4q 2015 earnings call · 2019-09-10 · 4q 2015 earnings call. 2 disclaimer this presentation...

March 4, 2016

4Q 2015 Earnings Call

2

Disclaimer

This presentation contains certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions.

Forward-looking statements are typically identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target” and other words of similar meaning. All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain. There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. These factors include, among others: (a) negative or uncertain worldwide economic conditions; (b) volatility and cyclicality in the industries in which we operate; (c) operational risks inherent in chemicals manufacturing; (d) our dependence on major customers; (e) our ability to compete in the industries in which we operate and the availability of substitutes for carbon black; (f) volatility in the costs and availability of rawmaterials and energy; (g) our relationships with our workforce; (h) environmental, health and safety regulations and the related costs of maintaining compliance and addressing liabilities; (i) current and potentially future investigations and enforcement actions by the EPA; For additional information see “Risk Factors” in our annual report on Form 20-F for the year ended December 31, 2015; (j) litigation or legal proceedings; (k) our ability to protect our intellectual property rights; (l) our ability to generate the funds required to service our debt and finance our operations; and (m) potential conflicts of interests with our principal shareholders.

In light of these risks, our results could differ materially from the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements.

We present certain financial measures that are not recognized by International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). These non-IFRS measures are Contribution Margin, Contribution Margin per Metric Ton, Adjusted EBITDA, Adjusted EPS, Net Working Capital and Capital Expenditures

Adjusted EBITDA, Adjusted EPS, Contribution Margins and Net Working Capital are not measures of performance under IFRS and should not be considered in isolation or construed as substitutes for revenue, consolidated profit (loss) for the period, operating result (EBIT), gross profit and other IFRS measures as an indicator of our operations in accordance with IFRS. For a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS measures, see Appendix.

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Agenda

Jack ClemCEO

Charles Herlinger

CFO

• 4Q 2015 Highlights & Business Review

• Financial Review

• 2016 Economic & Market Outlook

• 2016 Guidance

• 2016 Operational Priorities & Responses

• Q&A

4

4Q 2015 Highlights

4Q15 4Q14

Y-o-Y

Comparison

Total volume (kmt)

263.5 239.3 10.1%

Adjusted EBITDA (EUR/Millions)

50.9 48.5 4.9%

Adjusted EPS (EUR)

0.20 0.09 122.2%

• Volume gains of 10% from both

Specialty and Rubber

• Completed purchase Chinese

Production Facility OECQ

• Total volume gain of 5.3%

before acquisition of OECQ

• Adjusted EBITDA recovery from

3Q

• Voluntary debt repayment of

EUR 50 million

(1) Non-IFRS measures. See Appendix for reconciliation to the most directly comparable IFRS measures

(1)

(1)

5

4Q14

4Q 2015 Highlights`

4Q15

Volume Mix Adjusted EBITDA

0%

20%

40%

60%

80%

100%

4Q15

Volume By Producing Location

0%

20%

40%

60%

80%

100%

4Q14

Other 1%

Africa 4%

Brazil 7%

Korea 20%

NAFTA 34%

Europe 33%

Other 1%

Africa 4%

China 4%

Brazil 6%

Korea 19%

NAFTA 31%

Europe 35%

Rubber

Carbon

Black (1)

79.6%

Specialty

Carbon

Black

20.4%

Specialty

Carbon

Black

20.5%

Rubber

Carbon

Black (1)

79.5%

4Q14

4Q15

Rubber

Carbon

Black

€28.3M

Specialty

Carbon

Black

€20.2M

Specialty

Carbon

Black

€28.4M

Rubber

Carbon

Black

€22.4M

Strengthening Specialty Business Demonstrates Success of Strategy. Rubber Margins

Supported by Improved Mix of Technical Grades (1)

(1) 28.5% of 4Q15 Rubber Carbon Black volume is technical grade products versus 26.4% for 4Q14.

6

Rubber Carbon Black Business

4Q15 4Q14Y-o-Y

Comparison

Volume (kmt) 209.4 190.5 +9.9%

Revenue (EUR/Millions) 168.9 222.2 -24.0%

Gross Profit (EUR/Millions) 39.8 44.0 -9.5%

Gross Profit/ton (EUR) 190.0 230.9 -17.7%

Adjusted EBITDA (EUR/Millions) 22.4 28.3 -20.6%

Adjusted EBITDA/ton (EUR) 107.2 148.3 -27.7%

Adjusted EBITDA Margin 13.3% 12.7% +60bps

Weaker Gross Profits in Spite of Strong Volume Growth

� Growth in all regions consistent with market

demand

� Volumes increased reflecting good demand in

Europe and North America

� Volume gain of 3.6% before 11.4 kmt

contribution from OECQ

� Gross profit decreased due to cost and price

developments related to sharply lower

feedstock costs

� Adjusted EBITDA decreased reflecting decline in

gross profit

7

Specialty Carbon Black Business

4Q15 4Q14Y-o-Y

Comparison

Volume (kmt) 54.1 48.8 +10.9%


Gross Profit (EUR/Millions) 38.6 29.1 +32.9%

Gross Profit/ton (EUR) 714.2 596.0 +19.8%

Adjusted EBITDA (EUR/Millions) 28.4 20.2 +40.5%

Adjusted EBITDA/ton (EUR) 524.8 414.1 +26.7%


� Strong volume growth reflecting increased

demand and sales penetration

� Strong auto build globally as well as polymer

market strength in Europe and Asia

� Good demand across all regions; Asia stronger than

market would indicate

� Volume expansion as result of increased sales and

technical presence in Asia and South America

� New products and product extensions growing

rapidly, especially in Asia

� Gross profit improved with the ability to manage

price in the face of lower feedstock costs

� Adjusted EBITDA per ton improvement reflects

operating leverage

Continued Volume Growth Due to Increased Sales Coverage and

Successful Product Development

8

103.5

110.210.2 (3.6) 5.0 (4.9)

4Q14 Volume Differential FX Other 4Q15

48.5

(0.2) 50.9

6.7 (1.2)(3.0)

4Q14 Asia SalesSupport

Other 4Q15Contribution

Margin

FX on

Fixed Costs

4Q 2015 Consolidated Operating Results (1)

High Margin Specialty and Technical Rubber

Grades (e.g. MRG) Drive Operating Leverage

Adjusted EBITDA Variance

Contribution Margin VarianceNot to scale

Not to scale

4Q15 4Q14

Y-o-Y

Comparison

Volume (kmt) 263.5 239.3 10.1%


Contribution Margin (EUR/Millions) 110.2 103.5 6.5%

Contribution Margin/ton (EUR) 418.3 432.5 -3.3%

Operating Result (EBIT) (EUR/Millions) 23.1 21.6 6.9%

Adjusted EBITDA (EUR/Millions) 50.9 48.5 4.9%


Profit or Loss for the Period (Net Income) (EUR/Millions)

1.5 (8.3) NM

EPS (EUR) 0.02 (0.14) NM

Adjusted EPS (EUR) 0.20 0.09 122.2%

€M

€M

(8.3)(0.2) 1.5

2.3

8.4 (0.7)

4Q14 Adj EBITDA Finance Costs Depreciation Other 4Q15

Net Income€M Not to scale

(1) See Appendix for reconciliation to the most directly comparable IFRS measures

9

Cash at12/31/14

Cash Flowfrom

Operations

Capex Interest andDebt

Payments

Dividends Other Cash Prior ToVoluntaryActions

OECQPurchase

VoluntaryDebt

Payments

Cash at12/31/15

138.5

138.5 70.5

214.4 51.5

37.8

40.0

17.0

23.2

50.0

2015 Cash Flow and Balance Sheet Highlights

(1) Includes EUR 44 million change in working capital

(2) Interest payments

(3) Total purchase price EUR 27.9 million less acquired cash of EU 4.7 million

(4) Net working capital = Inventories + Trade Receivables – Trade Payables

Balance Sheet Highlights2015 Cash Flow Generation

In EUR/Millions

As of

December 31, 2015

Cash & Cash Equivalents 65.3

Net Working Capital 183.0

Total Debt 650.8

Total Liability and Equity 970.5

Net Debt 603.7

Net Debt/LTM Adjusted EBITDA 2.89x

Net Working Capital (in days) 64

160

200

240

Net Working Capital€M

Continued Strong Cash Flow due to Capex Discipline and Balance Sheet Strengthening

M&A and Voluntary Debt

Payment

Cash Flow Generation

Prior to Voluntary

Actions:

€68.1M

(1) (2)

€M

(4)

(3)

600

640

680

720

Total Debt

Underlying Debt FX Impact

€M

10

EuropeNorth America

Asia PacificBrazil

+ 2.5%

�Continued North American economic growth

expected

+ 1.9%

�Recovery in the EU is expected to continue

-3.5%

�Brazilian recession is expected to continue

+ 6.3%

�Overall Asian economic growth will slow relative

to previous years. China estimated also at 6.3%

Source: IMF World Economic Outlook database January 2016

2016 GDP Growth Expectations

Specialty Black Demand Historically Exceeds GDP

11

Europe

Auto Build - 2016 Outlook

North America

Asia PacificSouth America

+ 2.0 %

�NAFTA automotive sales grow moderately

+ 2.6 %

�Some decline in Eastern Europe offset by strong

growth in Western Europe

-4.8%

�Further decline expected, mainly driven by

poor demand in Brazil

+ 4.2%

�China accounts for the large majority of market

growth

Source: ScotiaBank Global Auto Report January 2016

Generally Slower Growth in Auto Build Expected

with Continued Decline in South America

12

2016 Guidance and Cash Analysis

Adjusted EBITDA: EUR 205 to 225 million

Forecast assumptions:

• Volume growth in line with current GDP expectations

• Oil prices and foreign exchange rates at Q4 2015 levels

Other guidance metrics:

• Capital Expenditures: EUR 55 – 60 million

• Depreciation: EUR 60 million

• Amortization: EUR 20 million

• Tax rate: 35%

• Assumed Shares outstanding: 59.6 million

2016 Guidance

Key Takeaways

Excess cash flow will be available to support:

� Regular dividend

� Expansion capex

� Voluntary debt repayment

(EUR/Millions)

Maintenance Capex 30

Mandatory Debt Service 6

Interest Payments 34

Cash Tax Payments * 35

Change in NWC ** 0

Total Cash Requirements 105*

*Assumes mid-range 2016 Adjusted EBITDA guidance

** A $10 (decrease/increase) in Brent crude will likely (lower/raise) total

cash requirements by causing NWC to (contract/expand) by roughly

€19m - €20m over approximately a 3 month period

Base Business Annual Cash Requirements €M

Continued Strong Cash Conversion Expected given Limited Maintenance Capex Needs and

Reduced Interest Payments

13

2016 Operational Priorities

� Drive stronger growth of higher value added technical carbon black grades

– Continue building momentum in Specialty Carbon Black

– Expand specialty and technical grade mix at OECQ

– Deepen penetration in underserved specialty markets

� Continue productivity and efficiency measures to improve Rubber Carbon Black’s

Adjusted EBITDA

� Address imbalance between Rubber Feedstock Cost and Product Pricing

� Capital Expenditures

– Expand capacity of selected Specialty Carbon Black grades

– Continue attractive yield efficiency projects

� Evaluate global production footprint for cost improvement opportunities

� Advance Lighthouse projects

14

Management Responses to Oil Price Impacts on EBITDA

• Shift production more rapidly to specialty and technical

rubber grades

• Rationalize production of lower value rubber grades

• Manage fixed costs down further in low margin regions

Costs

Production

• Address the imbalance in formula pricing between

feedstock cost and product price

• Reconfigure energy efficiency programs to the low oil

price environment

• Invest further to increase raw material flexibility to

address unfavorable feedstock costs

Note: Several critical initiatives have already been initiated

Appendix

16

Historical Non-IFRS Metrics Reconciliation

Historical Non-IFRS Metrics Reconciliation (€million unless otherwise stated)

Three Months Ended December 31,

2014 2015

Revenue 317 261

Variable costs (1)-213 -151

Contribution Margin 104 110

Sales volume (in kmt) 239 263

Contribution Margin per Metric Ton 433 418

Profit or loss for the period -8 2

Income taxes 7 7

Profit or loss before income taxes -2 9

Finance costs, net (2)23 15

Operating result (EBIT) 22 23

Depreciation and amortization 20 21

EBITDA 42 44

Restructuring expenses (3)1 0

Consulting fees related to group strategy (4)1 2

Other non-operating (5)5 5

Adjusted EBITDA 48 51

Thereof Adjusted EBITDA Specialty Carbon Black 20 29

Thereof Adjusted EBITDA Rubber Carbon Black 28 22

1 Includes costs such as raw materials, packaging, utilities and distribution

2 Finance costs, net consists of Finance income and Finance costs

3 Restructuring expenses include personnel-related costs

4 Consulting fees related to the Group strategy include external consulting fees from establishing and implementing our operating, tax and organizational strategies

5 Other non-operating expenses in 2015 primarily relates to costs in association with our EPA enforcement action. Other non-operating expenses in 2014 included in particular IPO related costs

17

Historical Non-IFRS Metrics Reconciliation

Historical Non-IFRS Metrics Reconciliation (€million unless otherwise stated)

Full Year Ended December 31,

2014 2015

Revenue 1,318 1112

Variable costs (1)-898 -673

Contribution Margin 420 439

Sales volume (in kmt) 991 1037

Contribution Margin per Metric Ton 424 423

Profit or loss for the period -56 43

Income taxes 17 24

Profit or loss before income taxes -39 67

Finance costs, net (2)143 56

Operating result (EBIT) 104 122

Depreciation and amortization 77 73

EBITDA 181 195

Restructuring expenses (3)4 0

Consulting fees related to group strategy (4)5 2

Other non-operating (5)17 11

Adjusted EBITDA 208 209

Thereof Adjusted EBITDA Specialty Carbon Black 100 115

Thereof Adjusted EBITDA Rubber Carbon Black 108 94

1 Includes costs such as raw materials, packaging, utilities and distribution

2 Finance costs, net consists of Finance income and Finance costs

3 Restructuring expenses include personnel-related costs

4 Consulting fees related to the Group strategy include external consulting fees from establishing and implementing our operating, tax and organizational strategies

5 Other non-operating expenses in 2015 primarily relates to costs in association with our EPA enforcement action. Other non-operating expenses in 2014 included in particular IPO related costs

Diana Downey

+1 832-445-3865

[email protected]

Investor Relations Contact Details:

4q 2015 earnings call · 2019-09-10 · 4q 2015 earnings call. 2 disclaimer this presentation...

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