Kerling plc. Investor Day presentation. Investor Days London & New York. 16 th and 20 th April 2012

Transcription

1 Kerling plc. Investor Day presentation Investor Days London & New York 16 th and 20 th April

2 Agenda I Business Overview - Kerling II Financials - Kerling III ChlorVinyls SHE, Financials and Issues 2

3 Business Overview 3

4 Kerling business portfolio Kerling Plc 10% 36% 18% 90% 46% INEOS ChlorVinyls Heritage ICI, EVC Heritage Norsk Hydro PVC resin and compounds Caustic soda Chlorine derivatives (chloromethanes, chlorinated paraffins, hydrochloric acid) 50% ownership of Norwegian ethylene cracker #1 PVC and #2 caustic soda (merchant sales) in Europe #1 in chlor-alkali in UK and Nordic region #1 globally in chlorinated paraffins UK, Norway, Sweden, Germany and Switzerland LVM Heritage Tessenderlo Chemie Group PVC ChlorAlkali #5 PVC market share in Europe #1 KOH market share in Europe France, Belgium and Netherlands INEOS Enterprises Heritage ICI Brine Salt Sulphuric acid Biodiesel, esters #1 UK salt producer by volume #1 sulphuric acid producer in the UK #2 biodiesel producer in France UK and France 4

5 Kerling financial dimensions Kerling Plc Sales 2011E 2,806m EBITDA 2011E 210m Employees 3,793 Sites 16 INEOS ChlorVinyls INEOS Enterprises Sales 2011E 2,558m EBITDA 2011E 168m Employees 3,351 Sites 12 Sales 2011E 248m EBITDA 2011E 42m Employees 442 Sites 4 Note 1: Unaudited preliminary financials Note 2: Adjusted EBITDA before exceptionals Note 3 : Proforma for 12 months with LVM 5

6 ChlorVinyls 6

7 SHE performance in line with industry leaders and far ahead of European peers Recordable Rate (Emp+Ctr) 100,000hrs ChlorVinyls BP Shell Exxon Arkema Chlorvinyls data for 2010, comparables using latest published data from

8 Asset overview - ChlorVinyls (ktpa) Ethylene Chlorine VCM PVC Other Chlorine derivatives Runcorn (UK) * Rafnes (N) Wilhelmshaven (DE) Stenungsund (S) Aycliffe (UK) 300 Schkopau (DE) 310 Tessenderlo (BE) * Beek (NL) 225 Mazingarbe (FR) 255 Total * In tonnes of chlorine 8

9 Runcorn UK Rafnes Norway Wilhelmshaven Germany 9 Tessenderlo Belgium

10 ChlorVinyls: European #1 PVC, caustic soda, caustic potash, chlorine derivatives and ethylene contributed 80% of Kerling s combined EBITDA (1) Europe s leading PVC, caustic soda and caustic potash producer Durable blue-chip customer base No single customer accounts for more than c. 5% of total revenues Kerling is the only PVC producer in Western Europe with its own ethylene (1) EBITDA before exceptionals 2011 Note : Unaudited preliminary financials Source: Management 10

11 2011 Revenue breakdown Revenues by Product Revenue by Geography Compounds 6% Caustic 21% Other 15% E-PVC 5% S-PVC 53% Other ROW 12% Turkey, India & Russia 9% Poland 5% Benelux 10% Other EU 9% Scandinavia 13% Germany 16% UK 20% France 6% 11

12 European PVC market Market size is about 5 m. tes Kerling share is ~30%* Growth is related to GDP Diverse user base European capacity forecast to decline despite improving demand Regional market structure with high barriers to entry Middle East and Asia no threat Transport costs erode raw materials cost advantage Asian capacity additions are needed to meet strong domestic demand growth PVC industry positioned for strong recovery CMAI expects steep rise in industry gross margins by 2015 Profiles & Tubes 4% Wire & Cable 8% Coatings 4% Bottles 1% Flooring 6% PVC Demand by End Use Film & Sheet 19% Source: IHS March Data is for Western Europe in 2011 All Others 4% Window Profiles 31% Pipes & Fittings 23% Regional PVC Market Share by Capacity % Kerling+LVM Solvin Vinnolit Arkema Shin-Etsu Vestolit Vinilis Vinyls Italia Vinylberre Cires Aiscondel Hellenic * Incl. LVM 12 Source: CMAI November 2009, Company estimates 2011

13 European caustic soda market: counter-cyclical to PVC Caustic soda is counter-cyclical to PVC Caustic soda demand is diverse across a range of end-uses: Pulp / paper / cellulose: adhesives, newspapers, books Aluminium and metals: cans, car / aeroplane panels, steel hardening Market is regional Kerling benefits from strong market share and cost leadership Caustic soda prices and margins have risen, supported by slow recovery in PVC IHS estimates that 2011 demand was 1.5% down on 2010 % Caustic Soda Demand by End Use Inorganic chemicals 22% Textiles 4% Soaps & Detergents 5% Water treatment 5% Organic chemicals 20% Other 20% Pulp & Paper 14% Alumina 4% Propylene Oxide 6% Regional Caustic Soda Market Share by Sales (1) Kerling+LVM Solvay Akzo Dow Arkema Bayer Vinnolit Anwil Ercros Vestolit (1) Merchant sales excludes sales of anhydrous caustic soda and any caustic soda consumed captively by the producer Source: IHS, Kerling 13

14 Wide range of downstream applications Chlorine products are present in numerous industrial and manufacturing processes Chlorine chemicals PVC Compounds Caustic Cosmetics Water and sewage Lubricants agrichemcials Pulp, paper and packaging Household products & cleaning Building Products Construction Infrastructure Food & ingredients Pharma & medical Automotive Metal alloys 14

15 Continuous improvement to fixed costs and output is key to success ChlorVinyls Fixed Costs ( m) Heritage ChlorVinyls Fixed Cost Performance 54% reduction in Chlor headcount 50% reduction in ChlorVinyls fixed costs Chlor Headcount 2,500 2,000 1,500 1, % 25% 20% 15% 10% 5% 0% Heritage ChlorVinyls Output Increase since 2000 PVC VCM CMs Chlorine 2011 ChlorVinyls Fixed costs 25% or ~ 90m lower than 2007 m p.a. Significant Potential from the LVM acquisition Acquired fixed costs of approx 112m Major headcount/cost reduction project now underway, targetting savings of > 20% Output increases also available through higher operating levels and debottleneck investments Source: Kerling internal analysis 15

16 EBITDA Chlorvinyls m Proforma EBITDA BOC TOC 16 Includes LVM as reported

17 INEOS Chlorvinyls 2011 Performance EBITDA of 168m still at BoC conditions New production records set for Runcorn Membrane Chlorine Runcorn HPE Runcorn Chloromethanes Runcorn Cereclor Schkopau S-PVC Stenungsund P-PVC High cash conversion rate (EBITDA less capex / EBITDA) of 68% 17

18 Margin development quarterly averages /tn Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SPVC - 0.5E (undiscounted) SPVC - 0.5E (undiscounted) Caustic - Energy Price sources: Harriman Chemsult Ltd, EEX power. 18

19 Q1 performance to date PVC demand down 3% from Q1 11* Caustic demand down 6% from Q1 11* Calculated margin over ethylene and energy down 1% from Q1 11 (Jan/Feb average) European Markets slow to recover from Q4 11 *IHS estimates 19

20 Strategic developments 2011 New long term power supply agreement with Statkraft in Norway Energy from Waste project progressing according to plan Implementation of major Chloroform deal LVM acquisition Additional financing 20

21 Strategic developments 2011 New long term power supply agreement with Statkraft in Norway Energy from Waste project progressing according to plan Implementation of major Chloroform deal LVM acquisition Additional financing 21

22 LVM Synergy Opportunities pre completion view Pro Forma EBITDA Bridge m (5) PF LTM Mar '11 EBITDA Distribution Raw Materials Fixed Costs 20% Contingency PF Adjusted LTM Mar '11 EBITDA Kerling Synergies Target Considerations High synergies potential with run rate synergies to achieve 20million Enlarged asset portfolio to facilitate c. 2 million of distribution savings through optimisation of customer site supply arrangements Raw material procurement benefits of c. 4 million through access to Kerling purchasing power Room to improve Target's operations and rationalise organisational structure of the combined entity leading to an estimated 19 million of fixed cost savings across the enlarged group Conservative 20% contingency assumption Synergies expected to be delivered over 3 years Spare capacity utilisation presents further upside potential 22

23 The initial review is giving us confidence in our synergy targets m Fixed Cost reduction Logistics savings Procurement Output increases Total EBITDA increase Working capital reduction Updated targets

24 Summary Europe s leading and lowest cost PVC producer Excellent SHE performance Well invested, strategically located assets Interesting growth opportunities available Strong cash flow generation even at bottom of cycle Significant synergy benefits from LVM acquisition 24