Styrolution Group GmbH

Transcription

1 Styrolution Group GmbH Unaudited Presentation of Results of Operations, Financial Position and Cash flow three and twelve months ended 2013 Forward Looking Statements The following presentation includes forward-looking statements, based on our current expectations and projections about future events, including: the cyclical nature of our businesses and their sensitivity to changes in supply and demand; raw material availability and costs, as well as supply arrangements, including arrangements with principal feedstock suppliers; the highly competitive nature of our principal industries; current or future environmental requirements, including those related to greenhouse gas and other air emissions, and the related costs of maintaining compliance and addressing liabilities; currency fluctuations and economic downturns in the countries in which we operate; our ability to implement our business and cost reduction strategies; our ability to successfully integrate our businesses and realize anticipated synergies and cost savings; and our substantial indebtedness following the consummation of the Joint Venture Transaction may affect our ability to service our outstanding indebtedness, which would likely impact the way we operate our business. All statements other than statements of historical facts included in this presentation, without limitation, statements regarding our future financial position, risks and uncertainties related to our Company and the notes, strategy, capital expenditures, projected costs and our plans and objectives for future operations, may be deemed to be forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Words such as believe, expect, anticipate, may, intend, will, should, estimate and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. In addition, from time to time we or our representatives, acting in respect of information provided by us, have made or may make forwardlooking statements orally or in writing and these forward-looking statements may be included in but are not limited to press releases (including on our website), reports to our security holders and other communications. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reporting entity Styrolution Group GmbH ( Group GmbH or the Company ) is an intermediate holding Company which is wholly owned by Styrolution Beteiligungs GmbH, a wholly owned subsidiary of Styrolution Holding GmbH. Styrolution Holding GmbH is a joint venture ultimately owned by two shareholders, INEOS Industries Holdings Ltd., a subsidiary of INEOS AG, and BASF SE ( BASF ). INEOS Industries Holdings Ltd. ( INEOS ) owns 50% of the shares of Styrolution Holding GmbH. BASF SE directly owns 18.09% of the shares of Styrolution Holding GmbH and indirectly through BASF Antwerpen N.V. (a wholly owned subsidiary) another 31.91%. The Company is domiciled in Germany and has its registered office at Erlenstrasse 2, Frankfurt am Main, Germany. The Company was formed on 19 April The Unaudited Presentation of Results of Operations, Financial Position and Cash flow ( presentation ) comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities ). The Group is the leading global producer, marketer and merchant seller of styrene monomer and styrenics polymers. 1

2 Styrolution Group GmbH Unaudited Presentation of Results of Operations, Financial Position and Cash flow Consolidated Statement of Income for the three and twelve months ended October to Revenue 1, ,837.2 Cost of sales (1,182.0) (5,223.7) Gross profit Selling expenses (60.7) (265.8) General and administrative expenses (24.8) (100.8) Research and development expenses (3.7) (13.7) Other operating expenses (net) (21.5) (38.3) Income from operating activities Interest income Interest expense (13.0) (48.9) Other finance loss (net) (15.7) (23.7) Net finance costs (28.2) (69.0) Income before tax Income tax benefit (expense) 14.8 (10.5) Net income Attributable to: Non-controlling interests Owners of the company

3 Styrolution Group GmbH Unaudited Presentation of Results of Operations, Financial Position and Cash flow Consolidated Statement of Financial Position Assets Property, plant and equipment Intangible assets and goodwill 1, ,312.0 Deferred tax assets Other receivables and miscellaneous non-current assets Non-current assets 2, ,162.3 Inventories Accounts receivable, trade Other receivables and miscellaneous current assets Cash and cash equivalents Current assets 1, ,592.4 Total assets 3, ,754.7 Equity Share capital Contributed surplus 1, ,641.4 Other reserves (26.2) 17.3 Retained earnings (accumulated deficit) 71.0 (38.0) Equity attributable to owners of the Company 1, ,630.7 Non-controlling interests Total equity 1, ,637.5 Liabilities Financial indebtedness Employee benefits Deferred tax liabilities Other liabilities and other long term provisions Non-current liabilities ,027.5 Accounts payable, trade Financial indebtedness Current tax liabilities Other liabilities and short term provisions Current liabilities 1, ,089.7 Total liabilities 1, ,117.2 Total equity and liabilities 3, ,

4 Styrolution Group GmbH Unaudited Presentation of Results of Operations, Financial Position and Cash flow Consolidated Statement of Cash Flow Cash flows from operating activities Income before tax Adjustment for: Depreciation of property, plant and equipment Amortization of intangible assets Change in other receivables (19.4) 3.2 Change in pension provisions, other liabilities and charges (53.9) 6.7 Net finance cost Current income tax paid (64.8) (58.4) Working capital adjustments: - Inventories 60.6 (123.3) - Trade receivables Trade payables (25.9) (72.6) Cash generated from operating activities Interest paid (39.7) (44.9) Net cash flows from operating activities Cash flows from investing activities Investments in property, plant and equipment and intangible fixed assets (123.9) (127.9) Proceeds from disposal of property, plant and equipment and intangible assets Repayment of other investments (0.5) 0.0 Receipt of other investments Proceeds from sale of disposal group (ELIX) Net cash flows used in investing activities (123.7) (101.9) Cash flows from financing activities Share purchase India 0.0 (6.6) Share sales India Receipt (repayment) from asset securitization (net) (83.6) 4.9 Repayment of borrowings from related parties 0.0 (106.5) Receipts of receivables from related parties Receipt of other borrowings Repayment of other borrowings (23.6) (44.2) Net cash flows used in financing activities (55.7) (59.9) Net changes in cash and cash equivalents (76.4) Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash held (6.9) 0.5 Cash and cash equivalents at

5 Presentation of the Styrolution fourth quarter 2013 business s results of operation The Company prepared this discussion and analysis of its results of operations by comparing its unaudited presentation of results of operations, financial position and cash flow for the three months ended 2013 to the unaudited presentation of results of operations, financial position and cash flow for the three months ended Additionally the Company prepared a discussion and analysis of its results of operations by comparing its unaudited presentation of results of operations, financial position and cash flow for the twelve months ended 2013 to the corresponding period of October to October to 2012 Revenue 1, ,435.6 Cost of sales (1,182.0) (1,302.4) Gross profit Selling expenses (60.7) (71.1) General and administrative expenses (24.8) (26.7) Research and development expenses (3.7) (1.8) Other operating expenses (net) (21.5) (0.8) Income from operating activities Interest income Interest expense (13.0) (18.1) Other finance loss (net) (15.7) (7.0) Net finance costs (28.2) (19.5) Income before tax Income tax expense 14.8 (10.4) Net income Attributable to: Non-controlling interests Owners of the company

6 Presentation of the Styrolution twelve months 2013 business results of operation % Revenue 5, ,989.5 (2.5) Cost of sales (5,223.7) (5,415.5) (3.5) Gross profit Selling expenses (265.8) (316.0) (15.9) General and administrative expenses (100.8) (86.6) 16.4 Research and development expenses (13.7) (11.3) 21.2 Other operating expenses (net) (38.3) (23.2) 65.1 Income from operating activities Interest income (37.9) Interest expense (48.9) (53.8) (9.1) Other finance loss (net) (23.7) (6.3) >100.0 Net finance costs (69.0) (54.3) 27.1 Income before tax Income tax expense (10.5) (33.0) (68.2) Net income >100.0 Attributable to: Non-controlling interests Owners of the company >

7 Revenue: Revenue in the fourth quarter of 2013 amounts to EUR 1,335.7 million, a decrease of EUR 99.9 million or (7.0)% compared to EUR 1,435.6 million in the fourth quarter The revenue decrease resulted mainly from the lower EMEA Styrene Monomer and Polysytrene volumes as the Marl facility was closed during the fourth quarter of As a result of the closure, the Group was able to use a relatively higher portion of Styrene Monomer for its internal demand and sold less into the market. The Group s revenue in 2013 was also impacted by the Texas City turnaround, albeit to a lesser extent. Polystyrene sales decreased because the company follows a value approach strategy mainly in EMEA and Americas. ABS revenues and volumes improved mainly in Asia compared with previous year due to a scheduled maintenance shutdown at the Ulsan plant in This effect was offset by both weak reexport market demand from China and current oversupply in Asia putting pressure on margins Specialties revenues and sales volumes increased across all product lines in the fourth quarter 2013 compared to the fourth quarter The strongest increases were in EMEA, because of stronger focus on profitable market segments and applications and in Asia because of stronger demand in India and from good automotive sector demand in China. Revenues by segment: 1 October October 2012 Polymers EMEA (6.5) Polymers Americas (10.8) Polymers Asia Styrene Monomer (13.0) Revenue 1, ,435.6 (7.0) % Revenues by product: 1 October 31 December October 31 December 2012 Acrylonitrile Butadiene Styrene Polystyrene (12.0) Styrene Monomer (13.0) Specialties Revenue 1, ,435.6 (7.0) %. Cost of Sales: Cost of sales decreased by EUR million, or 9.2%, to EUR (1,182.0) million compared to EUR (1,302.4) million in the previous year. This decrease is also due to lower volume as a result of the Marl closure and the Group s value approach strategy. Cost of sales includes impacts resulting from purchase prices allocations at the formation of the Styrolution joint venture. The cost of sales impact for the fourth quarter 2013 was EUR 24.1 million compared to EUR 15.7 million in the fourth quarter of This increase was mainly due to higher depreciation and amortization costs. Gross profit: Gross profit increased by EUR 20.5 million, or 15.4% to EUR million compared to EUR million in the previous year. The Group was able to improve its polymer margins in the fourth quarter 2013 in all regions and all businesses, except for margins of ABS Standard and Polystyrene products in Asia. The Group benefited mainly from synergy advantages and a margin over volume strategy. These effects were mainly visible in the Americas and EMEA. 7

8 The gross profit of the styrene business increased significantly, because of better market conditions in EMEA. Gross profit was significantly up as a result of much stronger margins driven by tighter supply balances due to competitor outages and low Propylene Oxide Styrene Monomer (POSM) rates in Europe. This was partly offset by the planned Texas City turnaround and slightly negative flow through. Selling expenses: Selling expenses decreased by EUR 10.4 million or 14.6% to EUR (60.7) million compared to EUR (71.1) million in the previous year. The decrease mainly reflects lower freight and selling costs. Freight costs in 2013 were lower because of lower styrene monomer sales volumes as a result of the Marl closure. General and administrative expenses: General and administrative expenses decreased by EUR 1.9 million, or 7.1%, to EUR (24.8) million compared to EUR (26.7) million in the previous year. The decrease was caused by implemented synergies such as the reduction in service level agreements, IT harmonization and optimization of the organisation. Research and development expenses: Research and development expenses increased by EUR 1.9 million, or 105.6%, to EUR (3.7) million compared to EUR (1.8) million in the previous year because of unusually low expenses in the fourth quarter of Research and Development costs of the fourth quarter of 2013 are in line with the normal spending pattern of the Group. Other operating expenses: Other operating expenses were EUR (21.5) million, an increase of EUR 20.7 million compared to other operating expenses of EUR (0.8) million in the previous year. The operating expenses of the fourth quarter 2013 primarily include special items related to the IT integration, termination cost for the Marl tolling agreement and legal expenses. EBITDA before special items: EBITDA before special items increased by EUR 38.3 million, or 45.6%, from EUR 83.9 million to EUR million. The fourth quarter of 2013 was an acceptable volume and margin quarter in an uncertain economic environment. The increase is mainly due to improved performance as a result of the margin over volume strategy and synergy effects. Reconciliation of EBITDA before special items to income (loss) before tax: 1 Oct - 31 Dec Oct - 31 Dec Jan - 31 Dec Jan - 31 Dec 2012 EBITDA before special items Special items (restructuring expenses) (19.7) (9.9) (36.2) (28.7) Depreciation and Amortization (59.5) (41.2) (211.1) (169.0) Income from operations Net finance costs (28.2) (19.5) (69.0) (54.3) Income before tax EBITDA represents income from operations plus depreciation of property, plant and equipment and amortization of intangible assets. EBITDA before special items represents EBITDA less special items. Although EBITDA and EBITDA before special items should not be considered substitute measures for profit and net cash flow from operating activities, we believe that they provide useful information regarding our ability to meet future debt service requirements. EBITDA and EBITDA before special items may not be comparable to similarly titled measures used by other companies. 8

9 LIQUIDITY AND CAPITAL RESOURCES The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents do not include deposits and guarantees that are not immediately available. These amounts are included in other receivables. Cash provided from operating activities Cash provided from operating activities by the Group in the year 2013, excluding interest payments increased by EUR million or more than 100% to EUR million. The cash flows provided from operations were significantly higher than the result from operations on the income statement due to material depreciation and amortization amounts included in the result from operations. The increase in cash flows from operating activities was driven by a significantly stronger operating performance that is accompanied by a reduction of working capital. In an environment of higher feedstock prices the Group had a negative cash flow for working capital changes of EUR million in 2012 whereas in the reporting period changes in working capital resulted in a positive cash flow of EUR 56.1 million. Cash used in investing activities The cash used in investing activities consists of investment activities in tangible fixed assets (EUR million) and internal use software (EUR 11.3 million). Cash used in financing activities The Group used cash flow in financing activities primarily to reduce the balance from asset securitizations by EUR 83.6 million, partly offset by EUR 22.4 million collections on receivables from shareholders that resulted from the formation of the joint venture and receipts of EUR 12.7 million for a partial sale of some shares in its subsidiary in India. Financing of Styrolution The financing of the Group is mainly through the issuance of Senior Secured Notes of EUR 480 million, a Trade Receivables Securitization Facility (up to EUR 500 million) and ancillary lines for instruments such as guarantees and letters of credit. The financing of Styrolution and the use of funds at the end of December 2013 of the Group was as follows: Senior secured bond* Short term borrowings from asset securitizations Other Financing Total Financing Cash and cash equivalents (288.1) (190.1) Net Debt* * Net debt includes the notional amount of the senior secured bond rather than the carrying amount in accordance with IFRS which is lower than the notional amount due to debt issuance cost that are amortized over the term of the bond. 9