Bekaert
Content Bekaert in essence Strategy review Annex: 3 rd quarter trading update 2014 1 st half year results 2014 1
Company profile Industrial company with unique geographic, product and sector exposure Focus on industrial growth in emerging markets and solid position in mature markets Sector innovator 2
Bekaert in essence Sustainable Profitable Growth Worldwide market and technological leadership advanced metal transformation and coatings 2013 3Q 2014 Combined sales consolidated joint ventures 4.1 billion b 3.2 b 0.9 3.0 billion b 2.4 b 0.6 Operational cash flow (EBITDA) consolidated joint ventures Worldwide production platform 413 million m 297 m 116 1st half 2014 240 million m 190 m 50 30 countries 27 000 employees Listed on Euronext Brussels BEL20, DJ Stoxx, FTSE, SRI Market capitalization of 1.5 billion 2 million euro per day 3
Bekaert core competences Steel wire transformation from wire rod 6.5 mm Coatings from traditional coatings Adhesion Corrosion resistance Wear resistance Anti-fouling 1 µm to metal fibers to advanced coatings 4
Bekaert in brief: market leadership in diverse sectors Basic materials 4% Agriculture 7% Automotive 36% Machinery 9% Consumption 7% Utilities 13% Construction 23% 5
Strategy review : sources of Bekaert competitive advantages 50% of product portfolio less than 10 years Bring products from mature to emerging countries Unique global footprint Innovation Geographical presence Co-develop and scale up Opex Own machine making = rapid scale-up Key pillar of strategy Source of competitive advantage lean manufacturing 6
Strategy review Strategy remains unchanged, but different focus areas. Bekaert creates sustainable profitable growth by: - Diversified geographic presence with a broad product portfolio and focus on growth markets: Changed demand patterns More focus outside China - Innovation Continue to develop customer relevant innovation Less focus on sawing wire - Operational excellence More important than ever before (more low-end local competitors/imports) Cost competitiveness in our plants and in our structure Program to reduce overall cost structure with 100 million 7
Global cost reduction program (in mio ) 2012 2013 Ongoing Identified 90 100 100 Implementation started 60 100 100 Impact on cost structure 20 70 100 Headcount impact Reference 2011 End 2013 Difference Mgmt & WC 6410 4990 1420 40% of cost reduction are in cost of sales Wage cost inflation partly offsets cost saving efforts, estimated 15 million annual Investment in selling expenses to support future growth M&A activities negatively impacted absolute amount of indirect costs Exchange rate fluctuation 8
Geographical expansion: mature and growth markets 100 75 74,2 Growth 72,6 50 25 25,8 Mature 27,4 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14 Growth Mature 9
Bekaert global presence Combined sales third quarter 2014 North America EMEA 420 million sales 1 600 employees 14% 26% 807 million sales 5 900 employees Latin America 1064 million sales 35% 7 800 employees Asia-Pacific 25% 761 million sales 11 600 employees Automotive Construction Energy & Utilities Other 10
Divestitures Acquisitions Portfolio Management Wire Hlohovec Wire Orville Wire CDP Peru (38%) Ecuador(80%) Wire Latam Integration (52%) Solaronics Combustion Carding Solutions Venezuela (80%) Columbia (80%) Tire cord Bridgestone Plants Wire Chinese Entities Wire Malaysia Wire Cimaf Cabos Wire Costa Rica 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fencing Europe Fencing Handling 2 Diamond Like Coatings Window Films Industrial coatings Advanced Filtration Fencing Handling 1 Composites 11
2014 focus areas by region EMEA Maintain growth momentum with focus on high value added products. North America Turnaround the business momentum to capture growth in a difficult market. Important investment program and closure of Canadian wire activities. Latin America Maintain strong market shares by remaining competitive versus Asian imports. Integration of Costa Rica and consolidation of ropes activities in Brazil. Asia Pacific Retain volume momentum in Rubber Reinforcement China. Improve profitability in newly acquired entities. 12
Bekaert s technological leadership Continued focus on innovation 62 million in-house R&D in 2013 International Research and Development team in Belgium Research and Development in China Close to 2 000 patent rights 43 new patents in 2013 - with the right partners and priorities: Customer focused innovation and co-development Focus on high-tech products, systems and solutions Outward orientation internationalization of technologists cooperation with internationally renowned research centres & universities R&D partnerships Assuring intellectual property protection 13
Our flat and shaped wire gives you more flexibility Flexible pipes that are better, leak proof and reusable Offshore industry Need of flexibility Development of flat wires and profiles Fulfillment of demands Transport of oil and gas Greater flexibility = easier to place Mechanical reinforcement Various advantages Bekaert enables companies to work in more extreme conditions - Use & re-use of pipes over 2 kms in length with guaranteed lifespan of up to 20 years - Pipes can be installed at depths up to 3000 m - Easier to install - No leakage 14
Operational excellence: based on a strong financial structure 1H2014 2013 2012 2011 2007-2011 1990 2006 Growth -2,4% -7.9% 3.6% 2.4% 11.3% 2.2% ROIC > WACC 8,5 > 8,0 4.8 < 8.0-0.5< 8.4 9.3 > 6.3 13.18 > 8.0 6.9 < 9.1 EBITDA on sales 11.8% 9.3% 7.9% 14.9% 16.4% 12.0% REBIT 6.3% 5.2% 3.41 8.41 11.2 4.9 EBIT 7.3% 4.3% -1.4% 8.7% 10.1% 4.9% WC (mature/growth) 26.5% 26.5% 27.9% 28.0% 23.2% 19.4% Dividend pay out NA 202% NA* 36% 34% 50% Tax 25% 89% NA* 27% 21% 21% Debt 673 574 700 856 570 313 Equity / total assets 41% 45% 44% 42% 46% 48% Gearing (net debt /Equity) 44% 38% 44% 49% 40% 36% Net debt / EBITDA 1.8 1.9 2.6 1.7 1.3 1.7 Net debt / REBITDA 1.9 1.8 2.1 * Due to negative result 15
Shareholder value in % 25 20 15 10 5 0-5 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 200120022003 2004 2005 20062007 2008 2009 2010 2011 2012 2013 3Q14-10 -15 WACC RoIC 16
Influences on Bekaert stock price Fact sheet 2013 10/2014 Number of shares : 60 094 825 Average closing 24.565 27,315 Average daily traded volume 79 000 High price 31.110 30,195 Average daily traded value m 2,3 Low price 20.010 21.900 Market capitalization m 1 505 Closing price 25.720 25,050 1.000.000 Structural result volume improvement ROIC > WACC Product innovation Solar Crisis Eurozone Drop in solar euro 100 90 800.000 600.000 400.000 200.000 Emerging markets 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 0 17
Third quarter trading update 2014
Highlights third quarter 2014 5% Sales growth in Q3 2014 vs Q3 2013 FX : -1,2% decline mainly due to Latam M&A : +0,8% positive impact of the inclusion of Costa Rica and Ropes in Brazil Price/Mix : Positive impact of 4.4% due to mix improvement and especially price increases in Latam YTD Stable sales : Organic sales neutralized by negative Fx impacts Net debt decreased to 717 million versus 730 m in Q3 2013. Compared to 1H2014 net net debt increased slightly due to higher working capital and share buy-back. 19
Sales 3Q14 2.422-8 99 8-98 2.423 in mio Consolidated 3.142-11 90 4-168 3.052 Combined 3Q 2013 Venezuela Organic growth Acquisitions / Divestments FX 3Q 2014 EMEA: Strong demand throughout the first nine months of 2014. Particularly apparent in the automotive sector, the energy-related markets and other industrial sectors. North America: Strong volume and sales growth in the third quarter of 2014, driven by higher demand from automotive and construction markets compared with the same period last year. Latin America Excluding Venezuela, Organic volume growth of 4%. Important negative Fx impacts, compensated by significant First-in (M&A) as to price increases resulted in strong revenue growth of 13% in Q3. Asia Pacific Strong sales volumes in highly competitive tire markets across Asia. Sawing wire sales also grew significantly, contributing to a positive product mix. Price pressure and passed-on lower wire rod prices tempered the top line growth rate to 3%. 20 November 2012 2014
Consolidated 3Q14 sales by segment 2013 2014 variance share FX impact EMEA North America Latin America Asia Pacific 791 424 496 711 819 420 458 725 +3.5% -0.8% -7.7% +2.0% 34% 17% 19% 30% -7-16 -46-29 Total 2 422 2 423 0.0% 100% -97 1Q14 2Q14 3Q14 3Q13-3Q14 FX impact EMEA North America Latin America Asia Pacific 275 139 141 226 279 142 154 252 264 140 163 247 +1.9% +8.0% +13.0% +2.7% -2-1 -10-1 Total 782 827 814 +5.2% -13 30% 19% 34% 17% Europe North-America Latin America Asia 21
Combined 3Q14 sales by segment 2013 2014 variance share FX impact EMEA North America Latin America Asia Pacific 783 424 1 187 748 807 420 1 064 761 +2.9% -0.7% -10.4% +1.7% 26% 14% 35% 25% -7-16 -115-31 Total 3 142 3 052-2.9% 100% -168 1Q14 2Q14 3Q14 3Q13-3Q14 FX impact EMEA North America Latin America Asia Pacific 273 139 340 237 275 142 353 264 259 140 370 260 +2.9% -0.7% -10.4% +1.7% -2-1 -6-1 Total 990 1 033 1 029-2.9% -10 25% 35% 26% 14% Europe North-America Latin America Asia 22
Outlook 2014 Mitigation of adverse currency effects on a year-to-date basis. Moderate slowdown in the European tire markets. Usual year-end seasonal effects on volume, especially in Emea and NA. Latam : turnaround to remain for the coming months Asia Pacific : In China, continued price erosion in tire markets and a weakening industrial demand overall. 23
First half year results 2014
Highlights first half 2014 - Organic volume growth of 3.9% - Consolidated sales of 1.61 billion, (-2.4%), combined sales of 2.02 billion (-5.4%) - Currency impact : -85 million (-5.1%) on consolidated sales and -158 million (-7.4%) on combined sales - Negative price/mix effect (-1.2%), mainly reflecting lower wire rod prices - REBIT of 101 million (6.3% margin) - Non-recurring items of +16.6 million - EBIT of 118 million (7.3% margin) - EBITDA of 190 million (11.8% margin) - EPS: 1.34 compared with 0.45 - Net debt of 673 million, versus 770 million on 30 June 2013; 574 million at year end 25
Business review - Solid volume growth in a difficult global industrial environment - Weakening of the growth of the Chinese industrial economy lowered key commodity prices and affected the output of the mining sector in Latin America with an important impact on those economies - Lower local demand in China for commodity products increases the export at very low prices, creating price pressure all over the world - Strong demand in automotive markets globally - Overcapacity in China resulted in continued price pressure - Strong Euro had a significant translation impact but limited transactional effect as only 10% of our production is shipped across Regions 26
Business review EMEA: Very strong results due to solid volume growth, favorable product mix and sustained effect of cost reduction program. North America: Slow recovery mainly driven by better automotive demand while other markets like agricultural and public investments remain weak. Latin America: Slowdown in GDP growth driven by weaker mining sector impacted demand and created very competitive price environment in lower end product segments. Political uncertainty in different countries also impacted the economic environment. Asia Pacific: Growing but very competitive tire cord and sawing wire market in China while other markets were softer reflecting overall economic slowdown. SEA and India had strong industrial growth but were impacted by imports from China. 27
Sales in mio 1H2013 Venezuela Organic growth Acquisitions / Divestments FX 1H2014 Consolidated 1 649-11 54 2-85 1 609 1H2013 Venezuela Organic growth Acquisitions / Divestments FX 1H2014 Combined 2 139-11 52 2-158 2 023 - Consolidated organic growth more than offset by exchange rate movements - Impact of exchange rate movements on combined even more significant reflecting the weaker Brazilian Real versus same period last year 28
Sales by segment First Half 2014 Consolidated sales Combined sales EMEA North America Latin America Asia Pacific In mio variance in mio variance 555 281 295 478 +4% -5% -16% +2% 548 281 693 501 +4% -5% -16% +1% Total 1 609-2% 2 023-5% Consolidated sales Combined sales 30% 35% EMEA 25% 27% North America Latin America Asia Pacific 14% 18% 17% 34% 29
Consolidated income statement: key figures (In mio ) 1H 2013 1H 2014 Sales 1 649 1 609 Cost of sales (1 400) (1 351) Gross profit 249 258 Gross profit margin 15.1% 16.0% - Sales decline of -2.4% reflects: - Solid organic volume growth of 3.9% - Negative price/mix effect mainly reflecting lower wire rod prices (-1.2%) - Negative impact of exchange rate movements (-5.1%) - Increase of gross profit due to volume increase and sustained cost control partly offset by translation effect of exchange rate movements 30
Consolidated income statement: key figures (In mio ) 1H 2013 1H 2014 Gross profit 249 258 Selling expenses (68) (68) Administrative expenses (63) (65) R&D expenses (32) (30) Others 5 6 Operating result before non-recurring items (REBIT) 91 101 - SG&A remained stable: - Final impact of cost reduction program largely offset by inflation - Positive impact of exchange rate movements - Selling expenses negatively impacted by movement in bad debt reserves 31
Consolidated income statement: key figures (In mio ) 1H 2013 1H 2014 Operating result before non-recurring items (REBIT) 91 101 REBIT margin on sales 5.5% 6.3% Non-recurring items (2) 17 Operating result (EBIT) 89 118 EBIT margin on sales 5.4% 7.3% EBITDA 172 190 EBITDA margin on sales 10.4% 11.8% - REBIT increase of 10 million reflects an organic increase of 22 million partly offset by the business situation in Venezuela -6 million and the impact of exchange rate movements for -6 million - Non-recurring items include: i) negative goodwill of the transaction in Latam ( 11 million), ii) gains on sale of real estate ( 8 million), iii) change in environmental provision ( 6 million) and iv) impairments and other elements ( -8 million) 32
Segment reporting: EMEA (In mio ) 1H 2013 1H 2014 Consolidated sales 532 555 Operating result before non-recurring items (REBIT) 46 64 REBIT margin on sales 8.7% 11.5% Non-recurring items (1) 7 Operating result (EBIT) 45 70 Depreciation, amortization and impairment losses 23 22 EBITDA 68 93 EBITDA margin on sales 12.8% 16.7% - Sales increase due to a very strong volume growth mainly in Q1 and good product mix - Profitability well above 10% due to very high capacity utilization combined with sustainable cost control - Non-recurring reflect sale of real estate and reversal of some environmental provisions 33
Segment reporting: North America (In mio ) 1H 2013 1H 2014 Consolidated sales 294 281 Operating result before non-recurring items (REBIT) 13 14 REBIT margin on sales 4.3% 5.1% Non-recurring items (0) 1 Operating result (EBIT) 12 15 Depreciation, amortization and impairment losses 6 5 EBITDA 18 20 EBITDA margin on sales 6.2% 7.2% - Sales decline due to exchange rate movements partly offset by 2% volume increase - REBIT and REBITDA margin improve thanks to slightly better capacity utilization and the impact of cost savings program but are still below target 34
Segment reporting: Latin America (In mio ) 1H 2013 1H 2014 Consolidated sales 352 295 Operating result before non-recurring items (REBIT) 28 11 REBIT margin on sales 7.9% 3.9% Non-recurring items (0) 10 Operating result (EBIT) 28 21 Depreciation, amortization and impairment losses 11 (3) EBITDA 39 18 EBITDA margin on sales 11.1% 6.2% - Sales drop of 16% due to devaluation of the Chilean Peso by 21% and a 50% volume drop in Venezuela due to the political and economic situation - Overall market share remained stable at a very strong level - REBIT significantly impacted by Venezuela -6 million, devaluation of Chilean Peso -2 million and lower margins on commodity products to remain competitive with import from Asia 35
Segment reporting: Asia Pacific (In mio ) 1H 2013 1H 2014 Consolidated sales 470 478 Operating result before non-recurring items (REBIT) 39 43 REBIT margin on sales 8.4% 8.9% Non-recurring items (0) (4) Operating result (EBIT) 39 39 Depreciation, amortization and impairment losses 44 49 EBITDA 84 88 EBITDA margin on sales 17.8% 18.4% - Sales increase of 2% due to 10% volume increase partly offset by exchange rate movements -6%, lower prices reflecting lower wire rod costs and the competitive market situation in tire cord and sawing wire in China - Non-recurring includes impairment of some assets in Malaysia as the turnaround of the acquired business remains challenging 36
Consolidated income statement: key figures (In mio ) 1H 2013 1H 2014 Operating result (EBIT) 89 118 Interest income / expense (33) (28) Other financial income & expenses (8) 0 Result before taxes 48 91 Income taxes (30) (23) Result after taxes (consolidated companies) 18 68 - Lower interest cost due to average lower net debt of 100 million - Taxes reflect current cash tax cost and some adjustments in tax related to prior years 37
Consolidated income statement: key figures (In mio ) 1H 2013 1H 2014 Result after taxes from consolidated companies 18 68 Share in the results of JVs and associates 17 12 Result for the period 35 80 Attributable to non-controlling interests 9 2 Attributable to the Group 26 78 - Result of the joint ventures is lower due to the devaluation of the Brazilian Real and 2013 included some one off items - Result attributable to non-controlling interest is low due to low profitability in Latam and impairment in Malaysia 38
Cash flow: key figures (In mio ) 1H 2013 1H 2014 Gross cash flows from operations 137 136 Cash flows from operations 62 10 Cash flows from investment activities (20) (46) Cash flows from financing activities (80) 177 - Cash flows from operations impacted by an increase in working capital - Investments at a higher level versus 2013 39
Working capital: key figures (In mio ) 1H 2013 YE 2013 1H 2014 Inventories 576 539 618 Accounts receivable 830 716 819 Accounts payable (432) (462) (502) Working capital 974 793 935 - Working capital increased versus year end 2013 in line with typical seasonality but remains below the level of the same period last year - Average working capital to sales reduced to 26.9% vs. 28.4% for the same period last year 40
Consolidated balance sheet: key figures Assets Equity and Liabilities 3 380 3 724 3 380 3 724 Non-current assets 1 609 1 619 Equity 1 504 1 545 Current assets 1 772 2 105 Non-current liabilities Current liabilities 905 1 108 972 1 071 YE 2013 30 June 2014 YE 2013 30 June 2014 - Assets and liabilities increase significantly with issue of the convertible bond for which the proceeds have not been used yet to finance the Pirelli Tire cord acquisition 41
Balance sheet: key figures (In mio ) 1H 2013 YE 2013 1H 2014 Net financial debt 770 574 673 Gearing (net debt to equity) 49.3% 38.2% 43.6% Net debt on EBITDA 2.2 1.9 1.8 Net debt on REBITDA 2.2 1.8 1.9 - Net debt increase versus year end 2013 due to seasonality effect of increased working capital, dividend payment and some share buyback - Both gearing and net debt / EBITDA remain below long term company target 42
Ratios: key figures (In mio ) 1H 2013 1H 2014 EBITDA margin on sales 10.4% 11.8% REBIT margin on sales 5.5% 6.3% EBIT margin on sales 5.4% 7.3% Sales on capital employed (asset rotation) 1.4 1.5 Return on capital employed (ROCE) 7.4% 10.7% Return on equity (ROE) 4.4% 10.5% 43
Key figures per share (In mio ) 1H 2013 1H 2014 Share price 24.44 27.29 Number of existing shares 60 000 942 60 063 871 Book value 23.13 22.89 Earnings per share (EPS) 0.45 1.34 Weighted average number of shares 58 653 506 58 388 094 44
Outlook - Unchanged overall business climate. - Price erosion in Chinese tire cord market will accelerate in Q3. - EMEA remains strong but modest slowdown is projected in automotive market. As always there will be a seasonal effect of second half year. - We believe that Latam is bottoming out with some potential upward trend towards the last quarter of the year. - Recovery in North American remains fragile with limited visibility on project business from public sector investments. - Continued internal drive to better leverage our scale while focusing on driving growth in our key markets. 45
Contacts www.bekaert.com Investor Relations : Mr. Jérôme Lebecque +32 56 23 05 72 Jerome.Lebecque@bekaert.com Documentation : Mrs. Christine Clarysse +32 56 23 05 41 Christine.Clarysse@bekaert.com Shareholders, investors and other interested parties wishing to receive the Group's annual report, the shareholders guide, the annual accounts of NV Bekaert SA or other information published by the Group may contact the Investor Relations department at any time. Agenda 2014 Results 27 February 2015 2014 annual report available on the internet 27 March 2015 First quarter trading update 2015 13 May 2015 General Meeting of Shareholders 13 May 2015 Dividend ex-date 15 May 2015 Dividend payable 20 May 2015 First half year results 2015 31 July 2015 Disclaimer This presentation may contain forward-looking statements. Such statements reflect the current views of management regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this brochure as of its date and does not undertake any obligation to update any forward-looking statements contained in this brochure in light of new information, future events or otherwise. Bekaert disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any other publication issued by Bekaert. 46
Welcome online For more information, welcome @ www.bekaert.com Copyright by NV Bekaert SA, 2013 47
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