NSG Group Overview and Results to 31 March 2009 20 May 2009 2
Stuart Chambers Group Chief Executive Mike Powell Group Finance Director 3
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 4
Key Points - April 08 to March 09 Full year results in line with previous forecast Good progress on strategic objectives with net debt target achieved one year early Restructuring plans announced in response to market downturn Full year dividend held reflecting Board confidence in longer term prospects 5
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 6
Consolidated Income Statement (JPY bn) FY2009 FY2008 Change from FY2008 Revenue 739.4 865.6-15% Op.Income before amortization* 22.5 70.5-68% Amortization* (20.6) (24.0) Operating Income 1.9 46.5-96% Non-operating items (14.2) (16.1) Ordinary income (12.3) 30.4 Extraordinary items (1.2) 31.9 Pre-tax Income (13.5) 62.3 Net Income (28.4) 50.4 EBITDA 68.2 120.4-43% * Amortization arising from the acquisition of Pilkington plc only Operating income sharply reduced 7
Operating Income Change Analysis 80 70 FY2008 FY2009 60 50 40 30 20 10 0 Total Sales Vol/Mix Selling Prices Input Costs Wage Costs Exchange Rates Others Total JPY bn 70.5 (18.1) 1.7 (22.3) (4.0) (8.8) 3.5 Market deterioration and significant cost push 22.5 8
Non-operating Items FY2009 (JPY bn) FY2008 (JPY bn) Interest and dividend income 8.3 9.7 Interest expenses (20.0) (25.5) Joint ventures and associates (continuing) 1.6 6.5 Joint ventures and associates (discontinued) - 3.8 Other income and expenses (4.1) (10.6) (14.2) (16.1) Interest costs fall with reduced debt 9
Extraordinary Items FY2009 (JPY bn) FY2008 (JPY bn) Gain from sale of securities 7.7 13.4 Gain from sale of discontinued operations - 30.8 Gain on disposal of associates and joint ventures 30.0 - Gain on disposal of fixed assets 0.2 2.7 Restructuring as announced 29 January: Redundancies (12.4) - Impairments (7.2) - Other restructuring: Redundancies (3.1) (12.5) Impairments (4.0) (6.0) EC Automotive fine (7.8) - Others (4.6) 3.5 (1.2) 31.9 Sale of NH Techno Glass Corporation and significant restructuring charge 10
Consolidated Cash Flow Summary FY2009 (JPY bn) FY2008 (JPY bn) Income before income taxes and minority interests (13.6) 62.2 Depreciation and amortization 66.3 73.9 Increase in working capital (3.0) (3.4) Net interest & tax paid (31.1) (61.1) Addback profit on disposal of subsidiaries/investments (37.7) (44.2) EC fines (43.4) (22.5) Others 29.9 44.4 Net cash provided by (used in) operating activities (32.6) 49.4 Purchase of fixed assets (43.1) (46.6) Disposal of subsidiaries/investments 52.3 84.0 Others (6.6) (7.9) Net cash provided by investing activities 2.6 29.5 Cash flow before financing activites (30.0) 78.9 Cash flow impacted by EC Automotive fine 11
Net Debt Position 600 Allowance for EC fines 500 400 JPY bn 300 200 100 0 Jun-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 JPY 350bn target achieved one year early 12
Key Performance Indicators 31-Mar-09 31-Mar-08 Net Debt (JPY bn) 331 328 Net Debt/EBITDA 4.9x 2.7x Net Debt/Equity Ratio 1.29 0.88 FY2009 FY2008 EBITDA Interest Cover 5.2x 6.9x Operating Return on Sales* 3.0% 8.1% * Before amortization arising f rom acquisition of Pilkington plc Ratios weaker on declining EBITDA 13
NSG Group Year End Results Financial Results Agenda Market Demand and Business Update Building Products Automotive Specialty Glass Solar Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 14
NSG Group Summary Ownership/interests in 51 float lines Global Automotive customer base Leading player in lenses for multi-function printers Strong position in glass fiber products worldwide Growing presence in glass for PV cells Principal manufacturing operations in 29 countries; sales in c.130 countries A global glass manufacturing company 15
External Sales Group Businesses JPY 739 billion Auto Japan 7% Auto - ROW 5% Specialty 10% Auto North America 9% BP Europe 24% Auto Europe 21% BP North America 4% BP - ROW 5% BP Japan 15% 16
Global Flat Glass Capacity and Utilization Available Capacity Demand Capacity Utilization Mn Tonnes 60 50 40 30 20 10 100% 95% 90% 85% 80% 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Calendar Year 75% 17
Building Products Europe Market Business 000 tonnes Market Size 11,000 10,000 9,000 8,000 Capacity Utilization 110% 100% 90% 80% FY2009 m FY2008 m 1,400 1,400 250 1,219 208 1,200 200 1,000 150 800 600 99 100 7,000 70% 400 200 50 6,000 60% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar year Substantial demand reduction from the final quarter of 2008 Market restructuring and capacity reduction 0 Sales 0 Operating Income before amortization Revenues reduced due to lower prices and volumes Higher input costs, lower selling prices and volumes reduce operating income Note. 1. Amortization is only that arising on acquisition of Pilkington plc 2. Market size now gross. Previously shown net of imports. 18
Building Products Japan Market Business FY2009 Market Size 1,500 Capacity Utilization 110% JPY bn 120 104 100 FY2008 109 JPY bn 3.0 000 tonnes 1,300 1,100 900 100% 90% 80% 70% 80 60 40 2.0 1.0 700 60% 20 0.2 0.3 500 50% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar year Market demand remains depressed 0 0.0 Sales Operating Income Sales increased due to better prices and 15 months of downstream consolidated sales offsetting lower volumes Strong cost push compensated by cost reduction and improved product mix 19
Building Products North America Market Business Market Size 6,000 Capacity Utilization 100% FY2009 $ m FY2008 $ m 300 281 278 30 000 tonnes 5,500 5,000 4,500 90% 80% 250 200 150 24 15 25 20 15 4,000 3,500 70% 100 50 10 5 3,000 60% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar year Very weak glass demand, particularly residential Demand downside partially mitigated by industry capacity reductions 0 Sales Operating Income before amortization Sales flat as higher prices offset lower volumes Higher input costs and cold repair downtime depressing margins 0 Note. Amortization is only that arising on acquisition of Pilkington plc 20
Building Products Rest of World Market In South America, a sharp demand reduction in final quarter after strong growth earlier in the year Malaysia/Vietnam markets remain weak Sales Business FY2008 $ m 400 54 347 338 350 300 250 200 150 100 50 0 FY2009 43 $ m 60 50 40 30 20 10 0 Operating Income before amortization In South America, higher input costs offset by higher prices In South East Asia, higher input costs and lower volumes reduce profits Note. Amortization is only that arising on acquisition of Pilkington plc 21
Global Light Vehicle Build Growth M illio n s 80 70 60 50 40 30 20 CAGR = compound annual growth rate 1.4% CAGR 5.2% CAGR -4.9% CAGR Region: CAGR % CY2007 CY2010 China (8.1%) E Europe (-6.9%) S. America (2.2%) R of Asia (0.3%) RoW (-0.1%) N. America (-12.0%) 10 0 C Y 97 C Y 98 C Y 99 C Y 00 C Y 01 C Y 02 C Y 03 C Y 04 C Y 05 C Y 06 C Y 07 C Y 08 C Y 09 C Y 10 W. Europe (-9.0%) Japan (-6.0%) 5% decline in CY08 followed by 20% decline in CY09; 13% growth CY10 22
Automotive Europe millions 17 16 15 14 13 12 11 W. Europe Light Vehicle Build Market '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar Year Demand declined rapidly across all countries in Q4 2008 and extended into Q1 of 2009 Extended assembly plant shutdowns as VMs adjusted inventory AGR market decline less marked Note. Amortization is only that arising on acquisition of Pilkington plc 1,200 1,000 800 600 400 200 1,186 Business FY2009 m FY2008 m 1,400 171 180 1,054 76 160 140 120 100 80 60 40 20 0 0 Sales Operating Income before amortization OE sales declined strongly in second half of year Profit impacted by sales falling faster than costs could be removed Encouraging AGR performance through strong cost control 23
Automotive North America millions Market NAFTA Light Vehicle Build 18 16 14 Business FY2009 $ m FY2008 $ m 800 718 80 632 600 60 400 40 12 10 200 0 1.7 20 0 8 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar Year Demand declined rapidly especially during the second half of 2008 and into 2009 Prolonged VM plant closures to address excess inventory Recovery expected in 2010-200 -400 Sales -20-31 -40 Operating Income before amortization Sales fell strongly in Q3 and Q4 Results impacted by float rebuild, lower sales, and cost push Note. Amortization is only that arising on acquisition of Pilkington plc 24
Automotive Japan 12 Japan Light Vehicle Build Market JPY bn 60 57 Business FY2009 FY2008 2.7 JPY bn 3 11 50 48 millions 10 9 40 30 2 20 1 8 10 0.4 7 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Calendar Year Local demand severely hit by the economic crisis, especially moving into 2009 Export markets also strongly impacted Car maker de-stocking now complete 0 Sales Operating Income Sales declined rapidly in Q4 FY2009 Strong underlying improvement in Q4 FY2008 through to Q3 FY2009 Q4 FY2009 impacted by sales decline and profit gains eroded 0 25
Automotive Rest of World Market Rest of the World FY2009 South American demand down on prior year China still growing year on year but at slower rate $ m 400 350 300 250 200 150 100 50 0 302 Sales FY2008 337 54 38 $ m 60 50 40 30 20 10 0 Operating Income before amortization Excluding exchange rate changes, sales are lower in FY2009 Profits impacted by lower sales, higher energy and other cost push Note. Amortization is only that arising on acquisition of Pilkington plc 26
Specialty Glass External sales by product Thin Glass for Small / Medium LCDs 29% Lenses for Copiers / Printers 22% Glass Cord for Engine Timing Belts 13% Other 13% Air Filters 13% Battery Separators 10% 27
Market Overview - Printers Millions of Units 160 140 120 100 80 60 40 20 Laser Inkjet 0 CY07 CY08 CY09 CY10 Inkjet Multi-function Printer Inkjet Single-function Printer EP Single-function Printer EP Multi-function Printer Facsimile Scanner Source : JEITA & NSG estimates 28
Market Overview - Mobile Phones 1,200 1,000 Millions of Units 800 600 400 200 0 NSG Estimates CY06 CY07 CY08 CY09 CY10 TFT C-STN BW-STN OLED 29
Specialty Glass Significant deterioration from Q3 in all Specialty Glass markets Glass cord and battery separator markets were impacted by automotive slowdown JPY bn 100 84 80 60 75 9 JPY bn 10 8 6 FY2009 Printer and scanner components affected by a slowdown in consumer electronic markets 40 20 4 4 2 FY2008 Display market shows signs of recovery but demand remains low 0 Sales 0 Operating Income Strong yen affecting exports from Japan 30
Solar Market Background Restrictions on project finance slowing growth, but funding is available for good projects Government incentives maintained, underpinned by environmental agenda The drive for renewable energy remains high on many governments agendas. USA and China take up could transform the market in coming years Environmental concerns will ensure sales momentum 31
NSG s Solar Business Background Thin film Market leading technology Medium term outlook remains unchanged from previous forecasts Crystalline Growth plans scaled back in response to industry over capacity Leading position in thin film 32
Solar Revenue Outlook 100 FY2012 80 FY2011 JPY bn 60 40 FY2009 FY2010 20 FY2008 0 Actual FY2008 Previous F'cast Actual FY2009 Previous F'cast Current F'cast Previous F'cast Current F'cast Previous F'cast Current F'cast Thin Film (TCO Coated Glass) Crystalline (Low Iron Rolled) Concentrated Power (Low Iron Float) Solar market fundamentals unchanged 33
Solar Summary Underlying demand and prospects remain strong Technology improvements are rapidly opening up new potential markets Crystalline is more commoditised at module and glass levels; thin film is much more focused on added value and technology NSG is well placed to retain its leading position in thin film, and to be competitive in crystalline 34
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 35
Restructuring - Actions Announced Actions Now being implemented in three areas 1. Headcount reduction 2. Capacity reduction 3. Investment review Costs 25 billion yen over two years. 18 billion yen cash cost. FY2009 FY2010 Total Income statement charge 19 6 25 Cash - 18 18 Projected savings Realized in FY2010: Annualized savings from April 2010: 10 billion yen 16 billion yen 36
Restructuring - Headcount Reductions Early action taken to reduce headcount in Group s seasonal and temporary workers Further reduction now well advanced in all business lines Overall reduction will be more than 15 percent of global headcount Around 4,500 employees (permanent and temporaries) reduced by 31 March 2009 and a further 2,200 will leave by March 2010 Plans ahead of schedule 37
Restructuring - Capacity Reductions Automotive production capacity in Europe and North America reduced Float glass capacity reduced by approximately 25 percent Specialty Glass reduced shifts with line closures Adjusting capacity to reduced customer demand 38
Restructuring - Reviewing Investment Investment plans reviewed in line with new markets and demands Some planned investment will be reduced or postponed Solar is still a key area for expansion and will receive increased proportion of remaining investment Capital expenditure under 60 percent of depreciation 39
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 40
FY2010 Key Points Year of restructuring First half result will reflect current economic environment Second half result will increasingly benefit from restructuring actions Rebuilding organization for profit growth from FY2011 onwards 41
Income Statement Outlook JPY bn FY2010 FY2009 Revenue 580 739 Op. income before amortization* (12) 23 Amortization* (18) (21) Operating Income (30) 2 Non-operating items (17) (14) Ordinary Income (47) (12) Extraordinary items (10) (1) Pre-tax Income (57) (13) Net Income (50) (28) * Amortization is only that arising on acquisition of Pilkington plc 42
FY2010 Operating Income Change Analysis JPY bn 40 Forecast FY2010 FY2009 FY2010 20 0-20 -40 Total 23 Sales Vol/Mix (21) Selling Prices (31) Input Costs 5 Exchange (2) Cost Movement 14 Total (12) No significant market improvement expected 43
Commercial Assumptions Market continues to be at depressed levels Volume JPY (21) bn Automotive represents about 60 percent Selling Prices JPY (31) bn Building Products accounts for almost all of the decrease reflecting weak market conditions 44
Cost Assumptions Input Costs JPY +5bn Gas prices lower, reduction not relative to oil Raw material prices dependent on commodity Cost Movement JPY +14bn JPY 10bn from restructuring JPY 4bn removal of other costs 45
Outlook Commerical Assumptions Input Cost Assumptions Cost Reduction FY2011 FY2012 - In FY2012, we expect the business to be at operating margins (operating profit before amortization/revenue) similar to FY2008 of eight percent This is in line with the original Medium-term Plan margin 46
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 47
Our Long-term Vision Execute growth strategies through 3 phases Phase 1 <4 years> Create a new entity focused on differentiating ourselves from competitors, and maximizing productivity and operational quality while reestablishing our financial foundations Phase 2 <3 years> Achieve aggressive growth in the flat glass business Geographically expanding into emerging countries Improve competitiveness, launch major new products, improve R&D and foster technologies Phase 3 <3 years> Explore new areas for further growth Exploring new businesses by both leveraging our customers and our technical and operational competencies Pursuing acquisitions, mergers, and alliances in adjacent areas 2007~ 2011~ 2014~ 2017 48
Phase 1 Objective Create a new entity focused on differentiating ourselves from competitors and maximizing productivity and operational quality, while re-establishing our financial foundations Priorities/Achievements 1. Integration of global business achieved 2. Net debt target levels achieved a year early 3. Preparation for Phase 2 underway, but slowed by global downturn End of Phase 1 now delayed by a year 49
Net Debt Position 600 Allowance for EC Fines 500 400 JPY bil 300 200 100 0 Jun-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 JPY 350bn target achieved one year early 50
Medium-term Plan Medium-term Plan will be updated later this year Strategy direction likely to be largely unchanged Work on restructuring will strengthen our position Revenue line will be smaller than envisaged in Mediumterm Plan and therefore we need to ensure we consciously revisit our plans and priorities 51
NSG Group Year End Results Agenda Financial Results Market Demand and Business Update Restructuring Actions and Update FY2010 Outlook Progress on Strategy Summary 52
Summary Continuing good progress on strategic objectives, with net debt target met a year early Global market deterioration affecting all business lines Solar business holding up well Restructuring to re-establish profit growth from FY2011 53
Notice The projections contained in this document are based on information currently available to us and certain assumptions that we consider to be reasonable. Hence the actual results may differ. The major factors that may affect the results are the economic environment in major markets (such as Europe, Japan, the U.S. and Asia), product supply/demand shifts, and currency exchange fluctuations. Nippon Sheet Glass Co., Ltd. 54
Appendices 55
Revenue by Business FY2009 (JPY bil) Building Products Automotive Specialty Others Total Japan Europe North America Rest of World Total 109.0 176.7 28.1 34.1 347.9 48.4 152.8 63.9 34.0 299.1 43.3 7.9 2.2 22.0 75.4 6.2 10.8 0.0 0.0 17.0 206.9 348.2 94.2 90.1 739.4 56
Operating Income before Amortization FY2009 (JPY bil) Building Products Automotive Specialty Others Total Ratio on Sales North America Rest of World Ratio on Sales Japan Europe Total 0.3 14.4 1.5 4.3 20.5 6% 0.4 11.0 (3.2) 3.8 12.0 4% 2.3 0.5 (0.1) 1.1 3.8 5% (4.4) (9.4) 0.0 0.0 (13.8) (1.4) 16.5 (1.8) 9.2 22.5 3% -1% 5% -2% 10% 3% 57
Operating Income after Amortization FY2009 (JPY bil) Building Products Automotive Specialty Others Total Ratio on Sales North America Rest of World Ratio on Sales Japan Europe Total 0.3 6.9 0.2 3.2 10.6 3% 0.4 4.2 (5.3) 2.0 1.3 0% 2.3 0.5 (0.1) 1.1 3.8 5% (4.4) (9.4) 0.0 0.0 (13.8) (1.4) 2.2 (5.2) 6.3 1.9 0% -1% 1% -6% 7% 0% 58
Exchange Rate Assumptions Average rates used: JPY/GBP JPY/EUR JPY/USD FY2009 174 145 101 FY2010 150 130 100 Closing rates used: JPY/GBP JPY/EUR JPY/USD 140 130 98 150 130 100 59