China and LANXESS Deutsche Bank Investor Visit

Transcription

1 China and LANXESS Deutsche Bank Investor Visit Martin Kraemer, CEO Greater China Dongqi Hu, General Manager Wuxi Oliver Stratmann, Head of Investor Relations Wuxi, March 7th, 2011 Agenda Welcome Overview LANXESS Macro-view China - a growth basis for LANXESS products Strongly positioned to benefit from mega-trends in China Q&A 2 LANXESS Investor Visit, Wuxi, March 7th,

2 LANXESS site in Wuxi, China - located on the main traffic hinge in East China in the 21 st century Located in the hinterland of the Yangtze River delta About 120 km from Shanghai and 147 km from Nanjing Tongjiang Beijing Chengdu Wuxi Shanghai Sanya 3 LANXESS Investor Visit, Wuxi, March 7th, 2011 Growth driver of LANXESS operations in China LANXESS s Wuxi Site is a key production facility and technology point for the LEA, SCP and MPP Business Units in Asia-Pacific Location: about 120 kilometers north-west of Shanghai Founded: July, 1995 Production commenced: October, 1998 SCP capacity: expansion to ~60,000 tons/year 310 employees, including over 50 application specialists 4 LANXESS Investor Visit, Wuxi, March 7th,

3 Manufacturing site & technology location Manufacturing Facility - Engineering Plastics - Leather Chemicals R&D Facility - R&D Testing Center for engineering plastics of SCP in the world - Largest R&D Center for leather products in Asia- Pacific - MPP Microbiology test lab 5 LANXESS Investor Visit, Wuxi, March 7th, 2011 Leading sustainable development in China 1 st recipient of China s Environmentally Friendly Enterprise award from the State Environmental Protection Administration in 2004 A commemorative stamp issued by China Post Administration for this event On June 29th, 2007, Premier Wen Jiabao visited the Wuxi site and acknowledged LANXESS s efforts 6 LANXESS Investor Visit, Wuxi, March 7th,

4 Agenda Welcome Overview LANXESS Macro-view China - a growth basis for LANXESS products Strongly positioned to benefit from mega-trends in China Q&A 7 LANXESS Investor Visit, Wuxi, March 7th, 2011 LANXESS A leading specialty chemicals company based on three powerful segments LANXESS Energizing Chemistry Performance Polymers Advanced Intermediates Performance Chemicals Globally No. 1-3 Europe No. 1-2 No. 1-4 in niches Global technology leader in synthetic rubber and polyamide based high-tech plastics Leading suppliers of custom synthesis and intermediate building blocks (agrochem-related) Application-orientated specialty chemicals Strong brands and technology leader Megatrend Mobility Megatrend Agro Megatrend Urbanization Megatrend Water Competitiveness across the portfolio 8 LANXESS Investor Visit, Wuxi, March 7th,

5 LANXESS Improvement trend of financials, based on strategy implementation In m EBITDA * pro forma data only ~900 Net financial debt 1,429 1, Net fin. debt / EBITDA * 4.6x 2.5x 1.2x 0.8x 0.6x 1.2x 1.7x Gearing 128% 101% 54% 36% 30% 65% 55% Underlying EPS ** >4.24 Continued performance improvement * pre exceptionals ** EPS pre exceptionals, based on actual taxrate; 2008 data adjusted for change in pension accounting 9 LANXESS Investor Visit, Wuxi, March 7th, 2011 LANXESS has a broad customer portfolio LANXESS sales distribution by industry, 2009 Others Tires Construction Agro Chemicals Automotive Consumer Goods 10 LANXESS Investor Visit, Wuxi, March 7th,

6 LANXESS customer industries with excellent prospects LANXESS sales by customer industry* Outlook for customer industries Annual growth e** [%] Electric/Electronic Agriculture Construction Automotive Chemicals Tire EU 15 US BRIC World Sources: Global Insight; J.D. Power; LMC; * Bubble size represents sales, selection; ** Overall industry market growth (CAGR=Compound Annual Growth Rate) 11 LANXESS Investor Visit, Wuxi, March 7th, 2011 Strong focus on growth markets Strategic shift of asset base (CAPEX and M&A) LANXESS sales 71% 16% 12% 50% North America 25% 10% 3% 13% EMEA Asia ~10% ~23% M 2010 Latin America 2005 Cumulated e Sales LANXESS Share of sales in BRIC A foundation for an optimized regional asset base Share of sales in BRIC doubled since LANXESS Investor Visit, Wuxi, March 7th,

7 LANXESS key data Greater China in 9M 2010 Sales in Asia: Greater China most important market Change in sales in Greater China* [ million] Greater China 49.2% Greater China % Unadjusted growth Rest of APAC 50.8% 9M M 2010 * including Mainland, Hong Kong, Taiwan, Macao 13 LANXESS Investor Visit, Wuxi, March 7th, 2011 Strong LANXESS presence in China Office Production Site R&D Center Beijing Qingdao Nantong Wuxi Liyang Tongling Shanghai Guangzhou Hong Kong HQ in Shanghai Production in China - Shanghai: Inorganic Pigments (IPG) since and Wuxi: Leather (LEA) since 1998 and Semi-Crystalline Products (SCP) since Qingdao: Rhein Chemie (RCH) since Tongling: Rubber Chemicals (RUC) since Liyang: Basic Chemicals (BAC) since Nantong: LANXESS-TSRC since 2010 R&D in China - Shanghai: Technical Rubber Products (TRP) technology center - Wuxi: Leather (LEA) R&D center, Semi-Crystalline Products (SCP) R&D Testing Center, Material Protection Products (MPP) microbiological test lab - Qingdao: Rubber R&D center - Beijing: Performance Butadiene Rubbers (PBR) cooperation with Beijing Research & Design Institute of Rubber Industry 1 in Taopu; 2 in Jinshan 14 LANXESS Investor Visit, Wuxi, March 7th,

8 LANXESS achieves sustainable growth by serving the world s megatrends Performance Polymers Advanced Intermediates Performance Chemicals Megatrend Mobility Megatrend Agriculture Megatrend Urbanization Megatrend Water Globalization pushes trade worldwide Individualization drives consumer demand Rapid growth rates for mobility related products in emerging markets Growing world population Increasing crop demand (nutrition, feed) Expanded production of renewable resources Need for resource efficiency - Energy - Raw materials - Water Need to explore alternative sources Trend to environmental awareness 15 LANXESS Investor Visit, Wuxi, March 7th, 2011 Agenda Welcome Overview LANXESS Macro-view China - a growth basis for LANXESS products Strongly positioned to benefit from mega-trends in China Q&A 16 LANXESS Investor Visit, Wuxi, March 7th,

9 Chinese economy has more than doubled from 2005 value and has surpassed Japan as the world s second largest economy China economic development Chinese economy has shown the most impressive growth of all world economies over the past >30 years In real GDP terms, the economy has grown by 9.7% p.a. since 1978 Even in crisis-impacted 2009, China s economy grew by 9.1% In 2010, Chinese economy has doubled from the 2005 value Chinese nominal GDP , RMB trillion CAGR 9.7% RMB 33.5 trn Top 18 economies by real GDP 2010, US$ trillion United States PR China Japan Germany France United Kingdom Italy Brazil Canada Russia India Spain Australia 3,3 2,6 2,3 2,0 2,024 1,564 1,5 1,43 1,4 1,2 5,7 5,4 14,6 5 Mexico South Korea 1,0 1,0 0 Netherland Turkey 0,8 0,7 Indonesia 0,7 Source: National Bureau of Statistics Source: International Monetary Fund 17 LANXESS Investor Visit, Wuxi, March 7th, 2011 For the next 10 years, China will be by far the main contributor to both the BRIC s and global GDP growth G7 and BRIC economic development G7, BRIC, N-11 share of global GDP 2000/2010/2020, in 2010 US$ trillion Contribution to global GDP growth / in %age-pts In Goldman Sachs most recent forecast for the BRIC countries, the projections envisage the BRIC s GDP will continue to gain on the G7 even faster than originally expected BRICs will contribute twice as much to global growth as the G3 in the next decade Sources: Goldman Sachs Is this the BRICs Decade? May 20, LANXESS Investor Visit, Wuxi, March 7th,

10 Economic growth will lead to a rapid increase of the global middle class in China and (later) India G7 and BRIC middle class development # of people living in middle class , in mn people # of people entering middle class 2000/2010/2020, in mn people In the next 10 years, growth in the middle class will be led by China Number of Chinese having entered the middle class is to reach almost 1 billion by 2020 India s population entering the middle class will accelerate after 2020 and reach a peak around 2050 As China and India are the world s two most populous countries, rising incomes there will have much greater impact on global demand than any other countries could * Goldman Sachs generally consider Middle Class as those with incomes >$6,000 and <$30,000. But, to compare BRICs to the G7, GS included estimates for all people >$6,000 (i.e. both middle and upper class) Sources: Goldman Sachs Is this the BRICs Decade? May 20, LANXESS Investor Visit, Wuxi, March 7th, 2011 unleashing vast growth potentials in transportation (mobility), infrastructure and health industries G7 and BRIC middle class development With the explosion of the middle class, spending patterns are likely to change, leading to competition for resources The rapid expansion of the middle class offers an increasing potential for products based on chemicals Environmental pressures will become even more acute, as the demand for energy increases Share of consumption by income bracket in % and US$ Transport, recreation/culture, restaurants and hotels Housing, water, electricity & other fuels Health Education Communication Furnishings, household equipment Clothing & footwear Food, beverages, tobacco Available Income in US$ Sources: Goldman Sachs Is this the BRICs Decade? May 20, LANXESS Investor Visit, Wuxi, March 7th,

11 China will be by far the biggest contributor to car assembly growth in the coming years Contribution to passenger car assembly growth by region , in % Sources: PWC - Autofacts Q1 21 LANXESS Investor Visit, Wuxi, March 7th, 2011 Strong Chinese retail sales growth: increase by 18.4% yoy in 2010 and by 19.1% yoy in December Consumption In 2010, the total retail sales of consumer goods reached RMB 15.5 trillion, a growth of 18.4% In December, the retail sales was RMB 1.5 trillion in December, up 19.1% year on year The December growth rate was 0.4% higher than that of November Retail sales Growth rate RMB trillion % Aug Sep Oct Nov Dec 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10-Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Retail Sales (in RMB trillion) & Growth Rate (yoy in %) Source: National Bureau of Statistics 22 LANXESS Investor Visit, Wuxi, March 7th,

12 China s consumption of chemicals is expected to grow at a CAGR of 8.1% p.a. until 2020 Chemicals consumption future China could surpass the United States as the largest specialty chemicals consuming country in 2013 With a CAGR of 8.1% (global average: 4.3%), China s chemicals consumption is forecasted to account for 29% of global demand by the end of 2020 With a CAGR of 7.5% (global average: 3.7%), China s specialty chemicals consumption is forecasted to account for 25% of global demand by the end of 2020 China and global consumption & growth prediction (in % and in EUR bn) China specialty chemicals / chemicals consumption CAGR 7.5% 8.6% 726 Combined 8.1% Global chemicals consumption, 2009 vs % 4.1% 1.5% 3.3% 13.6% 6.3% 3.5% 19.4% 3.1% 1.6% 3.3% 14.4% 4.6% 4.5% 29.0% China Other Chemicals Consumption China Specialty Chemicals Consumption ,582 2,500 CAGR 4.3% 1.9% 1.9% Other L.A. 4.4% 3.3% 3.3% Brazil 4.4% 3.8% 3.5% 14.3% United States 1.9% 18.3% 1.7% 1.9% 0.7% Other CEE Russia 3.3% 3.2% 0.8% 14.2% Rest of Western Europe Germany Middle East Other APAC Japan India China 1.5% 4.2% 4.8% 1.2% 6.8% 8.1% Source: Global Insight 23 LANXESS Investor Visit, Wuxi, March 7th, 2011 Agenda Welcome Overview LANXESS Macro-view China - a growth basis for LANXESS products Strongly positioned to benefit from mega-trends in China Q&A 24 LANXESS Investor Visit, Wuxi, March 7th,

13 LANXESS capitalizing on global megatrends Mobility Agriculture Urbanization Water 25 LANXESS Investor Visit, Wuxi, March 7th, 2011 SCP megatrend mobility as main growth driver LANXESS capitalizing on global megatrends Performance Polymers Mobility Urbanization Agro Water Megatrend mobility Globalization pushes trade worldwide Rapid growth rates for mobility related products in emerging markets Individualization drives consumer demand 26 LANXESS Investor Visit, Wuxi, March 7th,

14 China auto sales rose 32.4% yoy in 2010, December sales up but growth slowed Automotive Sales In 2010, auto sales rose 32.4% yoy to 18.1 million units China's passenger car sales in December rose 18.6% yoy to 1308,600 units Total auto sales rose 17.9% yoy to 1.7 million units in December Strong historical growth set to continue - BU SCP will benefit Auto sales in million unit Growth rate (yoy in% Jan- Mar Apr May Jun Jul Aug Sep Oct Nov Dec Auto sales Growth rate Feb 10 Source: China Association of Automobile Manufacturers 27 LANXESS Investor Visit, Wuxi, March 7th, 2011 Great untapped potential in Asia Car ownership and population Asia compared to Europe and US Dynamics Passenger cars per 1,000 inhabitants Population in millions 796 2,900 There are ~300m Americans In the US, of every 1000 people ~800 own a car 548 There are ~3bn Asians In Asia of every 1000 people ~40 own a car Western Europe United States Asia Solid long-term growth potential from Asia Source: Michelin estimates 28 LANXESS Investor Visit, Wuxi, March 7th,

15 Innovative solutions required for tires Opportunity / increase in demand Global tire production [bn units] Standard tires (High-)performance tires ~ +53% ~ +25% e 2015e LANXESS solutions Neodymium butadiene rubber (Nd-PBR, Buna CB) and solution styrene-butadiene rubber (S-SBR, Buna VSL) are synthetic high-performance rubbers with optimal properties for performance tires Tire labeling* Europe U.S. Japan Vulcuren Rhenogran Rhenocure A new crosslinker and anti-reversion agent enhancing tire performance over its product life Accelerators that improve the production of performance tires Sources: LANXESS estimates based on LMC; * EU: General Safety Regulation 661/2009 published July 2009, implementation to be completed by December 2010; U.S.: proposed; Japan: Total coverage aimed by end of December LANXESS Investor Visit, Wuxi, March 7th, 2011 Growing car production and trend of weight reduction increase demand for high-tech plastics from LANXESS High-tech plastics in automotives Demand growth for high-tech plastics* +7% p.a. ~14kg/car 2010e 2020e Car production Usage LANXESS is the preferred development partner for new applications in structural components Global car production growth of ~3.3% p.a. and increased usage of high-tech plastics per car drive growth of 7% p.a.* * Source: JD Powers 08/2010, LXS own estimates 30 LANXESS Investor Visit, Wuxi, March 7th,

16 New technologies reduce vehicle weight and improve performance Opportunity / increase in demand Global production of light vehicles [mn units] ~ +30% ~ +10% LANXESS solutions Hybrid technology: Durethan offers new design opportunities and reduces weight of certain structural components by up to 50% versus metal alone e 2015e Share of materials in automotive production [%] High-tech plastics Other materials Ferrous metals Polyamide composite insert (Organo sheet) Polyamide composite insert: Next generation hybrid technology yields up to 20% further weight reduction e 2015e Sources: JD Power; Polymotive; PlasticsEurope; LXS estimates 31 LANXESS Investor Visit, Wuxi, March 7th, 2011 BU SCP Investing in upstream-integration to strengthen focus on high-tech plastics end-compounds Performance Polymers Advanced Intermediates Performance Chemicals Facts Investments in - compounding in Wuxi, China and Jhagadia, India - caprolactam and KA-oil in Antwerp, Belgium Capacities on stream in 2011 Total CAPEX of projects: ~ 50 m Market perspective Market growth of high-tech plastics expected >6% Supply / demand balanced to tight Rationale Expansion of upstream-integration secures efficient raw material supply Expansion of compounding in India and China serves rapidly growing demand CAPEX ~ 50 m Project ROCE* SCP investments into growth Expected sales Sales multiple ~ 80 m ~0.6x above group average * ROCE in average profitability year 32 LANXESS Investor Visit, Wuxi, March 7th,

17 Track record of sustainable organic growth at Wuxi site China: SCP high-tech plastics production China, Wuxi 2005 Start up of SCP manufacturing China with annual capacity 20kt 2007 Expansion to annual capacity 40kt 2011 Expansion to annual capacity 60kt on track SCP high-tech plastics site and PAD center 2007 Start up of research and development testing center 33 LANXESS Investor Visit, Wuxi, March 7th, 2011 Advanced Intermediates and Performance Chemicals Global megatrends as main growth drivers LANXESS capitalizing on global megatrends Mobility Agro Advanced Intermediates and Performance Chemicals Megatrends Urbanization Water Urbanization fuels demand for construction materials Growth of agrochemicals driven by population growth and increasing middle-class Scarce water resources drive purification demand 34 LANXESS Investor Visit, Wuxi, March 7th,

18 As a result of the economic development, urbanization is currently predominantly coastal Urbanization in China status quo China s tiered city structure, 2006 In 2006, there were only four cities (Shanghai, Beijing, Guangzhou, Shenzhen) which Chinese government classifies as tier 1* The majority of the 19 tier 2* cities are located in coastal areas especially in the Yangtze River Delta The 22 tier 3* cities are spread across the country in rather central regions Tier 1 Tier 2 Tier 3 Source: WEFA-WMM; McKinsey analysis * Tier 1 city defined as registered population >4.5 m and GDP/capita >USD3,000, tier 2 city defined as either population >4.5m or GDP/capita >USD3,000, tier 3 city defined as registered population m and GDP/capita USD1,500-3, LANXESS Investor Visit, Wuxi, March 7th, 2011 but will rapidly expand into China s central regions Urbanization in China development By 2020, the number of tier 1* cities is expected to increase to 18 (Shanghai, Beijing, Guangzhou, Shenzhen, Wuhan, Tianjin, Shenyang, Xi'an, Hangzhou, Nanjing, Jinan, Dalian, Chongqing, Haerbin, Chengdu, Changchun, Zibo, Taiyuan) The number of tier 2* cities will increase to 89 and that of tier 3* cities to 40 The majority of those cities will still be in coastal areas China s tiered city structure, 2020 Tier 1 Tier 2 Tier 3 Source: WEFA-WMM; McKinsey analysis 36 LANXESS Investor Visit, Wuxi, March 7th,

19 Since the mid 1970s, China has surpassed the US to be the nation with the largest number of urban dwellers in the world History of urbanization population By the end of 2010, China s urban population will be 636 million, 75% more than India s urban population and about 1.5 times larger than US Urban Populations (million) China 400 India US Brazil Russian Germany Source: UN World Urbanization Prospects 37 LANXESS Investor Visit, Wuxi, March 7th, 2011 Urban middle-class disposable incomes and consumption will climb steeply Impact of urbanization economic Urban Residents Consumption (RMB trillion) 25.1 Urban consumer spending is expected to grow more than twice from RMB 8.5 trillion in 2009 to RMB 25.1 trillion in 2025 CAGR 7.0% By 2025, China, dominated by its urban areas, will become the world s second-largest consumer market, overtaking Japan Source: China Statistical Yearbook; McKinsey s forecast 38 LANXESS Investor Visit, Wuxi, March 7th,

20 China s urbanization will require huge investments in infrastructure by 2025 Source: McKinsey Global Institute Preparing for China s Urban Billion LANXESS Investor Visit, Wuxi, March 7th, 2011 Improved living standards in expanding urban areas fuel growth for LANXESS specialty chemicals Opportunity / increase in demand Urban population worldwide [bn] + ~40% LANXESS solutions Non-hazardous, environmentally friendly pigments for use in construction materials 2010e 2030e Consumer households worldwide [bn] (Upper) middle + ~70% (Upper) middle Lower middle Lower middle Poor Poor e Additives for fashionable high-quality leather Biocidal and disinfectant formulations Phthalate-free plasticizers Halogen-free flame retardants Sources: United Nations 2010; McKinsey LANXESS Investor Visit, Wuxi, March 7th,

21 Leading solution provider to agrochemicals 3 2 Opportunity / increase in demand Grain* demand [bn tons] CAGR** 1.5% Fuel Feed LANXESS solutions Leading worldwide outsourcing partner for the agrochemical players Technology leadership in high-end and complex chemistry Rapid ramp-up capabilities 1 Food Basic Chemicals Leading supplier of Isocyanate intermediates for agrochemicals e 2020e Chemical crop protection is serving efficiency increase to meet demand in volume growth of grain Levanyl Levanox Seed colorants embraced by our customers Sources: USDA, Syngenta, LANXESS prognosis; * Grain = corn, soya, wheat and rice; **CAGR=Compound Annual Growth Rate ( ) 41 LANXESS Investor Visit, Wuxi, March 7th, 2011 China with strong increase for cartridge solutions Water demand for household use China: water purifier use [m m 3 ] Bottled water Water purifier e 2015e 2020e 2025e Asia-Pacific beverage industry growth [sales, bn] CAGR: ~9% Water quality increase required Rising middle class with growing consumption of water in drinking quality (household and beverages) Opportunity for cartridge and membrane solutions Acceptable threshold levels of impurities for arsenic in water are constantly being adjusted downward - Europe as leader: <10 ppb* acc. to WHO - China: often >50 ppb* Mid-term, China is expected to adopt WHO guidelines Water purifier to become main driver for drinking water supply in households in China e 2020e Source: China drinking water industry report, ; Global Insight, 2010; * parts per billion 42 LANXESS Investor Visit, Wuxi, March 7th,

22 Addressing global water management Opportunity / increase in demand Global water supply and demand [bn m 3 ] 4,200 Current clean supply Shortfall 2,700=39% 4,500 Current demand 6,900 Shortfall 2030e demand Continued and future water pollution and shortfalls endanger human life Bayoxide 33 Levoxin LANXESS solutions Water filtration, ion exchange resins and membrane technology* for: Drinking water Seawater Ground water Industrial water Food & beverage Bayhibit and Baypure for: Cooling water Waste water For removal of arsenic from: Drinking water Non-drinking water As corrosion prevention for: Industrial water (in steam power plants) Sources: Charting our Water Future, The 2030 World Water Resource Group; * Plant under construction 43 LANXESS Investor Visit, Wuxi, March 7th, 2011 In 2015 LANXESS will strive for an EBITDA of ~ 1.4 billion New EBITDA target bridge [ m] Performance Polymers BTR Singapore and debottlenecking PBR debottlenecking of Nd-PBR SCP caprolactam and compounding Advanced Intermediates BAC expansions ~ 1,100 ~ 1,400 Additional EBITDA will be the result of: - announced CAPEX projects - additional organic and external growth over next five years ~800 Performance Chemicals ION India and Germany 2010 Additional organic and external growth 2015 Reaching a new profit level References to EBITDA are pre exceptionals; ~ 800m as communicated on Capital markets day September 2010 ; projects are exemplary 44 LANXESS Investor Visit, Wuxi, March 7th,

23 China a special focus of LANXESS growth strategy China Continuous strong growth in 2011 Growth mainly driven by the rubber business units and Semi- Crystalline products Continue to concentrate on specialty chemical products and solid, technology-based businesses Focus on the expanding economies of the BRIC countries, especially China, with further investment to fuel profitable growth 45 LANXESS Investor Visit, Wuxi, March 7th, 2011 Agenda Welcome Overview LANXESS Macro-view China - a growth basis for LANXESS products Strongly positioned to benefit from mega-trends in China Q&A 46 LANXESS Investor Visit, Wuxi, March 7th,

24 47 LANXESS Investor Visit, Wuxi, March 7th,