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Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

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Page 1: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Interim results presentation

Emery Severin – Chief Executive OfficerIan Davis – Chief Financial Officer

21 February 2013

2013 Financial Year

Page 2: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Disclaimer

This presentation has been prepared by Nuplex Industries Limited. The material that follows contains general background information about Nuplex’s activities as at the date of the presentation 21 February 2013.

The information in this presentation is not an offer or recommendation to purchase or subscribe for securities in Nuplex or to retain any securities currently held. It does not take into account the potential and current individual investment objectives or the financial situation of investors.

Actual results may vary materially either positively or negatively from any forecasts in this presentation. Before making or disposing of any investment in Nuplex securities, investors should consider the appropriateness of that investment in light of their individual investment objectives and financial situation, and seek their own professional advice.

All currencies are in NZD unless stated otherwise.

2

Page 3: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Safety Making progress towards our goal of zero harm

3

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1H130

4

8

12

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1H1305

1015202530

Lost time injury frequency rate per million employee hours worked

Total reportable injury frequency rate per million employee hours worked

0

10.2

Page 4: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

1 Earnings before interest, tax, depreciation and amortisation 2 Net profit after tax attributable to equity holders of the parent company3 As defined by earnings before interest, tax and unusual items divided by average funds All figures are in NZD unless otherwise stated

1H13 financial overview

4

Sales revenue

$828.7m up 11.0%

EBITDA1

$57.6m steady

NPAT2 after significant items

$11.5m down 52.3%

NPAT before significant items

$24.5m down 9.6%

Earnings per share

5.8 cents down from 12.3 cents

Dividend per share

10 cents unchanged

Return of funds employed3

9.8% down from 12.1%

Working capital to sales ratio

14.8% down from 16.5%

Page 5: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

1H13 in review

5

1. Defined as a unit margin as a percentage of sales = sales revenue minus raw material costs divided by tonnage All figures in NZD unless otherwise stated

Taking action to improve returns on funds employed

Existing operations steady despite significant weakness in Australia and volatility in Europe in November/ December• Resins segment excluding acquisitions

– Volume growth due to Asia and Americas offsetting ANZ and Europe– Unit margins up 3.4%1

Strengthening Nuplex by reducing costs • Restructuring Australia and New Zealand to adapt to changing markets • Executing NuLEAP I - delivered $6m during 1H13, on track to deliver program target of

$30m net benefits by the end of the FY13• Investing in NuLEAP II - procurement initiative to deliver $5.3m in 2H13, $12m in FY14

Acquisitions successfully integrated – delivering in line with forecast in FY13 and acquisition criteria • Viverso on track to deliver EBITDA of €12m• Nuplex Masterbatch on track to deliver EBITDA of A$5m

Page 6: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

1H13 key financial outcomes

EBITDA • Supported by Viverso and Masterbatch

contributions• Impacted by

‒ ANZ restructure and procurement costs‒ Ongoing strength of the New Zealand dollar

Geographic diversity supported existing operations• Weakness in Australia and end-of-year slow down

in EMEA largely mitigated by growth in Asia and Americas

NPAT impacted by write downs • $13m in significant items including

‒ $5.8m write down of obsolete equipment in ANZ‒ $5.5m write down of Fibrelogic investment

Interim dividend maintained at 10 cents per share • Strong cash flows reflecting margin management

and tight cost control • Declared in context of the outlook for the full year

6

1H13 vs 1H121

% growth constant FX

GroupExisting

operations2

Sales revenue 14.8% (2.7)%

EBITDA 4.2% (14.5)%

EBITDA before restructure and procurement costs

14.8% (5.3)%

NPAT after significant items

(50.3)% (53.1)%

NPAT before significant items and restructure and procurement costs

8.9% 2.6%

1 See slide 25 for underlying data, 2. Excluding acquisitions All figures in NZD unless otherwise stated

Page 7: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

1H13 earnings drivers

Solid EBITDA despite continued challenging market conditions particularly in Australian coating resins business

7

1H13 EBITDA

FXUnit margin*

Resinsvolume*

1H12EBITDA

Spec-ialties

Cost inflation - wages, utilities etc

Other fixed costs

NuLEAP - benefit increase from 1H12 to 1H13

Restruc-ture and procure-ment costs at 1H12 FX rates

Viverso at 1H12 FX rates

Master-batch at 1H12 FX rates

$57.3m $57.6m

*Excluding the impact of NuLEAP initiatives and acquisitions

(3.1)* 1.5*0.5

(7.3)

9.7(4.5)*

(6.1)

(2.1)3.2

8.6

NZ

$ m

illio

n

Page 8: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Meeting challenging market conditions in ANZ with actionRestructuring to improve returns

8

1 Timing of expected restructure costs 1H13 $2.8m, 2H13 $4.0m, FY14 $2.8All figures in NZD unless otherwise stated

7sites

4sites

Pre-restructure

Post-restructure

Reducing capacity to meet future demand • Closing 1 site in New Zealand,

2 in Australia• Expected restructure costs $9.6m1

• Closures to occur 1st half FY14

Investing to improve efficiency and further reduce costs • Investing $13m to improve customer

responsiveness and efficiency

Benefits to flow from 2H13• 2H13: $0.5m in cost savings • FY14: $3.7m cost savings, 0.5 cents EPS

uplift • FY15: fully realised $5.6m cost savings,

2 cents EPS uplift

Page 9: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Meeting challenging market conditions with actionImproving procurement and delivering significant cost savings

9

All figures in NZD unless otherwise stated

NuLEAP I on track to deliver $30m net benefits by end FY13• 1H13 $6m realised

‒ 40% procurement, 40% sales, 20% operating costs

‒ Resins segment unit margins up 3.4%

NuLEAP II transformative procurement initiative • Adopting a center-led approach

supported by regional hubs• Invested $3.2m in 1H13• Benefits from this initiative to flow from

2H13 ‒ $5.3m in 2H13‒ $12m in FY14

Decentralised Center-led

Country procurement managers

Site buyer

Global category managers

Regional procurement managers

Implementing

• Strategic sourcing processes

• Category management disciplines

Page 10: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Global resins segment

EBITDA including Viverso $45.2m down 3.6% (up 0.6% constant FX)• Includes $6m in costs to restructure ANZ ($2.8m) and upfront costs of procurement

initiative ($3.2m)

EBITDA excluding Viverso, restructure and procurement costs $42.4m down 8.5% (down 6.4% constant FX)

10

Asia • 10.3% volume growth

– Growth in China (Auto OEM, Vehicle Refinish), Indonesia (Decorative) & Malaysia (Regional exports)

• EBITDA US$12.1m up 16.3%• Contribution from sale of Viverso products • Vietnam impacted by slowdown in housing market. New

capacity still expected to be filled in 4 years

Australia & New Zealand • Volumes down 11.4% • EBITDA A$3.8m down 56.8% after A$1.6m restructure costs • Cyclical low construction activity impacted demand • Importation of finished goods continued to impact manufacturing customers• Margin management and cost control mitigated some of volume impact

Americas • 3.7% volume growth

– Growth in higher margin High End Metal coatings

• EBITDA US$7.3m up 40.4%• Tight cost control• Contribution from sale of

Viverso products

Europe, Middle East & Africa (EMEA)• 2.5% volume growth ex Viverso

– Growth in powder resins – Decorative, Marine & Protective and Auto OEM

resins segments weaker • EBITDA ex Viverso €9.2m down 3.2%

– Earlier than usual end-of-year slowdown – Increased R&D costs, contribution to employee

fund

Viverso • Integration complete with successful transition of complex IT systems • 1H13 performance in line with management expectations• On track to deliver €12m in FY13• Focus now on operational improvement and leveraging product portfolio

All figures in NZD unless otherwise stated

Resins

Specialties

Page 11: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

ANZ specialties segment

EBITDA $12.4m up 19.2% (up 20.2% constant FX)

11

Agency and distribution

Defensive sectors growing • Food and nutrition growing due to

chocolate • Pharmaceutical and healthcare • Ongoing weakness in plastics, foam,

paints and coatings

Nuplex Masterbatch

Integration/restructure complete • 2 sites closed • Improved margins • Enhanced customer offering: expanded colour

range, black and performance additives

Delivering in line with acquisition base case • On track to deliver A$5m

EBITDA in FY13

Resins

Specialties

All figures in NZD unless otherwise stated

Page 12: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

2. Financial results

Page 13: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Financial results

13

NZ$ million 1H13 1H12 % change

Sales 828.7 746.4 11.0%

EBITDA 57.6 57.3 0.5%

Depreciation and amortisation (16.0) (12.2) 30.7%

EBIT 41.6 45.1 (7.7)%

Net financing costs (9.1) (6.5) 38.6%

Share of associates 0.9 (1.3) -

Minority interests (non controlling interests) (1.2) (1.0) 21.8%

Tax on operating profits (7.7) (9.2) (16.5)%

Underlying NPAT 24.5 27.1 (9.6)%

Write downs (13.6) - -

Legal provisions (0.3) (0.4) (17.8)%

Loss on sale of Plaster Systems NZ (0.7) - -

Acquisition related costs (0.8) (2.6) (71.5)%

Income tax credit on non-operating items 2.4 - -

NPAT attributable to equity holders of parent company

11.5 24.1 (52.3)%

Page 14: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

Reconciliation: EBITDA to cash flow

14

NZ$ million 1H13 1H12 $ change

EBITDA 57.6 57.3 0.3

Financing costs (9.1) (6.5) (2.6)

Provisions/other 1.8 (2.0) 3.8

Loss on business disposal 0.6 - 0.6

Movement in working capital 11.2 (9.9) 21.1

Tax paid (14.3) (15.9) 1.6

Dividends from associates 1.3 1.3 -

Cash-flow from operations before significant items 49.2 24.3 24.9

Cash flow from significant items (1.7) (3.0) 1.3

Cash-flow from operations 47.5 21.3 26.2

Capital expenditure less proceeds of disposal (18.8) (13.0) (5.8)

Cash flow 28.6 8.3 20.3

Dividends paid (18.7) (22.3) 3.6

Free cash flow 9.9 (14.1) 24

Page 15: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

15.816.5

14.8

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 June 12 Dec 12

Working capital as a percentage of 12-month rolling sales

Target range 15-17%

Working capital and capital expenditure

Working capital to sales ratio 14.8% Stay in business capex• 1H13: $12.2m, equivalent to 95.4% of

depreciation ‒ $2.9m global ERP project ‒ $2.3m new reactors at Botany, Wacol,

and East St.Louis‒ $1.2m Suzhou Technical Centre

• FY13: expected to be 120% of depreciation

Organic growth capex • 1H13: $6.7m

‒ China new site $4.8m• FY13 forecast approximately $20m• FY14 forecast $25 to $30m

15

All figures in NZD unless otherwise stated

Page 16: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

0%

10%

20%

30%

40%

50%

60%

Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12

Target range 20-35%

Funding and gearing

$209m net debt as at 31 December 2012• Largely unchanged from $220m as at

30 June 2012

Average cost of debt 6.6%

Completed US$105m US private placement funding • 7 year term, mature 2019• Coupon rate 6.125%• Settled 31 July 2012

NZ$52.6m of Capital Notes redeemed September 2012

16

Note: All figures are in NZD unless otherwise stated

Net debt to net debt plus equity ratio

27.4%

Page 17: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

3. Strategy and outlook

Page 18: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

• Consider acquisitions that

− Strengthen leading market & technology positions

− Leverage capabilities

− Meet disciplined criteria

To achieve superior shareholder returns by delivering high quality products to our customers through pursuing operational excellence, innovation and building market leading positions

Safety People NuLEAPEmerging markets

R&DStrategic

acquisitions

• Build a culture of ‘zero harm’

• Engage and leverage One Global Team

• Introduce global Overlay Teams to leverage products, R&D and procurement across the group

• Improve the way we work through rigorous improvement programs

• Profitably expand capacity and presence in emerging markets

• Grow market share through innovative products

• Pursue market development opportunities

• Leverage technologies across global platform

To be the leading, trusted independent polymer resins manufacturer globally, and leading agency and distribution business in ANZ

Growing through building market leading positions Strengthening through operational excellence

We’re strengthening and growing Nuplex

18

Our strategy

Our ambition

FY2013 Execution

• Consolidation of recent acquisitions

− Integration− Improving

operational performance

− Leveraging benefits of product portfolio

• Implementing global common standards relating to processes and policies

• Health & Wellbeing program in ANZ

• Global Senior Management Conference

• Employee survey

• Nuplex Leadership Academy: online development program

• NuLEAP I− Final phase of

execution• NuLEAP II− Planning − Procurement

initiative • Restructure of

Australia and New Zealand

• China: 3rd site progressing US$35m

• Indonesia: cap-acity expansion US$5.4m

• Russia: finalising JV

• Thailand: cap-acity expansion

• Preparing for launch of new products at European Coatings Show in March 2013

• Succession planning for R&D personnel

Page 19: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

FY12

44

31

16

9

FY09

58

21

12

9

FY15

37

34

20

9

expected (base case2)

Building leading positions where our markets are developing and growing

19

Sales by region1

%

ANZ

EMEA

Asia

Americas

1. FY09 sales retranslated at FY12 exchange rates 2. Forecast subject to unforeseen circumstances and economic uncertainty

100%

China, Changshu • Investing US$35m • Double capacity in China • Delayed 6 months• Commissioning now expected end FY14

Indonesia, Surabaya • Investing US$5.4m• Expanding capacity and adding new

technology• Commissioning expected end FY14

Thailand, Bangkok • Joint venture • Investing US$1.5m • Expanding powder capacity 40%• Funded from cash within JV

Russia, Belgorod • Joint venture negotiations nearing

completion • Expect to be operating 4th quarter FY13• Initial investment of €8m in existing plant

& equipment and working capital – Nuplex equity investment €2.5m

• Working towards starting construction of new site in 2014 – estimated investment €20 million, Nuplex share 50%

100%

100%

Page 20: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

FY13 guidance 2013 so far

ANZ • New Zealand: in recovery mode• Australia: bouncing along the bottom?Asia • China: signs of an upturn in China• SE Asia: growing steadily Europe • While activity is volatile, demand steady Americas• Steady growth

FY13 earnings guidance

EBITDA now expected to be between $135m and $140m• Assumes similar market conditions in 2H13 • Is based on 1H13 average exchange rates • Acquisitions on track to deliver EBITDA targets; Viverso €12m, Nuplex Masterbatch $5m • NuLEAP on track to deliver at least $13m• Procurement initiative to deliver benefits of $5.3m in the second half• ANZ restructure costs of $6.8m

Note: All figures are in NZD unless otherwise stated

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Page 21: Interim results presentation Emery Severin – Chief Executive Officer Ian Davis – Chief Financial Officer 21 February 2013 2013 Financial Year

FOR FURTHER DETAILS:

Emery Severin

Chief Executive Officer +61 2 8036 0902 [email protected]

Josie Ashton

Investor Relations +61 2 8036 0906 or +61 416 205 234 [email protected]