Being part of all our lives

Being part of all our lives Presentation Overview • • • • • • • • Yule Catto - key themes (slide 3) Yule Catto - the Synthomer Polymers business (s...
Author: Victoria Wood
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Being part of all our lives

Presentation Overview • • • • • • • •

Yule Catto - key themes (slide 3) Yule Catto - the Synthomer Polymers business (slide 4) Synthomer - an introduction (slides 5-20) Integration – synergy update (slides 21-24) Synthomer - products and markets (slides 25-34) Synthomer – profitable growth in Asian (slides 35-49) Synthomer – product development (slides 50-X) Synthomer – operational excellence (slides X-X)

www.synthomer.com

Key Themes • Continued strong progression in Group profitability • Group clearly focused on Polymers • The acquisition of PolymerLatex will drive medium term profitability improvement from commercial integration and cost synergies • Significant and increasing exposure to high growth emerging markets • Geographic balance and market leadership positions create good growth dynamics • Strong balance sheet Being part of all our lives

3

Yule Catto – Dominated by Polymer Chemicals SYNTHOMER – the Polymer Chemical business of Yule Catto Europe & North America 56% of Group turnover 13 manufacturing plants

Asia & ROW 39% of Group turnover 8 manufacturing plants

• Water based polymers used in a diverse range of applications including: • Protective gloves • • • • •

Adhesives Paints Carpets Varnishes and lacquers Paper

• Speciality chemicals including Lithenes, Polyvinyl Alcohol and Poly Chloroprene for applications such as: • Regulation of PVC manufacture •

Motor industry sealants

Pharma Chemicals - 5% of Group turnover

• Manufacture of Active Pharmaceutical Ingredients for both generic and ethical drug manufacture

Being part of all our lives

4

Introduction to Synthomer – Yule Catto’s Polymer business

www.synthomer.com

Overview of Synthomer Latex 50%

Dispersions 23% Nitrile 37%

H1 2011 Sales £664.3 million (Underlying Pro-forma Basis)

SBR 63%

Compounds 5% Specialities 22%

Sales by Business Unit Functional Polymers 14.4%

Performance Polymers 6.7%

Sales by Destination

Sales by Product

Asia 27%

Construction & Coatings 23.1%

East Europe and ROW 4%

West Europe 55%

Paper 14.7%

Carpet & Foam 19.1%

www.synthomer.com

Health & Protection 22.0%

South Africa and Middle East 10% Americas 4%

6

Scale & Scope of Synthomer Our Business

-

Aqueous Emulsion Polymers and Speciality Chemicals Producer Sales H1 2011 £664.3 million (Pro-forma Basis) 1.3 Million wet tonnes per annum 34 production & toll units globally 1,900 people

Our Technology

-

Strong heritage from our Parent Companies Lattices [Styrene Butadiene (XSBR) & Acrylonitrile Butadiene (XNBR)] Dispersions [Acrylic Polymers & Vinylic Homo/Co Polymers] Specialities [Liquid Polybutadiene & Polyvinyl Alcohol]

-

Health & Protection Coatings & Construction Carpet & Foam Paper Functional Polymer Performance Polymer

Our Markets

www.synthomer.com

(22%) (23%) (19%) (15%) (14%) (7%)

7

Key Facets of the Aqueous Emulsion Polymers Business • 50% Water  − Logistics costs rapidly become a significant proportion of total cost. − Need to manufacture close to customers − “In Built” defence mechanism to “Out of Region” competitors.

• We don’t sell a chemical – We sell a formulation  − Intimate knowledge of customers products/production process. − Significant technical service element to sales. − Deep “know how” required.

www.synthomer.com

8

Emulsion Polymers Market Others 3%

Lattices 35%

Global Emulsion Polymers Market

Acrylic Dispersions 35%

 17.5 Million Tonnes (wet)  €18 Billion Value    

Vinyl Dispersions 27%

www.synthomer.com

9

Europe – 29% Americas – 31% Asia – 36% ROW – 4%

Broad Product Offering Company

Products SBR

NBR

HSSBR

Acrylics

Vinylics

Synthomer (Global) BASF (Global) Dow (Global) Trinseo/Styron(Global) Celanese (Global) Kumho (Asia) LG ( Asia)

Optimised offer to the customer - the right product for the right application

www.synthomer.com

10

Synthomer’s Strategy In Europe • Create a strong, defendable and highly cash generative business by: • Market leading product range as a result of intimate knowledge of our

customers requirements and a highly capable R&D resource • Operating highly efficient “State of the art” production facilities which are well

located for access to customers and raw materials • Use these products and processes to create strong market positions that

deliver growth and defend unit margins through the cycle

www.synthomer.com

11

Synthomer’s Strategy In Asia and other developing economies • Grow strongly in existing and new business locations: •

Using the cash generated in Europe to finance growth both organically and through “Bolt on” acquisitions



Use our market leading products and production processes to build strong and lasting relationships with Asian regional customers and expand our relationships with Global multinationals



Utilise our existing management infra-structure in the region



Consistent EBIT growth of 5% per annum

www.synthomer.com

12

Strategic Priorities Task

Key Actions

Status

• Achieve integration synergies of at least £20m

• Detailed implementation plans

• Annualised run rate after 3 months - £4m • Confident of achieving target

• Increase exposure to “High Growth” economies

• €25m expansion in Pasir Gudang to provide further NBR and SBR capacity • “Bolt on” acquisitions and “Greenfield” investments

www.synthomer.com

13

• Main plant items on order • Completion target of Q3 2012 • Ongoing review of options

Strategic Priorities Task

Key Actions

Status

• Innovation

• Global head of R&D

• New organisation fully implemented

• Centres of excellence in key markets • Prioritised list of developments by key markets • High quality, cost effective production

• Quality focus

• Global production function

• Continue to drive production/process efficiencies

• Continuous improvement targets set

• Targeted investments in production capacity

www.synthomer.com

• Resources consolidated into state of the art facilities in Marl, Harlow and Kluang

14

• £20m to be invested in optimising production

The Global Emulsion Polymers Business Global Emulsion Polymers Market  17.5 Million Tonnes (wet)  €18 Billion Value

CAGR +3.9% ROW ~6% NAM ~1%

Asia ~ 8% Europe ~1%

www.synthomer.com

15

Synthomer World Map Oulu, Finland (JV)

Hasselt

Stallingborough

Synthomer BV

Synthomer Ltd

Oss

Batley

Synthomer BV

Synthomer Ltd

Accrington

Langelsheim

William Blythe Ltd

Synthomer GmbH

Kluang

Ossett

Revertex (Malaysia) & Synthomer Sdn Bhd

Marl (2 (2 plants) plants) Dormagen (Tolling) (Tolling) Dormagen Worms

Synthomer Ltd

Harlow Synthomer Ltd

Synthomer Vietnam Co. Ltd

Johor Bahru

Mouscron

Malaysia

Synthomer SA

Filago Filago

Sant Celoni

Lliçà de Vall

Uquifa SA

Uquifa SA

Dammam Synthomer Middle East Company (JV)

Dubai UAE (Tolling)

Durban Revertex Chemicals (Pty) Ltd

www.synthomer.com

Ho Chi Minh City

16

Synthomer Has Strong Market Positions both Globally and Regionally #1

-

Global NBR

-

Global HSSBR

-

MEA Dispersions

-

SEA Dispersions

Synthomer is #2 Emulsion Polymers producer in Europe

European SBR #2 European Dispersions #3 In Europe Top 5 suppliers represent 80% of the market BUT In Asia Top 5 suppliers represent ONLY 25% of the market www.synthomer.com

17

Synthomer Vision -

Today

Vision 2015

Values

www.synthomer.com

TOP 5 Global Emulsion Polymer supplier Very strong position in Europe Solid base in S E Asia for continued expansion Excellent products and production processes

-

No 1 or 2 in target markets > 50 % sales from high growth emerging markets Consistent EBIT growth 5 % p.a.

-

We create value for our customers We care about our employees and our neighbours We are responsible for minimising our impact on the environment We deliver for our shareholders

18

Polymers Profit Development (2006-2011) 70

64.8 60.2

60

53.7

50 EBIT 40 £’M

37.0

38.3

41.0 Full Year H1 (2011 pro-forma)

30.8

30

25.4 18.1

20

18.4

21.7

10 0 2006

2007

2008

2009

2010

New segmentation basis. History excludes Finewaters – sold in 2010 www.synthomer.com

19

2011

Key Factors for Synthomer’s Profitable Growth • • •

Access to multiple Polymer technologies Differentially managed product portfolio Commercial toughness & value selling

• • •

Access to Asian & Emerging Markets Manufacturing close to customers Proximity to suppliers

• • •

Cost effective production Flexible and effective organisation Fast & Commercially Focussed R&D

The Right Processes

• • •

Customer understanding & relationships Applications Technology & understanding Highly experienced & expert personnel

The Right Knowledge

The Right Locations

The Right Choice www.synthomer.com

The Right Product

PolymerLatex Acquisition Status Update www.synthomer.com

Acquisition Drivers • Excellent strategic fit − Complementary products/market positions − Well invested and located facilities in Europe and Asia − Similar but slightly stronger margins than Synthomer’s through the cycle − Accelerates Synthomer’s Asian expansion plans

• Attractive returns and growth opportunities − Annual “hard” cost synergies of at least £20m − Earnings accretive in first 12 months of ownership − Improved cash flow to invest in organic growth particularly in

“Developing” markets www.synthomer.com

22

Synergy Update • New organisation in place and operating successfully • Numerous projects running to improve operational and commercial efficiency • Highly confident of at least £20m of “hard” synergies • Anticipate £20m delivered in the second twelve months of ownership as announced at the time of the acquisition • Annualised run rate on £4m p.a. At the end of Q2 – three months post completion • Costs of delivery still expected to be in line with the original announcement - £20m cash costs and £23m capex

www.synthomer.com

23

Synthomer’s Key Growth Drivers • Delivering the benefits from the PolymerLatex acquisition • Excellent products and market positions • High percentage of current sales to Asia and other high growth economies • Established strategy of growing around existing hubs, particularly in developing economies • New product development pipeline

www.synthomer.com

24

Products and Markets Highly fragmented, highly specialised

www.synthomer.com

Six global Strategic Business Units focused on user industries •

Industry focused



Strategy formulated globally, executed regionally



Differential management according to segment



Transfer of best practice and expert knowledge

• •

Performance Polymers Functional Polymers

Paper

Health & Protection

Cross-regional leverage Close alignment with R&D

Carpet, Compounds & Foam

4 www.synthomer.com

Construction & Coatings

A wide range of polymers to a wide range of end uses Construction & Coatings SBR Latex

Nitrile Latex Acrylic/ Vinylic Speciality Latex Speciality Resins

www.synthomer.com

Functional Polymers

Paper

Carpet & Foam

Performance Polymers

Health & Protection

#1 or 2 in most targeted segments or regions Product Line Synthetic Latex

Dispersions

Speciality Latex

Speciality Resins

Type

Size (€m)

End-uses

Overview

Our Position

Competitors

XSBR

> €3bn

Coated Paper, Carpet, Construction, Textiles

Regional, (some niches), High entry barrier

#1 EMEA Niche in Asia/Nam

Styron, BASF

HS-SBR

€3bn

Regional

#4 EU, #1 ME

Celanese, Wacker, Vinavil

Adhesives, Gloves, Textiles

Global, Speciality

#2 EU and N Am

Lanxess, DuPont

Lipren® Pyratex®

85% share of the global disposable glove market



Synthomer is the only supplier with Nitrile Latex plants located in South East Asia



Our customer relationships and differentiated products have established a strong global no. 1 position, with 40% market share.



Innovation is core to Synthomer – latex for accelerator free gloves – Enhanced protection

www.synthomer.com

Coatings & Construction Water Based Dispersions

www.synthomer.com

The Asian Paints Market Paint Consumption (litre/head) vs Population (millions) 1600

Paint Consumption (litre/head)

25

1400 20 1200 1000

15

800 10

600 400

5 200 0

0 Indonesia

India

Vietnam

Philippines

China

Thailand

Paint Consumption (litre/head) Source: IRL

www.synthomer.com

Malaysia

Japan

South Korea

Population (millions)

Singapore

The Asian Paints Market SOUTH KOREA

JAPAN

Source: IRL

www.synthomer.com

Water-Based Dispersions •

Close customer relationships and a strong product portfolio allow us to achieve high market share in our local markets: – >50% in Malaysia & Singapore – >15% after only 3 years in Vietnam



Technology capability will lead to a strengthening of our product offer with opportunities to improve earnings



Strong customer relationships will be leveraged to benefit from their geographic expansion



We already sell to 8 of the top 10 global paint companies in Asia

www.synthomer.com

Summary •

Target is 50% of sales from Asia and emerging markets in three years



Already established a strong number 1 position in high growth markets



Sustainable competitive advantage, with healthy innovation pipelines



Well developed plans for growth by organic investment and bolt-on acquisitions



Trading Company now established in China to accelerate our growth plans there



Strong management team who have already delivered substantial growth

www.synthomer.com

Operational Excellence in Synthomer

www.synthomer.com

Operations – Leading technology, well positioned geographically  Merging the production networks and technology will deliver synergies  Production network matched to multiple product strategy  Broad geographical coverage  Leading process and product technology  Best practice globally deployed  Highest standards in Health, Safety, Environmental Compliance and Quality

www.synthomer.com

Network Optimisation provides synergies Production network synergies

Competitive network • Highly flexible • In the right region

Consolidation in Europe by depletion of overlaps and creating of economy of scale

• Close to customers -

Low freight costs

-

Fast response time

• Close to raw material suppliers -

Low freight costs

-

High availability

-

Integrated sites

Optimisation Strategy

Capitalise on strong market and technology positions

Expansion in Asia by using complementary strength in technology

• Consolidation in Europe • Expansion in Asia • Leverage of complementary technology – Conversion and cycle times – Yield improvement • Complexity reduction in raw material and finished products

www.synthomer.com

Production network with well-balanced mix of capabilities to serve the markets Production sites

Europe Latex • 6 plants • 4 countries

Europe Dispersions • 5 plants • 4 countries

MEA Dispersions • 3 plants • 3 countries

XSBR

HS-SBR





Acrylics

Perf.Polym., Comp. • 9 plants • 5 countries

www.synthomer.com

Others







 Well-balanced mix of capacities – cost leadership positions in plants of global production scale – highly flexible mid-sized plants for smaller product groups

 

 Flexible plants aligned to multiple product strategy enabling – diversification – fast reaction to changing requirements



• 2 plants • Malaysia • 2 plants • 2 countries

VAc(Co)



Asia Latex

Asia Dispersions

Nitrile

 Effectively managed network “one large virtual plant”

 

- Select cost-optimal plant based on raw material cost position and logistics - ensure supply by approving more than one plant

European geographical coverage ensures competitive supply chain

Northern European market

• Freight optimisation crucial for minimisation of total product cost • Excellent geographic reach across North/South axis

Western and Central European market

• Plants in proximity to key customer concentrations Southern European market

www.synthomer.com

Asian geographical coverage ensures proximity to key markets and customers Malaysia as a hub to Asia •Two world scale latex facilities - Nitrile-latex in the centre of a booming glove industry - option to deliver SBR-latex to SEA and China •Acrylics plants to participate on fast growing paints and construction industry Vietnam will further strengthen presence in SEA •Acrylic plant to continue serving markets with plants close to customer needs

www.synthomer.com

Leading process technology based on specific know-how Competitive advantages

Specific know-how Reactor technology

Low process costs

Constant product quality

High innovation potential

Fast time to market

Reactor technology

  World scale reactors

External seed

Direct feeding

 



 



 Multiple reactor geometry and technology for XSBR, Acrylics/VAc and XNBR



 Long-life productive assets in stainless steel and glass lined reactors  Best-in-class cycle

Direct upscaling



Note: XSBR: Carboxylated Styrene Butadiene Rubber, XNBR: Carboxylated (Acrylo-) Nitrile Butadiene Rubber;

www.synthomer.com



Process & Technology know-how deployed production Stripper

Reactor

Chain TA Initiator

Stabilizers

Monomers

W Water

Mixer

Cooler

Air Treatment

Splitter

Waste Water Treatment

Steam

Polymerization

Degassing

Product Latex

Raw Materials

Road Tanker & Flexibag Container

Drums

Loading Bay www.synthomer.com

1 m³ Container

Control Room

QA Lab

Storage tank Latex

Storage

Process & Technology know-how deployed production Reactor Technology

Low VOC

Chain TA Initiator

W Water Stabilizers

Monomers

Recipe know how

Stripper

Reactor Mixer

Cooler

Air Treatment

Splitter

Waste Water Treatment

Steam

Polymerization

Raw Materials

Degassing Product Latex

Automation Road Tanker & FlexibilityFlexibag in Container

customer supply Drums

1 m³ Container

Loading Bay www.synthomer.com

Control Room

QA Lab

Quality & Consistency Storage tank

Latex

Storage

HSEQ-Management worldwide according to highest International standards  Best-in-class standards implemented – Safety:

German /UK chemical industry

– Environmental: EMAS II / III or ISO 14001:2004 – Quality:

ISO 9001:2008 standard

 Strong position on REACH & regulatory compliance  Globally operated management systems worldwide to guarantee to meet HSEQ and compliance policy - annually reviewed

www.synthomer.com

Sustainable Profitable Growth through outstanding Innovation

www.synthomer.com

Value Added Formulating Components in Performance Applications

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Market Driven Innovation Generating Long Term Growth •

Responding to global megatrends – e.g., sustainability, urbanisation, energy efficiency, hygiene



Targeted innovation in high growth segments



Global co-ordination



Highly networked organisation – Internal and external



Efficiently managed for fast delivery and high commercial impact

www.synthomer.com

Global R&D Organisation •

Centres of Excellence – – –

●●



Over 100 R&D Staff –





www.synthomer.com

Marl, Germany Harlow, UK Kluang, Malaysia

Leadership team with 100+ years experience and strong track record of delivery 20% of staff with PhD



R&D co-located with applications and commercial teams



Well invested state of the art facilities

Polymerisation process know-how is core to innovation success Illustrative latex research and development parameters Process parameters

Lab polymerisation

~ 20 process Parameters determine product properties •

Direct monomers feed



Activator feed



Emulsifier, modifier feed



Temperature profile



Cooling

• • • • • •

Product properties ~ 20 end use properties



Binding power



Rheology



Cross-linking



Glass transition temperature

Stirring



Surface groups

Base



Mottling



VOCs



Printability

Process mode



Opacity

Other



UV-stability



Adhesion



Other

pH/buffer Pressure

Monomers • Styrene • Butadiene • Acrylate • Other

Water

Others

Test lab reactor

3 to 15kg

New latex particle

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Technology leadership in fast paced glove dipping market •

Rapid evolution of customer needs – Natural latex type feel – Low residual chemicals – Double dipping process



Advanced nitrile latex systems – “Soft & strong” grades – Proprietary self cross-linking technology – Tailored film formation systems



www.synthomer.com

45% of nitrile dipping sales from products launched in last 3 years and #1 global position

Responding to megatrends in global coatings market

www.synthomer.com



Green coatings systems • Low or no solvents • Free of harmful components • Cool roof technology



Strong growth in Asia and MEA • Speed to market



Dispersions technology in new applications • Direct to metal coatings • Elastomeric roof and wall coatings • Solvent free trim paints



Over 20 coatings products launched globally in last 3 years

Innovation in growing speciality pressure sensitive adhesives segment

www.synthomer.com



Diversification of applications • New substrates, e.g., metals, plastic • Thermal and water resistance • Environmental standards



Acrylic technology • High solids systems • Balance of cohesion and adhesion • Low volatile organic solvent



Recent product launches • Building insulation systems • Protective films, e.g., for electronic screens • Removable labels



20% of PSA sales from products launched in last 3 years and strong #2 position in Europe ̴

Delivering growth through technology development and product innovation •

Dynamic global organisation with extensive innovation network



State of the art equipment and high calibre staff



Excellent core technology with next generation platforms under development



Effective management of the product development pipeline



Strong track record of delivering commercially successful formulating solutions

www.synthomer.com