PETKİM PETROKİMYA HOLDİNG A.Ş. ANALYST PRESENTATION 14 August 2009
2 AGENDA PETROCHEMICAL INDUSTRY & PETKİM OPERATIONAL ACTIVITIES FINANCIAL RESULTS GROWTH PLAN
3 AGENDA PETROCHEMICAL INDUSTRY & PETKİM
4 World Economy & Petrochemical Industry GDP GROWTH % Nexant CMAI Daily QNAF-C-NWE, QBRT- Line, QNAF-C-NWE, Last Quote(Last) 31/07/2009, 598 Line, QBRT-, Last Quote(Last) 31/07/2009, 529.78 05/09/2007-21/08/2009 (GMT) Price USD T Platts Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 1,100 1,000 900 800 700 600 500 400 300 200.12 DUE TO THE CRISIS GROWTH RATES HAS DECELERATED IN ALMOST EVERY REGION OF THE WORLD. RECUPERATION BEGINNING FROM THE SECOND HALF OF 2009. POSITIVE GROWTH IS EXPECTED IN 2010. DUE TO THE SEVERE GLOBAL RECESSION THE OIL AND NAPHTHA PRICES SHARPLY DECLINED IN LINE WITH THE DEMAND CONTRACTION % CEFIC CEFIC WORLD PETROCHEMICAL PRODUCTION WAS DRAGGED DOWN TO THE LEVELS OF 15-20 YEARS EARLIER THE MOST DRAMATIC FALL HAS BEEN IN THE POLYMER PRODUCTION IN EU COUNTRIES THE WORLD PETROCHEMICAL SECTOR CAPACITY UTILIZATION RATES ABRUPTLY DECLINED TO THE LEVELS OF 65-70%
5 World Economy-Uncertainty Continues POSITIVE DEVELOPMENTS Expectation of global growth rate to resume its normal trend after 2010 Adoption of stimulus packages for the restoration of economic growth Declining energy prices Falling food and other product prices Taken measures against rising unemployment rates Reduced investment costs; the lowest levels of interest rates Resilient services sector especially the health industry Improvement in consumer s sentiment NEGATIVE DEVELOPMENTS The most severe recession since 1929 Overborrowed consumers who are resistant towards spending High inventories in automotive and construction sectors The posibility of inflation to become a major problem Difficulty of finding loans, highly leveraged financial statements Dwindling developed economies, the others who try to survive Source: CMAI
6 Market Conditions 2008 2009 H1 Crude oil prices climbing up to USD 147 per barrel in June. Sliding crude oil prices to $32 per barrel since January 2009 and resuming their upwards trend in February by reaching up to $70 per barrel in early June Ever increasing naphtha prices for the last six consecutive quarters and reaching up to 1,150 $/ton in mid-june. Negative impact of the rising energy prices on the costs and profit margins. Following the rally in crude oil prices naphtha prices significanty increasing from $350 to $550 After deteriorating rapidly over the last six month, petrochemical sector demonstrating a stabilization in the second quarter of 2009 Positive impact of falling energy prices on the profitabilities Tumbling oil and naphtha prices to the five year lows at the second half of the year Strengthening petrochemical product prices Suffering producers from the erosion of margins, collapsing profitabilities Improving sectoral profitabilities Extremely weak demand taking its toll on the operating rates of the companies and temporarily shutting down of the plants. Low levels of capacity utilization rates all around the world in the second quarter.
7 General Overview of Turkey Source: Investment Supharbour and Promotion Agency
8 Growth Potential in the Domestic Market Market Size $ 6-7 billion 1998-2008 CAGR Thermoplastics Demand 8% GDP 4% PETKİM Dominant Producer 25% Market Share 40,0 30,0 Growth in Thermoplastics Demand GDP Growth 20,0 10,0 0,0-10,0-20,0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
9
10 Company Overview PETKİM FACILITIES MAIN FEEDSTOCK PRODUCTS Established in 1965/Second complex commissioned in 1985 The sole petrochemical producer in Turkey 25% domestic market share (2008) well positioned in growing markets TRY 895 mn net sales (2009 H1) TRY 87 mn EBITDA (2009 H1) 15 main plants, 8 auxiliary units Located in Aliağa near Izmir Sits on a land of 19 mn sqm Harbour, water dam, power generation unit (220 MW) Adjacent to Tüpraş Aliağa Refinery Naphtha, LPG, C4, Condensate Main product goups: olefins, polyolefins, vinyl chain, aromatics and other basic chemicals PRODUCTION 2.9 mn. tons of gross production realized in 2008 3.2 mn. tons of gross production planned in 2009
11 Petkim s Ownership Structure Share Information (11 August 2009) Closing Price (TRY/Share) 7,40 Market Cap ( TRY million) 1.515 Market Cap ( $ million) 1.034 Free Float (%) 38,7 Ownership Profile PA 10,3% Stock Price Performance Free Float 38,7% 120 110 100 90 80 70 60 50 40 May-08 Jul-08 Aug-08 Sep-08 Nov-08 ISE 100 Relative Performance Dec-08 Jan-09 Mar-09 Apr-09 May-09 Jul-09 PETKIM Aug-09 SOCAR- TURCAS PETRO CHEMICAL COMPANY 51,0% Long-running privatization process completed in May 2008. SOCAR&Turcas Consortium submitted a bid of $ 2.04 bn and acquired 51 % stake in Petkim successfully
12 Petkim: The Strong & Tangible Symbol of Economical & Strategical Partnership TURCAS is the first privately-owned petroleum distribution company in Turkey which focus on oil products distrubution and energy investments with its international strategical partnerships SOCAR one of the world s oldest petroleum companies, has major investments in Azerbaijan. SOCAR is a shareholder and major supplier in the 50 million ton capacity BTC crude oil pipeline and the BTE natural gas pipeline, which transports 6,6 million ton cubic meters of natural gas to Turkey PETKİM A BRIDGE LINKING AEGEAN TO CASPIAN
Products and Capacity PETKIM PETKIM ALIAGA ALIAGA COMPLEX COMPLEX START-UP 1985 START-UP 1985 PLANT CAPACITIES PLANT CAPACITIES 13 Thermoplastics Thermoplastics Capacity Capacity 713 7 713,000 ton/yr t ton/yr Fiber Fiber Raw Raw Materials Materials Capacity Capacity 249,000 249,000 ton/yr t ton/yr Other Other Products Products 1 1 Capacity Capacity 954 9 954,000 ton/yr t ton/yr TOTAL TOTAL Capacity Capacity 1,916 1,916,000,000 ton/yr t ton/yr 1 Ethylene (520,000), VCM (152,000), PA (34,000), Chlorine (100,000), Benzene (134,000), MB (10,000), Plastic Products (4,000) Product Capacities (thousand tons) ETHYLENE 520 PROPYLENE 240 C4 140 PY-GAS 390 AROMATICS 346 BENZENE 160 P-X 136 O-X 50 CHLORINE 100 VCM 152 PVC 150 LDPE 334 HDPE 96 PP 144 MEG 89 ACN 90 PTA 70 PA 34 Power (MW) 226
14 AGENDA OPERATIONAL ACTIVITIES
15 Petkim: Created Efficiencies Achievement of the capacity utilization rates above than the Euro Area averages (96% CUR in the second quarter of 2009) Recruitment of 250 employees in the first six months of 2009 27% reduction in total energy costs compared to the last year Increase in market share from 24% to 29% due to the domestic demand contraction One of the rare petrochemical companies which have announced a net profit Reemphasized strategical importance of Petkim
16 Petkim: Labor Productivity Improvement in productivity and efficiency with the capacity increase and reduced number of employees Ongoing restructuring at organizational level: Assessment of personnel efficiency with the benchmarks (Performance Management System) Simplifying hierarchic level Outsourcing of the services other than the main activities (maintanance, logistics) Plant maintenance, power generation, harbour management are currently managed inhouse. 600 500 400 300 200 100 0 Per Capita Marketable Production and Efficiency Net Sales Per Capita (Left Axis) Marketable Production Per Capita (Left Axis) Employees (Right Axis) 2001 2002 2003 2004 2005 2006 2007 2008 2009 H1 7000 6000 5000 4000 3000 2000 1000 Production per capita has increased from 457 tons/capita in 200 to 539 tons/capita in H1 2009 0
17 Petkim Efficiency Increase Cost Efficiency Power Efficiency Switching over to LPG as an alternative to naphtha following the cut in special cosumption tax Efficiencies on production with the cost cutting efforts and Petkim s Suggestion and Reward System Raising capacity utilitization Energy savings program Feedstock flexibility in power generation Positive impact of power price reductions Trading, Sales & Marketing Meeting the total needs of customers Trading to be conducted from new logistic centers that will be established out of Aliağa Implication of alternative financial tools in order to promote sales Shell Global Solutions Risk based HSE management and adoption of HSE culture Efficient asset management and the management of planned shutdowns with the optimization techniques By establishing Power Management System improving site energy efficiency at a sustainable level. Setting up an advanced steam cracker model for the utilization of different feedstocks and the factory optimization
18 Petkim: Production & Sales Marketable Production (thousand tons) Net Sales (TRY Mn) 1600 2.500 1400 1200 2.000 1000 800 600 1.383 1.409 1.500 1.000 2.175 2.320 400 200 0 733 663 398 294 369 2007 2008 H1 08 H1 09 Q2 08 Q1 09 Q2 09 500 0 1251 895 681 375 520 2007 2008 H1 08 H1 09 Q2 08 Q1 09 Q2 09 Breakdown of Marketable Production 2009 H1 ACN 7% PA 3% Benzene 10% Others P-X 8% 6% PTA 4% PP 9% Costik 7% Production PVC 11% PY-GAS HDPE 6% C5 4% 4% LDPE 21% Breakdown of Sales Revenues 2009 H1 4% ACN 7% PA 3% Benzene 6% PTA PP 12% P - X 6% Others 6% Costik 3% HDPE 9% Sales PVC 11% PY-GAS 2% C5 3% LDPE 28%
19 Petkim: Export Breakdown of export revenues by product type 2009 H1 Py-Gas 10% C4 6% Caustic 3% P-X 10% PTA 8% Others 9% PVC 3% PP 6% HDPE 2% Benzen 25% AYPE 18% Breakdown of export by region 2009 H1 600 500 400 300 200 100 0 Export revenues by years (USD mn) 523 410 358 296 217 182 129 153 84 45 2004 2005 2006 2007 2008 H1 08 H1 09 Q2 08 Q1 09 Q2 09 Asia-Far East 24% EU Countries 40% Petkim products are exported to nearly 60 different countries Benzene, C4, LDPE, Py-Gas and P-X are the main export products. The third exporter in chemical industry in Turkey in 2008. Mid-East, Africa 26% Others 2% USA 8%
20 Petkim: Price Changes & Cost Base Petkim Thermoplastics and Naphtha Price Changes Petkim EBITDA Performance (TRY Mn) Index (January 2007=100) 190 167 200 140 150 100 50 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Thermoplastics Jul-08 Oct-08 Naphta Jan-09 Apr-09 90 40-10 87 46 36 54 32-5 2007 2008 H1 2008 H1 2009 Q2 2008 Q1 2009 Q2 2009 Raw Material and Product Prices* Global Basic Chemicals and Integrated EBIT 1.000 750 Cost of naphtha Product Prices Energy 12,2% Cost Breakdown* Others 10,8% 500 250 0 LDPE HDPE PP MEG PVC Labour 7,4% Raw Materials 69,6% * As of 2009 H1 Kaynak: CMAI
21 AGENDA FINANCIAL RESULTS
22 Financials Income Statement (TRY Mn) (UFRS ) 2007 2008 1H 08 1H 09 2Q 08 1Q 09 2Q 09 Net Sales 2.175 2.320 1.251 895 681 375 520 Cost of Goods Sold (-) (1.970) (2.355) (1.234) (823) (671) (338) (485) Gross Profit (Loss) 205 (35) 17 73 10 37 36 Gross Profit (Loss) Margin 9,4% (1,5%) 1,3% 8,1% 1,5% 9,9% 6,9% Operating Expenses (-) (96) (93) (34) (31) (9) (11) (20) Other Operating Income/(Expenses),net (26) (4) 2 1 5 (2) 3 Operating Profit/(Loss) 82 (131) (15) 42 6 23 19 Financial Income/(Expenses), Net (14) (26) (1) 3 (7) (4) 7 Profit/(Loss) Before Taxation 68 (157) (16) 45 (1) 19 25 Deferred Tax (2) 6 (2) (4) (2) (7) 3 Net Profit/(Loss) for the Period 66 (151) (18) 41 (3) 12 28 EBITDA 167 (5) 46 87 36 32 54 EBITDA Margin 7,7% (0,2%) 3,6% 9,7% 5,2% 8,6% 10,5%
23 Financials Balance Sheet (TRY Mn) (UFRS) 31/12/2008 31/03/2009 30/06/2009 Cash&Bank Debt (TRY Mn) Cash&Cash Equivalents Trade Receivables Inventories Other Current Assets Current Assets Non-Current Assets TOTAL ASSETS Financial Liabilities 28 72 232 247 174 194 9 23 443 536 1.255 1.242 1.698 1.778 29 32 80 296 205 24 605 1.227 1.832 14 120 100 80 60 40 20 0 98 28 83 31 64 54 72 2829 32 80 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Cash Bank Debt Receivables, Inventories and Payables (TRY Mn) 400 300 14 Trade Payables Other Payables Short-Term Liabilities 135 87 251 206 74 312 246 76 336 200 100 0-100 Long-Term Liabilities 90 97 99-200 Shareholders Equity TOTAL LIABILITIES 1.357 1.698 1.369 1.778 1.397 1.832-300 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Trade Receivables Inventories Trade Payables
24 AGENDA GROWTH PLAN
25 VISION AND MISSION VISION To become a regional force in petrochemical sector MISSION To achieve 40% market share in 2018 along with the sustainable growth
26 PETKİM 2018 Targetting a SUPERSITE With the implementation of Refinery-Petrochemical-Power-Logistics integration to become a regional power in petrochemical industry By reaching a 40% domestic market share By producing high value added products, to establish Cluster Model with the participation of local and foreign investors With one of the largest and most intensive container harbours of Aegean and Mediterranean Region and has logistics support fields
27 PETKİM: Growth Plan & Strategy Growth Plan VISION 2018 To become a regional power in petrochemical sector 40% market share in 2018 Short Term Growth Plan Capacity expansion/ debottlenecking Business Transformation Program Feedstock flexibility Energy saving/cost reduction Logistics Sales and marketing ERP Project Trading activities Mid to Long Term Growth Plans Upstream investments (SOCAR&Turcas) Downstream investments Energy-wind turbine Logistics (harbour, railway) Petkim s main strategy is to increase market share and achieve high customer satisfaction
28 PETKİM: Growth Strategy GROWTH WITH UPSTREAM INVESTMENTS REFINERY REFINERY Allocation of 130 ha area to SOCAR&Turcas Refinery A.S. for the refinery investment Additional income generation with the refinery services 30% investment cost cut with the current infrastructure Main customer of the refinery: Petkim ADVANTAGES Creating synergy with the vertical integration Feedstock security Competitive advantage Chance to be a global player
29 PETKİM: Growth Strategy 40% MARKET SHARE TARGET WITH DOWNSTREAM INVESTMENTS DOWNSTREAM INVESTMENTS Sufficient infrastructure for the investments Double digit growth rates in the chemical sector in Turkey Increasing competitive advantage with created synergy New investment opportunities with the local and foreign companies ADVANTAGES Increasing product diversity Producing high value added products Strategical partnerships The Cluster Model Chemical Park (Petkim Supersite) Accessing economies of scale
30 PETKİM: Growth Strategy GROWTH WITH ENERGY INVESTMENTS POWER Wind power Coal and/or natural gas based power production plants with potential partners More power production Supporting national power grid ADVANTAGES Lower cost of power production with the new investments Marketing of the redundant power produced
31 PETKİM: GROWTH STRATEGY GROWTH WITH LOGISTICS INVESTMENTS LOGISTICS To become one of the key logistics main terminals in the region High capacity of container handling potential High capacity of liquid and dry cargo handling potential High capacity of logistics support units ADVANTAGES Enlarging harbour capacity and utilization rate Storage of various solid, liquid, and compressed gas chemicals Paving the way for potential investments on transportation Import and export opportunities for chemicals
PETKİM GUZELHISAR DAM PETKİM harbour 32 PETKİM PETROKİMYA HOLDiNG A.Ş. HEAD QUARTERS ALİAĞA İZMİR / TÜRKİYE Tel: 0-232-6161240 (20 lines) 0-232-6163240 (20 lines) Fax: 0-232-6161248 0-232-6161439 0-232-6162490 Web site : www.petkim.com.tr, E-mail: petkim@petkim.com.tr