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2007 full year results and mid-term prospects
Press Conference - Paris, March 5th 2008
2 Press Conference / March 5th 2008
Transformingthe companyLow starting point but strong potential
A new faceFoward looking, competitive,with sigificant further growth potential
20102010
20072007First milestones cleared with successAhead of targets and high densityof projects launched
An ambitious industrial projectpoised for the long term
2007: already a very different company
20052005
2007Key points
4 Press Conference / March 5th 2008
EBITDA: €518m EBITDA margin: 9.1%
Net income: €122m
Free cash flow: €128m
4th quarter very significantly up in a rather more mixedenvironment
Results far exceeding the objectives
x2.7
+26%
+62%
EBITDA Q4 2007 +41% compared to Q4 2006
5 Press Conference / March 5th 2008
Four master projects
JV with Daikin in Asia for new generation of fluorogases
First acquisition: Coatex (specialty acrylic polymers)
Restructuring of European fluorochemical business
New headquarters and streamlined support functions
2005 - 2007A rapid and radical transformation
7 Press Conference / March 5th 2008
Implementing a winning long term strategy
3 strategic vectors:
Large cost reduction
Market-driven innovation
Accelerating businessdevelopment in Asia
Portfolio management to speed up transformation
8 Press Conference / March 5th 2008
- 21%
Large cost reduction
12/31/2004 12/31/2007
19,167
15,194*
France
Asia and RoW
North AmericaEurope
* incl. 600 related to change in business scope
Cumulative savings of €230m over two yearsEmployee headcount (2004 to 2007):
Decrease of G&A expensesEnergy savings in processes
9 Press Conference / March 5th 2008
2007: R&D projects are already bearing results
R&D expenses around 3% of sales
60% of budget allocated to development:
PMMA CapstocksTransparent technical polymersHigh temperature polyamidesSpecialty molecular sieves (medical & petrochemical)Sulfur derivatives (refinery and animal nutrition)New generation of fluorogases
19% of 2007 Performance Products salesgenerated by products < 5 years
Product and process improvement
New products
Long termbreakthrough
15%
12%
33%
New processes
40%
12%
10 Press Conference / March 5th 2008
20%
World-class sites
Over €50m capex per year
Building on Changshu platform(China)
Accelerating business development in Asia
% sales in Asia
2007 2012 (e)
80 kt H2O2(Shanghai)
F125 and fluorinated blends with Daikin (Changshu)
Kynar®
(Changshu)
Debottlenecktin stabilizers (Beijing)
Acrylic acid in India (MOU)Technical polymers
ThiochemicalsHydrogen peroxide
Polyamides(Changshu)
Other projects:
13%
€747
m
20092008 20102007
11 Press Conference / March 5th 2008
From divestments to acquisitions
~ €180m sales
~ €380m sales
Achieved
€500m to €800msales by end 2009
€300m to €400msales by mid-2008
Objectives
Coatex (Specialty acrylic polymers)
PMMA Repsol
Cerexagri (Agrochemicals)
Urea formaldehyde resinsSpecialty amines (Thiochemicals)
Product lines
Acquisitions
Divestments
Recentered portfolioStill very strong financial balance sheet
2007 Detailed ResultsExceeding the statedobjectives
13 Press Conference / March 5th 2008
Results significantly above guidance
* Calculated as total cash flow excluding M&A and NR pre-spin off items
79128
2006 2007
Free cash flow* (€m)
+62%45
122
2006 2007
Net incomegroup share (€m)
x 2,7115
186
+4%excl. exchange rate and scope effect
+0.2%2006 2007
Sales (€m)
411518
2006 2007
EBITDA (€m) & EBITDA margin
7.3%
9.1%
+26%
Rec. net income
Net income
14 Press Conference / March 5th 2008
EBITDAEBITDA margin
3556.2%
4117.3%
5189.1%
+ 26%
2005** 2006
Major improvement in profitability
2007 Variation2006 / 2007
Sales 5,710 5,664 5,675 + 0.2%
Operating income (recurring) 128 200 293 + 47%
Other income and expenses (514) (92) (72)
EPS (7.05) 0.75 2.02 x 2.7
Net debt (12/31/07) 567 324 459
Capital employed (12/31/07) 3,068 3,024 3,263
ROCE* 4.2% 6.6% 9.3%
Headcount (12/31/07) 18,377 17,044 15,194
In €m
* Calculated as recurring operating income divided by average capital employed ** Proforma financial statements including Cerexagri
15 Press Conference / March 5th 2008
+ 4% organic growth
€5,664m
(2.6)%
2006 sales 2007 sales
Prices Conversion effect
Scope
Volume
+1.7%
€5,675m
+4% organic growth
+2.3% (1.2)%
* Excluding negative impact on volumes from the closure of the urea-resin site in Villers-Saint-Paul (France) in 2006
Evolution by segment
Vinyl Products
Industrial Chemicals
Performance Products*
+2.9%
+5.7%
+4.2%
PricesOrganic growth
Volumes
16 Press Conference / March 5th 2008
Major contribution from internal projects
€411m
EBITDA2006
EBITDA2007
Internalprojects
OtherEnvironment
€518m+ €17m+ €83m
+ €7m + €83m coming from internal projects
+26%
Increasing raw material and energy costs offset by rises in sales prices
Savings
+ 110
- 11
- 42
+ 26
+ 83
Volume loss from
restructuring
Inflation on fixed
costs
Newbusinesses
Internal projetcs
In €m
17 Press Conference / March 5th 2008
Vinyl Products: good demand & cost savings
Fos/Lavera
HeadquartersSoveplast
Dorlyl
Novellara
2005 2006 2007 Var.*
Sales 1,387 1,379 1,418 +2.8%
EBITDA 20 38 90 x 2.4
EBITDA margin 1.4% 2.8% 6.3% -
Rec. op. income 8 21 65 x 3.1
2007 performance
EBITDA growth: 40% internal projects,60% external factors
2007 initiatives
Main projects
Good demand for PVC in EuropePrice increases compensate for higherraw material costs
Benefits from restructuring initiativesLarge maintenance turnaround in Fos (F)Strong performance of QVC**
Implementation of chlorochemicalconsolidation plan
€44m capex+ €30m cumulative EBITDA impact
Further reorganization in downstream PVC- 104 positionsfull impact in 2009
Transfer of teams based in Paris nearproduction sitesFocus on higher added value products
In €m
* 2007 vs 2006 ** Included in "equity income of affiliates"
18 Press Conference / March 5th 2008
Industrial Chemicals: strong resistance of results
2005 2006 2007 Var.*
Sales 2,406 2,494 2,529 +1.4%
EBITDA 316 267 289 +8%
EBITDA margin 13.1% 10.7% 11.4% -
Rec. op. income 204 160 178 +11%
Key partnerships in AsiaJV with DAIKIN in fluorinated gases
3 new restructuring plans- 302 positions (Carling, Pierre-Bénite, Lacq)
Downstream acquisitionsAcrylic polymersPMMAContrasted environment
Good demand in MMA, H2O2
Low acrylic margins & pressure on HFC -134a prices
Impact of € / $ exchange rate
Savings from European plansPMMA, Thiochemicals, Fluorochemicals
Benefits from growth projectsSuccessful start-ups (Calvert City, Carling,Becancour)
Robust set of results
Successful transformation of fluorochemicals
Restructuring of Pierre-Bénite
New generation of products(HFC-32) - Calvert City
2007 performance 2007 initiatives
In €m
19 Press Conference / March 5th 2008
Performance Products: double-digit EBITDA margin
2005* 2006 2007 Var.**
Sales 1,907 1,784 1,723 (3.4)%
EBITDA 109 156 184 +18%
EBITDA margin 5.7% 8.7% 10.7% -
Rec. op. income 19 71 97 +37%
Significant contribution from restructuring
19% of sales from new products < 5 years
Negative impact of € / $ parity
Price increases in functional additives to offsetincreases in tin price
Impact from divestments on revenue
Bonn (Germany) closure: - 83p.
2Q’07
Changshu (China)Rilsan ® polyamide capacity x2
Marseille St Menet (France)- 48p. / +10% monomer capacity
3Q’07 4Q’07
Mont (France) +40% Orgasol® capacity
1Q’07
Strengthening of polyamide business
Serquigny (France) ***- 49p. / €13m capex
Strong recovery
5 new restructuring plans launched infunctional additives and polyamides
- 263 positions
R&D emphasis on renewable materialsSale of non-core businesses
€300m of revenue
2007 performance 2007 initiatives
In €m
* Proforma financial statements including Cerexagri ** 2007 vs 2006 *** Subject to information/consultation of the work council
20 Press Conference / March 5th 2008
Strong and structural improvement of cash flow
122
45
In €m 2006 2007
EBITDA 411 518
Capex* (305) (281)
Tax & cost of debt (31) (93)
Δ WCR 16 47
Other (4) 10
Recurring cash flow 95 201NR items (16) (73)
Cash flow 79 128
NR pre-spin off items (359) (87)
Impact from M&A - (135)
Net cash flow (280) (94)
Low gearing€459m = 24% of shareholders equity
Very limited weight of liabilities• Retirement pension• Environment
Credit line of €1.1bn until 2012
€369m
Very strong financial structure
21 Press Conference / March 5th 2008
Proposed payment of first dividend
Proposed € 0.75 per shareat next General Shareholders Meeting on May 20th 2008
Shareholders to share in the improvementof the Company’s financial performance
2008 OutlookTarget confirmed
23 Press Conference / March 5th 2008
Conservative view of the external factors
Moderate revenue growth expected (1 to 2%) (impact of € / $ conversion)
Traget built with a strong level of internal projects
Keeping a strong focus on internal improvement
€5,675m
Confirmation of 10% objective for EBITDA margin
€518m
EBITDA Projects with an impact in 2008
Productivity + €42mChlorochemicals, Loison, Chantonnay, Dorlyl, Vlissingen, Feuchy, Pierre-Bénite, Lacq, Carling, Marseille, Serquigny
Growth + €23m Molecular Sieves (Inowroclaw), HFC-32 (Calvert City), H2O2 (Shanghai)
Portfolio + €15m Divestments: UF resins, water treatment, aminesAcquisitions: Coatex, Repsol’s PMMA business
24 Press Conference / March 5th 2008
600
500
400
300
€m
200
100
600
500
400
300
200
100
10% EBITDA margin target confirmed for 2008
* Proforma financial statements including Cerexagri
2005*2004* 2006 2008(e)2007
6.2%5.7%
7.3%
9.1%
10%
+26%+18%
+18%
EBITDA (€M) & EBITDA margin
Initial objective
of10 to 15%
Initial objective
of10 to 15%
EBITDA margin multiplied by 2 in 4 years
295
355
411
518
25 Press Conference / March 5th 2008
Dynamic start to the new year
Serquigny: last stage in polyamides planShared Services Centers: centralization of HR and Accounts functions EDF-Exeltium agreement finalized and put forward for approval inBrusselsAcquisition of Repsol’s PMMA business finalizedAnnouncement of doubling of capacity at Leuna H2O2 facility (+ 40kt)
26 Press Conference / March 5th 2008
BécancourCanada
73 kt 93 kt
JarrieFrance
105 kt 115 kt
MemphisUnited States68 kt 73 kt
ShanghaiChina
40 kt 80 kt
LeunaGermany
40 kt 80 kt
H2O2: growth and productivity working together
Average plant capacity
80
60
40
20
kt/year
Industry average (excl. Arkema) Arkema
Total H2O2 : ~ 330kt in 2004/05 ~ 440kt by 2010
2006
2010(e)
Towards 2010Growth platforms implemented
28 Press Conference / March 5th 2008
On track to reach 2010 targets
12% EBITDA margin
Gearing < 40%
Working capital at 18% of sales
Organic growth in Industrial Chemicals and Performance Products of 4 to 5% per year
WCR as % of sales
2006 2010 Objectifve
23.6%20.6%
19.6%18%
2005 2007
2007 2010
9.1%
Productivity
GrowthPortfolio
Variable costs
12%*
* EBITDA margin in mid-cycle conditions under a normalized environment
29 Press Conference / March 5th 2008
2006 2010(e)2007
120
500
230
2008(e)
330
Continuing to implement effective strategy
Confirming our €500m cost savings target
€200m net EBITDA impact
Accelerating organic growth strategyReaping the benefits of projects from 2005-2007
New projects in Asia
Committed to R&D innovation in sustainable development
Other selective acquisitions in specialty polymers
€400 to 500m of revenues in next three years
Cumulative cost savings since 2005
30 Press Conference / March 5th 2008
New in-house culture
StreamliningOrganization remodeled in depth for greater responsiveness
Sharing inSalaries more closely linked to the Company’s performance
Share capital increase reserved for employees: Arkema worldwide
New profit sharing agreement: Arkema France
Individualized and attractive compensation package for management
ModernizingEnhanced forward-looking management of employment and skills
Labor relations based on dialogueEuropean Works Council
Pro-active contractual labor policy
The men and women of Arkemaat the heart of the Group’s transformation
31 Press Conference / March 5th 2008
Carry through Reach successfullyContinue reducing our greenhouse gas emissionsContinue improving our safety records
Continue integrating our activities within their local contextCommon Ground® program: community relations and dialoguePartnership with French Red CrossOpinion survey targeting people living near our industrial sites
Our responsibility as a chemicals manufacturer
Frequency rate
2006 20072005 obj 2008
GHG emissions Mt eq CO2
2007 20101990 2010
Divided by 2.523
9.3
<5
5.3
3.6
2.4 2.0
< 2
Sustainable DevelopmentAn opportunity for innovationand growth
33 Press Conference / March 5th 2008
A chemicals business ready to take up the energy challenges of the 21st century
Innovative materialsEnergy savings and new forms of energyNanostructured materialsGrowing use of renewable raw materials
Process intensificationProduce more with less energy
Our contribution to sustainable development
34 Press Conference / March 5th 2008
Energy savings and new forms of energy
SAVE
Glass adapted to climate conditions
PRODUCE
Photovoltaics: Clean and renewable electricity
STORE
Batteries,supercapacitors,fuel cells
35 Press Conference / March 5th 2008
Today, Arkema’s materials:Protect silicon and electrical circuits
Arkema and future generation photovoltaics: Light concentration technologiesToward thin layers of amorphous siliconOrganic photovoltaics over the longer term
Arkema, a player in the photovoltaic sector
Concentrator(Altuglas®)
Connectedsilicon strips
Back-sheet(Kynar®)
Structure of standard module in crystalline silicon
Cover material(glass)
Cells(silicon)
Encapsulation(Evatane®, Luperox®)
Encapsulation(Evatane®, Luperox®)
Back-sheet (Kynar®)
36 Press Conference / March 5th 2008
Nanostructured materials
10 μm
A B+
Polymers Alloys Nanostructures
< 1970 > 20001970 - 2000
500 nm
2 μm2 µm 240 nm
37 Press Conference / March 5th 2008
Nanostructured PMMA (Altuglas®) in car manufacture
Promising innovations in nanomaterials
Weight saving=
Energy saving
300 nm 30 nm
38 Press Conference / March 5th 2008
Promising innovations in nanomaterials
New "self-healing" elastomers of vegetable origin
Bitumen enhanced with "supramolecular" polymers of vegetable origin, tougher and recyclable
39 Press Conference / March 5th 2008
Arkema’s expertise in plant chemistry
Flexible
blocks
Flexible
blocks
Castorplant
Castorplant
Castorseeds
Castorseeds
C7C7
C11C11
EstersEsters
Amino
11
Castoroil
Castoroil
C3C3
MonomersMonomersRenewable raw materials
Renewable raw materials
40 Press Conference / March 5th 2008
New polymers of vegetable origin
First range of technicalthermoplastic elastomersfrom renewable resources
First adhesive fromfully renewable source
41 Press Conference / March 5th 2008
Microreactors to manufactureorganic peroxides
Glycerol in acrolein and acrylic acid production Double dehydration of glycerol leads to acrolein, and subsequent oxidation to acrylic acid
Two examples of process intensification
OHHOOH
OH
H
2 H2O Acrolein and acrylic acid plant
Glycerol
Thermaloxidizer
Acrolein oracrylic acid
Storage
Storage
Separationplant
42 Press Conference / March 5th 2008
Building a major chemical player
An excellent 2007, with payment of very first dividend
Confidence reaffirmed for 2008
Growth relays in place thanks to projects launched over last three years
Very strong financial structure
2010 objectives confirmed
Sustainable development at the heart of innovation
Arkema tomorrow: A deeply transformed, modern and competitive chemical player.A project creating value over the long term.
43 Press Conference / March 5th 2008
Disclaimer
The information disclosed in this document may contain forward-looking statements with respect to the financial condition, results of operations, business and strategy of Arkema. Such statements are based on management’s current views and assumptions that could ultimately prove inaccurate and are subject to risk factors such as, among others, changes in raw materials prices, currency fluctuations, implementation pace of cost-reduction projects and changes in general economic and business conditions.
Arkema does not assume any liability to update such forward-looking statements whether as a result of any new information or any unexpected event or otherwise. Further information on factors which could affect Arkema’s financial results is provided in the documents filed with the French Autorité des MarchésFinanciers.
Financial information related to 2005 are extracted from pro forma financial statements presented in the 2006 prospectus for the listing of Arkema shares. Financial information for 2006 and 2007 are extracted from the consolidated financial statements of Arkema. Quarterly financial information are not audited.
The business segment information is presented in accordance with Arkema’s internal reporting system used by the management.
A global chemical player, Arkema consists of 3 coherent and related business segments: Vinyl Products, Industrial Chemicals, and Performance Products. Present in over 40 countries with 15,200 employees,Arkema achieves sales of 5.7 billion euros. With its 6 research centers in France, the United States and Japan, and internationally recognized brands, Arkema holds leadership positions in its principal markets
2007 full year results and mid-term prospects
Press Conference - Paris, March 5th 2008
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