode is also reflected in productivity and headcount Headcount 18,000 16,000 14,000 12,000 Headcount development and productivity Productivity Productivity* [ k / employee] LANXESS improved its productivity since day one After successful portfolio transformation LANXESS with focus on growth Since 2010 increase of productivity and headcounts in tandem 10, HY 0 * Productivity in EBITDA pre exceptionals per employee Chart 28 14

15 Capex increase for further growth Capital expenditures 1 [ million] +36% North America -27% Investments by region 3 [Increase vs 2010] Germany +15% EMEA (excl. Germany) +81% Asia/Pacific Latin America +43% +53% 2010 Investment ratio 2 7.0% 7.7% Asia with significant share of investments 1 Net of projects financed by customers, finance lease and capitalized borrowing costs 2 Capex in relation to sales 3 Circle size indicates level of investment; illustration Chart 29 R&D key to technology leadership R&D expenditures [ million] +24% R&D expense ratio * 1.6% 1.6% Committed to increasing R&D activities - New BTR process technology - Bio-based EPDM Keltan Eco - Cooperation for additional bio-based raw materials - Resource and energy efficiency increase of processes - International cooperations with universities and research institutes * In relation to sales Chart 30 15

16 Q4 : Solid growth in Latin and North America Q4 sales by region [%] Regional development of sales [ million] 2,123 Operational development* Asia/Pacific 25 LatAm 14 North America 17 Germany 17 EMEA (excl. Germany) 27 Asia/Pacific LatAm North America EMEA (excl. Germany) Germany 1, % % % % % 353 Q Q4 +8% +14% +14% +0% -3% * Currency and portfolio adjusted Chart 31 Q4 financial overview: Strong business performance despite devaluation effects Q Q4 yoy in % Sales EBITDA pre except. margin EPS Capex* 1, % , % % 1.2% -81.3% 20.0% % vs. YE Net financial debt 913 1, % Net working capital Employees 1,372 14,648 1,766 16, % 11.9% Sales increase on higher price level and acquisitions but burdened by volumes Sequential price decline lower than raw material deflation Capex above guidance; expenditures accelerated Working capital, acquisitions and capex increase net debt Raw material inflation, acquisitions and increased business activity drive working capital Headcount increase mainly due to recent acquisitions Solid EBITDA performance shaded by ~ 35 m inventory devaluation * Net of projects financed by customers, finance lease and capitalized borrowing costs Chart 32 16

17 EBITDA stable prices compensate volume and input costs Q4 yoy sales variances Price Volume Currency Portf. Total Perf. Polymers 19% -9% Adv. Intermediates Perf. Chemicals LANXESS 6% 5% 13% Q4 yoy EBITDA pre bridge -7% -5% -8% 1% 0% 0% 1% 17% 0% 4% 10% Q Volume Price Input costs Others Q4 28% -1% 4% 16% Solid sales increase due to higher price level mitigated by volume development Volume setback due to customer uncertainty and destocking Price-before-volume intact, selling price level above raw material price level Others mainly include portfolio and currency effects partly offset by maintenance Chart 33 A year of strong EBITDA generation FY 2010 FY yoy in % Sales 7,120 (100%) 8,775 (100%) 23% Cost of sales -5,381 (76%) -6,765 (77%) 26% Selling -646 (9%) -732 (8%) 13% G&A -298 (4%) -325 (4%) 9% R&D -116 (2%) -144 (2%) 24% EBIT 607 (9%) 776 (9%) 28% Net income 379 (5%) 506 (6%) 34% EPS % EBITDA 890 (13%) 1,101 (13%) 24% thereof exceptionals -28 (0%) -45 (1%) 61% EBITDA pre exceptionals 918 (13%) 1,146 (13%) 25% Financial metrics well under control Increased sales through higher price level (+17%) and positive portfolio effects (+6%) while volume (+3%) and currencies (-3%) balance each other Cost of sales burdened by ~ 55 m inventory devaluation R&D increases on commitment to technology development Excellent EBITDA pre due to a strong price-before-volume performance Chart 34 17

18 Performance Polymers: Strong performance driven by significant price increases FY 2010 FY Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * 3, % 298 5, % 437 Sales by BU SCP BTR TRP PBR Price and volume increases in all BUs in tandem Butadiene-driven raw material cost increase fully offset PBR with positive mix effect however impacted towards yearend by inventory devaluation (Butadiene) BU SCP expansion activities completed according to plan; Keltan-EPDM integration on track in BU TRP Positive pricing and strong portfolio effect support segment EBITDA; margins above previous year s high level Capex increase reflects growth plans as selected projects were accelerated Sales bridge yoy 3,692 27% 4% -4% 11% 5,059 (approximate numbers) FY 2010 Price Volume Currency Portfolio FY * Net of capitalized borrowing costs Chart 35 Advanced Intermediates: EBITDA driven by agro business FY 2010 FY Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * 1, % 73 1, % 107 Sales by BU SGO Sales increase on higher prices and volumes in tandem Price increases compensate raw material price inflation Both BUs with strong volumes based on agro-related demand Additional volumes from expansion of cresol train at BU AII BU SGO with continued softening in pharma products; realignment initiated in Q4 (~ 20 m exceptionals) EBITDA increases slightly above strong level of previous year Solid margins mirror price pass-through Higher capex in BU AII (Cresols, Menthol and Formalin) Sales bridge yoy 8% 3% -2% 0% 1,411 1,545 AII FY 2010 (approximate numbers) Price Volume Currency Portfolio FY * Net of projects financed by customers, capitalized borrowing costs and finance lease Chart 36 18

19 BU SGO: A leading custom-manufacturer for fine chemicals Key figures Sales: m Production: Leverkusen and Dormagen (GER) Global demand outsourcing: 61 bn CAGR ~5% ( ) Competitors: Albemarle, DSM, Evonik, ICIG, Lonza Drivers: Increased crop demand and increasing population Specialities 10% Pharma 20% End uses* Agro 70 % Raw material Advanced Intermediate Active Ingredient Formulation Customer Idea Lab Process Development Pilotation Production Market Technology base and production know-how are key assets * BU sales as of Chart 37 Performance Chemicals: Strong pricing fuels segment performance Sales EBIT Depr. / Amort. EBITDA EBITDA pre exceptionals Margin Capex * FY 2010 FY 1,978 2, % 13.6% Solid pricing drives sales increase; portfolio contribution offsets negative currency effect Price increases compensate raw material inflation BU RUC and BU MPP major contributors to EBITDA increase BU LEA impacted by industry strikes in South Africa and Argentina as well as a supplier s outage BU IPG with year-end impact from construction slowdown Strict adherence to price-before-volume strategy leads to solid margin RUC Sales by BU ION MPP IPG 1,978 Sales bridge yoy 7% 0% -2% 2% 2,130 RCH LEA FCC FY 2010 (approximate numbers) Price Volume Currency Portfolio FY * Net of capitalized borrowing costs Chart 38 19

20 Strong cash flow above previous year driven by strict working capital management Q Q4 Profit before tax 32 4 Depreciation & amortization Gain from sale of assets 0 0 Result from equity investments 7 12 Financial (gains) losses Cash tax payments / refunds Changes in other assets and liabilities 8-51 Operating cash flow before changes in WC & CTA Changes in working capital CTA funding* Operating cash flow Investing cash flow thereof capex** Financing cash flow Solid cash generation Profit before tax below previous year mainly due to inventory devaluation and exceptionals Increase in cash-outs for tax due to prepayments Changes in other assets due to financial derivatives (fair value) and share based compensation provisions Cash inflow from working capital through inventory management Investing cash flow driven by Q4 capex increase * CTA (Contractual Trust Arrangement) funding formerly shown in investing cash flow ** Net of projects financed by customers, capitalized borrowing cost and finance lease Chart 39 A well managed and conservative maturity profile Long term financing secured Well balanced maturity profile Diversified financing sources - Bonds and bilateral credit lines - Syndicated credit facility - Development banks Financing of bond maturity in June 2012 secured by liquidity and undrawn credit lines New CNH 500 m Renminbi bond 1 (~ 60 m) placed in Asia maturing 2015 to finance China investments & operations Liquidity and maturity profile as per December Bond % Bond % Synd. Credit Facility 1.4 bn Bond % Incl. EIB 2 Facility 3 Bond % >2017 Financial liabilities Cash & cash equivalents Near cash assets Undrawn long-term facilities 1 Placed February 2012, offshore bond 2 European Investment Bank 3 Final maturity of EIB financing in case of utilization in 2016 or later; EIB facility currently undrawn Chart 40 20

21 Premium products and technologies for global megatrends Mobility Urbanization Agriculture Water Chart 41 Raw material price declined in Q4, set to recover in Q [%] Global raw materials index* Raw material prices increase since the start of 2010 Feedstock prices (mainly Butadiene and Cyclohexane) continued their rise during Downward trend in H2 in raw material prices; related inventory devaluation ~ 55 m Prices stopped their downward trend at beginning of the year Q Q Q Q Q Q Q Q Q1 Q2 Q3 Q4 Q LANXESS committed to price-before-volume strategy * Source: LANXESS, average 2008 = 100% Chart 42 21

22 Business line Adipic Acid shifted to BU AII [ million] Adipic Acid used captively and for external sales External sales EBIT D&A EBITDA Q Adipic Acid sales split into: - External sales - Inter-BU sales - BU Captive use Business line Adipic Acid transferred from Performance Polymers to Advanced Intermediates Originally located in BU SCP, now part of BU AII Restatement reflects transfer of financials from Performance Polymers and addition to Advanced Intermediates Transfer of Adipic Acid: value chain streamlined Chart 43 Exceptional items incurred in Q and Q4 Q Q4 Exceptional thereof D&A Exceptional thereof D&A Performance Polymers Advanced Intermediates Performance Chemicals Reconciliation Total Chart 44 22

23 Exceptional items incurred in FY 2010 and FY FY 2010 FY Exceptional thereof D&A Exceptional thereof D&A Performance Polymers Advanced Intermediates Performance Chemicals Reconciliation Total Chart 45 Abbreviations Performance Polymers Advanced Intermediates BTR PBR TRP SCP Butyl Rubber Performance Butadiene Rubbers Technical Rubber Products Semi-Crystalline Products AII* SGO Advanced Industrial Intermediates Saltigo Performance Chemicals MPP IPG FCC LEA RCH RUC ION Material Protection Products Inorganic Pigments Functional Chemicals Leather Rhein Chemie Rubber Chemicals Ion Exchange Resins * Formerly known as BAC (Basic Chemicals) Chart 46 23

24 Upcoming events 2012 Upcoming events Q1 results 2012 May 9, 2012 AGM May 15, 2012 Q2 results 2012 August 7, 2012 Capital Markets Day September 19/20, 2012 Q3 results 2012 November 6, 2012 Chart 47 Contact detail Investor Relations Oliver Stratmann Verena Simiot Head of Investor Relations Assistant Investor Relations Tel. : Fax. : Mobile : Oliver.Stratmann@lanxess.com Tel. : Fax. : Mobile : Verena.Simiot@lanxess.com Tanja Satzer Ulrike Weihs Constantin Fest Joachim Kunz Private Investors / AGM Institutional Investors / Analysts Institutional Investors / Analysts Institutional Investors / Analysts Tel. : Fax. : Mobile : Tanja.Satzer@lanxess.com Tel. : Fax. : Mobile : Ulrike.Weihs@lanxess.com Tel. : Fax. : Mobile : Constantin.Fest@lanxess.com Tel. : Fax. : Mobile : Joachim.Kunz@lanxess.com Chart 48 24