Operational excellence - Solvay
Operational excellence - Solvay
Operational excellence - Solvay
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Building the new <strong>Solvay</strong>:<br />
a value creative transformation<br />
Jean-Pierre Clamadieu<br />
April 24, 2012
AGENDA<br />
1 Strong fundamentals<br />
2 A well defined strategy<br />
3 A transformation already underway<br />
Capital Markets Day 2012 April 24, 2012 2<br />
April 24, 2012
1 Strong fundamentals<br />
Capital Markets Day 2012 April 24, 2012 3<br />
April 24, 2012
STRONG FUNDAMENTALS<br />
A major player in chemicals with compelling strengths<br />
Our strengths<br />
Within top 10 worldwide largest chemical players from<br />
developed markets<br />
90% of sales in businesses ranking among the<br />
top 3 global leaders<br />
€ 12.7bn<br />
NET SALES<br />
2011 Proforma<br />
€ 2.1bn<br />
REBITDA<br />
Global presence with 40% of sales in fast growing<br />
countries<br />
€ 825m*<br />
NET INCOME<br />
Diversified end-markets creating resilience<br />
through cycles<br />
Differentiated innovation focused on sustainable<br />
development<br />
Committed to operational <strong>excellence</strong> targeting<br />
best-in-class process efficiency<br />
29,000<br />
EMPLOYEES<br />
55 Countries<br />
€ 656m**<br />
FREE CASH<br />
FLOW<br />
REBITDA: operating result before amortization, non recurring elements, financial charges and taxes<br />
* From continuing operations<br />
** Cash flow from operating activities + cash flow from investing activities, excluding acquisitions and sales of subsidiaries and other investments + dividends from associates and JVs.<br />
Capital Markets Day 2012 April 24, 2012 4
STRONG FUNDAMENTALS<br />
<strong>Solvay</strong> in the global top league<br />
Largest chemical players from developed markets<br />
2011 Revenue, EUR billions<br />
(3)<br />
Material Sciences<br />
(1)<br />
(2)<br />
(4)<br />
9.4<br />
9.2<br />
8.8<br />
8.7<br />
9.9<br />
12.7<br />
12.7<br />
12.5<br />
11.7<br />
10.8<br />
14.2<br />
15.7<br />
21.5<br />
20.2<br />
27.1<br />
SOURCE: Reuters; Chemical & Engineering News; Annual reports<br />
1) BASF excluding Oil and Gas activities<br />
2) Evonik excluding Real Estate activities<br />
3) Proforma 2011<br />
4) Consolidated revenues<br />
Capital Markets Day 2012 April 24, 2012 5<br />
43.1<br />
61.4
STRONG FUNDAMENTALS<br />
Strong global leadership positions<br />
World leader with 90% of its sales in businesses in which it is in the top 3<br />
Specialty<br />
Polymers<br />
Silica & Rare Earth<br />
Systems<br />
Consumer<br />
Chemicals<br />
Essential<br />
Chemicals<br />
High Barrier<br />
Polymers,<br />
High-Performance<br />
Engineering<br />
Polymers<br />
& Compounds,<br />
Fluorinated<br />
Polymers<br />
High-Performance<br />
Silicas,<br />
Rare Earth<br />
Systems<br />
Specialty<br />
Surfactants,<br />
Phosphorus<br />
Chemistry<br />
& Diphenols<br />
#1 #1 #1 #1<br />
Hydrogen<br />
Peroxide,<br />
Soda Ash &<br />
Sodium<br />
Bicarbonate<br />
Polyamide &<br />
Intermediates<br />
Vinyls<br />
& Acetow<br />
PA 6.6 Polymers,<br />
Intermediates &<br />
Engineering<br />
Plastics<br />
#2 #3<br />
PVC, Cellulose<br />
Acetate Fiber<br />
Capital Markets Day 2012 April 24, 2012 6
STRONG FUNDAMENTALS<br />
Strong footprint in fast growing regions<br />
North<br />
America<br />
17%<br />
25<br />
INDUSTRIAL<br />
SITES<br />
3,400<br />
Latin<br />
America<br />
14%<br />
10<br />
INDUSTRIAL<br />
SITES<br />
3,700<br />
Europe<br />
43%<br />
40<br />
INDUSTRIAL<br />
SITES<br />
16,300<br />
Asia<br />
Pacific / Rest<br />
of the world<br />
26%<br />
35<br />
INDUSTRIAL<br />
SITES<br />
5,700<br />
Plastics & Chemicals<br />
Rhodia<br />
40% OF NET SALES AND INDUSTRIAL ASSETS<br />
32% OF HUMAN RESOURCES<br />
Capital Markets Day 2012 April 24, 2012 7
STRONG FUNDAMENTALS<br />
R&D capabilities boosted by open innovation network<br />
2011 proforma figures<br />
12<br />
major worldwide<br />
R&D centers<br />
1,700 R&D<br />
employees<br />
€ 218m € 54m 322<br />
net R&D investment<br />
in venturing<br />
new patents<br />
North America<br />
222<br />
people<br />
Atlanta<br />
Bristol<br />
Europe<br />
1,219<br />
people<br />
Paris<br />
Brussels<br />
Lyon<br />
Hannover<br />
Dombasle<br />
Milano<br />
Asia<br />
188<br />
people<br />
Seoul<br />
Vadodara<br />
Shanghai<br />
Latin America<br />
82<br />
people<br />
Paulinia<br />
Major worldwide R&D centers<br />
Collaboration with major<br />
academic institutions<br />
Venture Capital investments<br />
Capital Markets Day 2012 April 24, 2012 8
STRONG FUNDAMENTALS<br />
Resilience to cycles resulting from diversified end-markets<br />
29%<br />
18%<br />
17%<br />
2%<br />
4%<br />
Agriculture, Forestry and<br />
Fishing 4%<br />
4%<br />
7%<br />
15%<br />
Electricals<br />
& Electronics<br />
Capital Markets Day 2012 April 24, 2012 9
STRONG FUNDAMENTALS<br />
Best-in-class profitability<br />
2011 REBITDA margin ranking<br />
2.6<br />
REBITDA margin on sales (%)<br />
REBITDA<br />
(in m€)<br />
REBITDA / employee<br />
(in k€)<br />
(1)<br />
18.2<br />
79<br />
(2)<br />
16.9<br />
4.9<br />
66<br />
(3)<br />
16.3<br />
2.1<br />
71<br />
(4)<br />
15.0<br />
9.2<br />
107<br />
(5)<br />
14.4<br />
1.0<br />
64<br />
14.3<br />
1.3<br />
60<br />
13.2<br />
0.8<br />
39<br />
13.1<br />
1.1<br />
70<br />
13.0<br />
5.6<br />
100<br />
11.4<br />
1.8<br />
31<br />
Material Sciences<br />
10.8<br />
1.2<br />
79<br />
1<br />
Excl. Real Estate<br />
2<br />
Excl. Pharma<br />
SOURCE: Annual reports 2011<br />
3<br />
Proforma FY 11, assuming Rhodia was consolidated into <strong>Solvay</strong>'s accounts from 1 January 2011<br />
4<br />
Excl. Oil and Gas activities<br />
5<br />
Incl. Vinyls<br />
Capital Markets Day 2012 April 24, 2012 10
2 A well defined strategy<br />
Capital Markets Day 2012 April 24, 2012 11<br />
April 24, 2012
STRATEGIC VISION<br />
Our ambition<br />
• Build a strong leader participating<br />
in the reshaping of the global chemical industry<br />
• Be a model of sustainable chemistry,<br />
attracting and growing the people<br />
who will imagine, engineer and make the solutions<br />
that meet the global challenges society faces,<br />
creating value for all our stakeholders<br />
Capital Markets Day 2012 April 24, 2012 12
STRATEGIC VISION<br />
A transformation geared towards value creation<br />
Portfolio thorough strategic analysis performed early 2012<br />
<strong>Solvay</strong>’s ability<br />
to extract value<br />
<strong>Solvay</strong><br />
Chemical<br />
industry average<br />
Growth engines<br />
‣ Priority to seize GROWTH:<br />
organic, innovation, external<br />
Areas of challenge requiring<br />
strategic position improvement<br />
‣ Priority to operational <strong>excellence</strong><br />
and disciplined cash<br />
management<br />
24 business segments analyzed<br />
Value Creation potential<br />
of Industry / Market served<br />
Clear strategic intent for each portfolio component<br />
Capital Markets Day 2012 April 24, 2012 13
STRATEGIC VISION<br />
Value creation through differentiated strategic priorities<br />
Portfolio Strategic Management<br />
Energy<br />
Services<br />
Specialty<br />
Polymers<br />
8%<br />
16%<br />
Consumer<br />
Chemicals<br />
16%<br />
12%<br />
Advanced<br />
Materials<br />
Focus on growth<br />
opportunities<br />
• Organic growth<br />
• Innovation<br />
• External growth<br />
› Double-digit<br />
profit growth<br />
› Outperforming<br />
the market<br />
Special<br />
Chemicals<br />
Polyamide<br />
3%<br />
8%<br />
10%<br />
Vinyls<br />
18%<br />
Essential<br />
Chemicals<br />
9%<br />
Acetow &<br />
Eco Services<br />
Focus on cash management and<br />
strategic positioning improvement<br />
• Improve contribution margin<br />
• Reduce costs<br />
• Enhance cash generation<br />
› Regain strategic<br />
flexibility<br />
› Secure sustained<br />
cash generation<br />
Capital Markets Day 2012 Proforma 2011 REBITDA breakdown by business (excluding New Business Development / Corporate Business Support) April 24, 2012 14
STRATEGIC VISION - AMBITION<br />
Focused on value creation<br />
Culture of Excellence<br />
HIGH<br />
PROFITABILITY<br />
ROBUST<br />
CAPITAL STRUCTURE<br />
REBITDA<br />
€ 3bn*<br />
by 2016<br />
STRONG CASH FLOW<br />
GENERATION<br />
VALUE CREATION<br />
CFROI > WACC<br />
Leveraging on strong track record<br />
* At constant scope and assuming no major macroeconomic crisis<br />
Capital Markets Day 2012 April 24, 2012 15
3 A major transformation underway<br />
Capital Markets Day 2012 April 24, 2012 16<br />
April 24, 2012
MAJOR TRANSFORMATION UNDERWAY<br />
Building a strong leader<br />
• Integration well advanced<br />
– Most workstreams completed<br />
by year-end<br />
• Focus now on building the new <strong>Solvay</strong><br />
• Key levers<br />
– <strong>Operational</strong> <strong>excellence</strong><br />
– Growth<br />
• Innovation aligned with megatrends<br />
• Geographical footprint<br />
• External growth<br />
Focus on value creation<br />
Capital Markets Day 2012 April 24, 2012 17
OPERATIONAL EXCELLENCE<br />
<strong>Solvay</strong> & Rhodia combination: a powerful catalyst to unlock value<br />
Purchasing<br />
and Logistics<br />
Industrial & Supply<br />
Chain <strong>excellence</strong><br />
€ 400m*<br />
by 2014<br />
----------<br />
~€ 130m*<br />
in 2012<br />
<strong>Operational</strong><br />
<strong>excellence</strong><br />
Action<br />
plans<br />
in progress<br />
Administrative &<br />
process efficiency<br />
Marketing &<br />
Commercial <strong>excellence</strong><br />
(*) Vs. 2010 Cost base<br />
Capital Markets Day 2012 April 24, 2012 18
OPERATIONAL EXCELLENCE<br />
Purchasing & Logistics <strong>excellence</strong><br />
Buy Cheaper, Buy Better, Buy Less<br />
Volume bundling<br />
Prices and contractual<br />
terms benchmarking<br />
Supplier rationalization<br />
Standardization<br />
Specification best practices<br />
PURCHASES<br />
• Raw materials<br />
• Energy<br />
• Logistics & packaging<br />
• Technical goods & services<br />
• General expenses / IT /<br />
Insurance<br />
€ 250m<br />
by 2014<br />
----------<br />
€ 75m<br />
in 2012<br />
Make-or-Buy<br />
Team in place since Nov 11, led by J. Matias: 250 people mobilized in over 40 workgroups<br />
Capital Markets Day 2012 April 24, 2012 19
OPERATIONAL EXCELLENCE<br />
Administrative & process efficiencies<br />
Streamlined organization<br />
Horizon<br />
• Processes redesigned<br />
to improve productivity<br />
• 800 full-time<br />
employees<br />
• Deployment<br />
completed by YE 12<br />
€ 150m*<br />
by 2014<br />
----<br />
~ € 55m*<br />
in 2012<br />
Integration synergies<br />
• Streamlined global<br />
organization<br />
• Unified corporate<br />
functions<br />
• Deployment of "best in<br />
class" Global Business<br />
Services organisation<br />
€ 65m annual savings € 85m annual savings<br />
Primarily impacting support functions<br />
(*) Vs. 2010 Cost base<br />
Capital Markets Day 2012 April 24, 2012 20
OPERATIONAL EXCELLENCE<br />
Industrial & supply chain <strong>excellence</strong><br />
Developing the best tools to support <strong>excellence</strong> initiatives<br />
Overall Equipment<br />
Efficiency<br />
Excellence in<br />
Maintenance<br />
Yield<br />
Improvement<br />
Reduction<br />
of Fixed Costs<br />
Working Capital<br />
Management<br />
Improve<br />
competitiveness<br />
Reduce<br />
Capital intensity<br />
Maximize<br />
Free Cash Flow<br />
Capital Markets Day 2012 April 24, 2012 21
OPERATIONAL EXCELLENCE<br />
Marketing and Commercial <strong>excellence</strong><br />
• Value pricing for innovative solutions<br />
• Pricing power<br />
• Revenue synergies through cross-selling<br />
opportunities and faster project developments across<br />
markets and geographies<br />
Capital Markets Day 2012 April 24, 2012 22
SOLVAY’S 6 INNOVATION PLATFORMS<br />
GROWTH - INNOVATION<br />
Innovation focused on growth megatrends<br />
SUSTAINABILITY<br />
GEOGRAPHIC SHIFT<br />
& NEW DEMAND PATTERNS<br />
MEGATRENDS<br />
DRIVING GROWTH<br />
IN CHEMICALS<br />
Climate Change<br />
Limited Resources<br />
Over 1bn<br />
new consumers<br />
Health<br />
& Well-being<br />
Renewable<br />
Chemistry<br />
Eco-Efficient<br />
Processes<br />
Sustainable<br />
Energy Solutions<br />
Organic<br />
Electronics<br />
Nanotechnologies &<br />
Advanced Materials<br />
Consumer<br />
Chemicals<br />
Cornerstone of <strong>Solvay</strong>’s competitive differentiation<br />
Capital Markets Day 2012 SOURCE: McKinsey Growth Initiative<br />
April 24, 2012 23
GROWTH - INNOVATION<br />
Innovation fueling sustainable growth<br />
Sustainable Energy<br />
Generation<br />
Fuel cells: membranes<br />
& Membrane Electrode<br />
Assembly<br />
Digitalization<br />
Smart devices<br />
High mechanical performance polymers<br />
for complex parts<br />
Photovoltaic materials<br />
Organic Photovoltaic<br />
Storage<br />
Li-Ion battery offering<br />
New batteries (e.g. Li-Air)<br />
Energy storage through H 2<br />
Driving megatrends<br />
• Fossil fuel replacement<br />
• GHG emissions reduction<br />
High performance chemicals<br />
in semicon fab’s<br />
Organic Light Emitting<br />
Diodes materials for<br />
emerging displays<br />
Driving megatrends<br />
• Electronic everywhere<br />
• Information everywhere<br />
Capital Markets Day 2012 April 24, 2012 24
GROWTH - GEOGRAPHICAL FOOTPRINT<br />
Expanding industrial & human footprint in fast growing regions<br />
~50% of <strong>Solvay</strong><br />
investments<br />
over 2010/11<br />
Middle East<br />
HPPO with<br />
(2015)<br />
Russia<br />
Rusvinyl (330 kt/y, 2013)<br />
& Surfactants JV with<br />
China<br />
• Feixiang<br />
• Specialty Polymers in Changshu<br />
• Soda Ash JV in Tianjin<br />
• Hydrogen Peroxide (50 kt/y) in partnership with<br />
• Rare Earths Automotive Catalysis line in Liyang<br />
• Surfactants (50 kt in Q1 12) in Zuhai<br />
Korea<br />
Joint R&D with<br />
EWHA University<br />
Brazil<br />
Hydrogen Peroxide (180 kt/y)<br />
India<br />
• Vadodara R&D center<br />
• Savil R&D (Q2 12)<br />
Thailand<br />
• HPPO JV with (330kt/y, YE 11)<br />
• Epichlorhydrine (100 kt in Q1 12)<br />
Growth investments aligned with geographic dynamics and strategic priorities<br />
Capital Markets Day 2012 April 24, 2012 25
EXTERNAL GROWTH<br />
Pursuing strategic bolt-on acquisition opportunities<br />
USA<br />
McIntyre 2009:<br />
Specialty surfactants<br />
Ajedium Film US 2008:<br />
Conversion of high<br />
performance resins into<br />
high value films<br />
Mississippi Polymers<br />
Technologies 2006:<br />
PARMAX ®<br />
Spotless track record<br />
Targeted<br />
Successfully<br />
integrated<br />
Outperforming<br />
initial expectations<br />
CHINA<br />
Feixiang 2010: Specialty amines<br />
INDIA<br />
Gharda’s PEEK division 2006:<br />
Specialty grades of ultra-performance polymers<br />
PI industries Ltd’s Technical Plastics 2011<br />
Going forward, targeted bolt-on acquisitions aimed at:<br />
• Strengthening positions in attractive business segments and regions<br />
Expansion into high value added downstream<br />
Market share gains<br />
• Participating in the industry consolidation<br />
Financial flexibility allowing to be proactive<br />
Capital Markets Day 2012 April 24, 2012 26
Building the new <strong>Solvay</strong>:<br />
A value creative journey<br />
April 24, 2012
www.solvay.com<br />
Capital Markets Day 2012 April 24, 2012 28
“To the extent that any statements made in this presentation contain information that is not historical, these statements<br />
are essentially forward-looking. The achievement of forward-looking statements contained in this presentation is<br />
subject to risks and uncertainties because of a number of factors, including general economic factors, interest rate and<br />
foreign currency exchange rate fluctuations; changing market conditions, product competition, the nature of product<br />
development, impact of acquisitions and divestitures, restructurings, products withdrawals; regulatory approval<br />
processes, all-in scenario of R&D projects and other unusual items. Consequently, actual results may differ materially<br />
from those expressed or implied by such forward-looking statements. Forward-looking statements can be identified by<br />
the use of words such as "expects," "plans," "will," "believes," "may," "could" "estimates," "intends", "goals", "targets",<br />
"objectives", "potential", and other words of similar meaning. Should known or unknown risks or uncertainties<br />
materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated.<br />
The Company undertakes no obligation to publicly update any forward-looking statements"<br />
www.solvay.com<br />
Capital Markets Day 2012 April 24, 2012 29
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