Transforming a long-established chemical

company: the Versalis business caseFerrari Daniele

CEO Versalis

Dubai, November 28th, 2016

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RESTORING

Transformation in key words

MINDSET GROWTH COMMUNICATION RELATIONSHIPS

RESULTS ORIENTATION SENSE OF URGENCY

INNOVATION VISION TEAMWORK

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Versalis roots in the chemical history

Since 1950s…

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Before the turnaround: fragmented industrial footprint

Acquisitions, divestments and horizontal cost-cutting - with poor

strategic vision – made the company vulnerable

Attributed ~20 sites in Italy

[e.g. Porto Torres with €800m

of cash absorption 2002-2012]

1958-1992

Imposed

acquisitions

From 42 to 16 sites

1993-2001

Opportunistic

divestments

[e.g. Energy efficiency, cracker

closures, logistics]

2002-2011

Focus on

operational

efficiency

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… and a weak competitive market positioning

Product portfolio

based on commodities

Commercial activity

mainly in Europe

70% sales on poorly backward

integrated commodity products

> 90% sales into mature markets

(Italy and EU)

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The regressive spiral of human capital

Unclear strategy,

obsessive cost reduction1

Depressed innovation

environment 2

Minimized development

opportunities3

Loss of people motivation

and unexpressed potential4

Lack of growth,

regression5

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Transformation starts from people and knowledge …

• Strong customer reputation and brand recognition

• Highly experienced and specialized technical assistance teams

• More than 230 commercial resources for an overall portfolio of over 2,000 customers

• 30 proprietary technologies and more than 250 patents

• 4 research centres, 12 pilot plants and 25 laboratories

• 350 scientists in R&D and technology & engineering

Recognizing and making the most of our people’s competences and

know-how was the first step in order to restore trust

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… and needs a change of mindset

What we kept

• Chemical DNA

• Safety culture & Manufacturing Excellence

• Technological know-how & commercial relationships

What we targeted

• More active and flexible approach

• Stronger brand reputation

• Value creation through innovation and partnerships

What we left

• Lack of dynamism

• Reactive approach

• Fear of change

Leveraging on a restored strategic vision

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2012: a new name and identity

2011

2012…

Towards the new face of

chemicals…

Universality

Movement

Flexibility

Direction

Versatility

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A completely new market-oriented organization

PolyethyleneIntermediates Styrenics ElastomersOilfield

chemicals

Chemicals from

renewables

Rationalization of production capacity

Greater efficiency and integration

Selective growth in insulation

Upgrade of product portfolio

Synergies with Eni upstream activities

Performance-driven product development

Optimization of production mix

Opportunities for downstream integration

New production technologies

International development

Know-how enlargement

Technological leadership

• Organization nowhere aligned with industry standard and needed a strong revision

• New organization by business units, with leaner processes from production to market

• Cross technical support functions (R&D, Licensing, Business Development and Supply Chain)

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Market driven model: seizing opportunities from megatrends

Energy and Resource

Efficiency Population Growth

Growing wealth in

Emerging MarketsMobility/ Urbanization

Environmental

Impact and

Sustainability

Smart Materials

Packaging Building &

Construction

Technical

goods

Agriculture Tyres Large

Appliances

Automotive Other*

Polyethylene

Styrenics

Elastomers

* “Other” category includes Adhesives, Electronics & Electrical, Personal Care & Pharmaceuticals and Polymer Modification end-markets.

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The transformation plan: strategic pillars

Optimization of industrial structure

• Rationalisation

• Increased efficiency

International development

• Licensing and JV’s

• Extension of commercial platform

Strengthening of portfolio

• Strategic investments

• Specialty products, incl. bio-based

Streamlined industrial footprint

+ cost-effective

+ integrated

+ flexible

Stronger market position

+ specialties

+ global

+ “green”

… with an ongoing commitment

to market-driven technological

research and development

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The transformation plan: acting on each single unit

Optimization

of industrial

structure

2011 2012 2013 2014 2015 2016

Porto Torres (IT)Permanent shutdown of

Cracker, Polyethylene and

Aromatics units

Gela (IT)Shutdown of Polyethylene

Priolo (IT)Optimization of Cracker and

shutdown of Polyethylene

Hythe (UK)Closure of the site

Sarroch (IT)Spin-off/shutdown

Porto Marghera (IT)Utilities and logistics overhauling

Cracker continuing to be in operation

Strengthening

of portfolio

Dunkerque (FR)Reconfiguration of

Polyethylene plant

Mantova (IT)New GPPS line and cont.

mass EPS plant

Guayule NR Experimental fields in

Southern Italy

Porto Torres (IT)start-up of Matrìca plants

Ravenna (IT)start-up of Butene-1 plant

Grangemouth (UK)start-up of new s-SBR line

Priolo (IT)New C9 Monomers plant

and beginning of C9 resins

project (JV Neville)

Mantova (IT)Development new pilot plant for ABS one-step breakthrough

technology

Ravenna (IT) New ‘specialties’ in Elastomers

Ferrara (IT) revamping EPDM lines and new EPDM line

International

develop-

ment

Versalis

International (Brussels)

Versalis Pacific

Trading (Shanghai)

Versalis

Pacific India (Mumbai)

JV Lotte Chemical (South Korea)

JV Genomatica bio-butadiene technology

Oilfield

chemicalsnew business line

Versalis

Americas (Houston)

Technology

partnership

Mesnac (China)

Total investments ~ 1,7 Bln €

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Building confidence: a step change in economic results

-481-395 -347

308 298

2012 2013 2014 2015 9 monthsof 2016

EBIT Adj (Mln €)• The actions carried out allowed to

maximise the benefit of the positive

outlook

• Operating break-even reached in 2015

- a year ahead of schedule

• 2016 expected results in line with last

year, with a positive FCF

• Confirmed target to consolidate a

strong financial position, leveraging on

innovation and portfolio development

+789

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Major KPI of the transformation

Field of action KPI 2012 2015 Notes

Optimization of

industrial

structure

N° of sites 17(11 Italy - 6 Europe)

12(8 Italy - 4 Europe)

Closures/spin-off: 2011: Feluy (B) - 2013: Gela (IT);

Settimo Milanese (IT) - 2014: Hythe (UK); Sarroch (IT)

Sites under MT

restructuring - 3

2011: P. Torres (IT) - 2013: Priolo (IT) –

2014: P. Marghera (IT)

Strengthening

of portfolio

New plants - 32014: Butene-1 (Ravenna IT) - 2014: Bio-Refinery

(Matrìca P.Torres IT) - 2015: s-SBR (Grangemouth UK)

% commodities 67% 56% Improved integration: 75% captive use

International

development

International

Partnerships/JV’s- 4 Lotte - Genomatica - Elevance - Neville

Business service

companies13

(Europe)

4(1 Europe - 3 worldwide)

Versalis International – Versalis Pacific Trading –

Versalis Pacific India – Versalis Americas

HSE (Injury Frequency Index) from 2.74 in 2012 to 0.28 in 2015

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Innovation for a sustainability-driven business model

Processes & Products

innovation for high performance

and improved environmental

footprint

New cross-competences

through partnerships (i.e. agro-

chemistry, compounding)

Fossil & bio-based synergies to

renew industrial platforms

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Bio-BDE: strategic raw material from alternative feedstock

• Partnership with Genomatica to develop a complete “end to end” process for the

production of bio-butadiene

• Versalis produced bio-butadiene from sugars at its research centers (pilot scale)

• Bio-butadiene has been used to make bio-rubber, specifically bio-polybutadiene

• The technology will be available for licensing

Bio-butadiene

1,3-BDO

separation

1st & 2nd catalytic

dehydration

BDE

PurificationFermentation

BDE

1st and 2nd

generation

sugars

GMO

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Green tyres: development of a breakthrough technology

• Strategic partnership with Ecombine and EVE

Rubber Institute (Mesnac group) in 2015

• Joint development of a breakthrough

technological platform in the tire

compounding, capable to produce extremely

high performance tires

• The agreement includes also the licensing of

Versalis’ proprietary elastomers technologies

• New milestone for Versalis ‘green tyre’

portfolio

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Smart packaging: essential oils for antimicrobial effect

Antimicrobial

effect

Blown film or

lamination

Guayule and

other plants

Essential

oil

Synthetic

Antimicrobial

Master

Turbo mix

Processing

• Protects foods during shipment

• Slows food spoilage

• Saves transportation costs due to lighter weight

Positive

Impact

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Styrenics: new ABS ‘one step’ technology

Development of a new and break-through

continuous mass ABS technology

Enhancement of portfolio top quality

specialties and access to new application

segments with higher added value and

demand growth

Lower total production costs and

environmental impact than market leading

technologies

Pilot plant start-up in H1 2017, industrial

plant basic engineering ongoing in parallel

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Innovation & transformation: how to lead them ?

Identify, assess, select the change

management leaders to speed up

transformation

Build a resilient and proactive leadership

team with a change of mindset

Balance and enhance the team’s talents

and competences, in order to multiply

successful results

Every transformation phase needs different styles of leadership,

organisational climate must be monitored

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Leadership patterns…in action

Turnaround

announced

Closures/

Shut-down

International

development

Restructuring

& new plants

Portfolio

upgrade

Operative

break-even

Transformation

still ongoing…

OR

GA

NIS

AT

IO

NA

L C

LIM

AT

E

2011 2012 2014 2015 20162013

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Leadership patterns…in action

Turnaround

announced

Closures/

Shut-down

International

development

Restructuring

& new plants

Portfolio

upgrade

Operative

break-even

Transformation

still ongoing…

VISIONARY

COACHING

AFFILIATIVE

DEMOCRATIC

COMMANDING

PACE-SETTING

2011 2012 2014 2015 20162013

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Conclusions: transformation at Versalis

Delivered:

a stronger and

internationally recognized

company

proactivity within the

global chemical industry

dynamics

a wide range of

optionality to our

shareholder

PROACTIVITY

INNOVATION

PROFITS

GROWTH

VISION

PEOPLE

Transformation mindsets should become an ongoing

process, allowing to quickly adapt to the evolving

industry environment