CHEMICALS Opportunities & Challenges Vincent De Cuyper Group General Manager of the Chemicals Sector
SOLVAY INVESTORS DAYS October 1, 2008
CHEMICALS
Our Chemicals sector 67%
7%
26%
Selective leadership
Europe
Soda ash Hydrogen peroxide Sodium bicarbonate Caustic soda
19% 2
Glass
Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
17%
Chemicals
12%
Paper
10%
Detergents
1 1 1 2
World 1 1 1 3
4%
Construction
CHEMICALS
Key financials Sales (mEUR) annual growth rate: +6%
REBITDA (mEUR) annual growth rate: +9%
3500
500
M EUR
3000 2500
400
2000
300
1500
200
1000
100
500
0
0 2003
2004
2005
2006
Organic Oxygens Electrochemistry & Fluor Minerals
3 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
2007
2003
2004
2005
2006
2007
CHEMICALS
Sustainable and profitable growth 20% 16% 15%
15%
16%
17%
14%
HY08 14%
AVG 2003-2007 REBITDA/sales : 16%
10%
5%
0%
2003
4 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
2004
2005
2006
2007
2008-2012
CHEMICALS
Strategy
Intensifying our geographic expansion Through investments in flagship products in high-growth regions.
Competitiveness Operational excellence/ World scale plants/Energy management/Managing the product portfolio.
Growth in specialties
(mainly bicarbonate, fluorinated & organic specialties) Extend products range and develop new usages/Develop value added products in markets with strong underlying themes.
Pursuing technological innovation Technology leadership as a source of competitive advantage 5 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Electrochemistry & Fluor
Extend to emerging regions Competitiveness and leadership Grow in specialty products, in particular develop Sodium Bicarbonate Exploit opportunities for reduction of energy dependence
Competitive electricity sourcing Membrane conversion Go global with EPICEROL® process Reduce exposure to refrigerants Development of inorganic specialties for semiconductor and electronic industries
6 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Geographical expansion Execute planned HPPO partnerships projects Intensify R&D efforts on current production processes and breakthrough technologies
Focus of API activities primarily on value added Peptide & Oligonucleotide segments Reduce exposure to Small Molecules
Organic
Oxygens
Minerals
Strategic Drivers by clusters
CHEMICALS
Major market growth drivers Minerals Global soda ash market : 46.5 Mt/y; growth rate +4%/y
Faster growth in Eastern Europe, Asia, Mercosur New applications (glass for high energy performance buildings, glass supports for solar power plants, …) Growth of soda ash specialties (e.g. bicarbonate)
Oxygens Global H2O2 market : 3.2 Mt/y; growth rate +4.5%/y
Traditional markets: Pulp & Paper, Chemicals, Textile (Asia) New markets : HPPO (captive uses) Growing markets : water treatment, disinfection, Mining, Electronics
Electrochemistry Global caustic soda market : 58.9 Mt/y; growth rate +3%/y Global epichlorohydrin market : 1.3 Mt/y; growth rate +6%/y
Chlor alkali business is chlorine demand driven in developed countries and caustic soda driven in developing countries Development of EPICEROL® (Epichlorohydrin)
7 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
source : Harriman,
CHEMICALS
Disciplined use of cash & growth CAPEX M EUR
450 400 350 300 250 200 150 100 50 0 2003
2004
Cash flow from operations 8 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
2005 Maintenance CAPEX
2006
2007
Growth CAPEX & Acquisitions
CHEMICALS
Selective CAPEX in growing markets HPPO
new unit ultra pure H2O2
Epicerol®
Expansion Soda ash steam supply
Acquisition (80% of ASCC) Soda ash
new unit Fluorinated products
Epicerol® HPPO
Expansion H2O2 Curitiba
9 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Main ongoing projects
Geographic expansion
Soda ash Bulgaria +300kt/y Egypt (ongoing) acquisition of ASCC +130kt/y
Hydrogen Electrochemistry peroxide Epicerol® HPPO projects : Belgium 230kt/y Thailand 100 kt/y Thailand 330kt/y
Growth in specialties
BY 2012 : EUR 350m+ expected additional sales 10 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Our Major Opportunities/Challenges Emerging markets
Growing but still low presence in Asia
Driving innovation
Development of usages in sustainability driven markets, business development around strong underlying themes
Competitiveness
World scale plants, portfolio management, technology leadership, restructuring
Energy
Proactive energy management, diversifying fuels source, highly efficient technologies
Raw materials
Largely vertically integrated; continued investments
Environmental footprint
11 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Active R&D projects and programs to address energy and emissions intensity, implementation of best available technologies
CHEMICALS
Emerging markets Î Î
Growing presence in growth markets Continued investments
EGYPT Acquisition of ASCC in progress (Alexandriabased Egyptian stateowned soda ash manufacturer) with a capacity of 130 kt/y (2008)
THAILAND Dow / Solvay Joint Venture to Build a 330 kt/y Hydrogen Peroxide Plant in Map Ta Phut (2010)
BULGARIA Expand Devnia capacity, +300kt/y, to support growth in the Balkans, the Community of Independent States (2010)
THAILAND Annoucement of a new 100 kt/y Epicerol® plant in Map Ta Phut (2010)
SOUTH KOREA New plant of F1EC* will be setup in Onsan South Korea (2009).
*New additive for lithium Ion batteries electrolytes
12 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Driving Innovation Î New applications contributing to Society needs Our products are an invisible but essential component of products needed for everyday life Segments of our portfolio are present in sustainability driven markets Long term growth will also come from markets driven by strong sustainability trends (R&D, innovation and portfolio management) Soda ash : key for glass and double glazing. Double glazing, can save a household about ¾ of a tonne of CO2 a year. (source : Energy Saving Trust 2008)
13 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
F1EC New additive for lithium Ion batteries electrolytes F2 A strong alternative to high GWP gas NF3 used in the semiconductor industry
Next generation technology in peroxide • Direct synthesis (hydrogen + oxygen) • Electrolysis • Fuel cells • Photocatalysis
CHEMICALS
Competitiveness
World scale and state of the art plants Infrastructure : efficient, streamlined and networked supply chain operations Portfolio management Soda Ash Average Plant Capacity (kt/y)
H2O2 Average Plant Size (kt/y) 330
871
230
+63%
122
447 IND AVG
75 36
(Solvay not included) Ind AVG
14 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Today AVG
Solvay 2015
Zandvliet
Thailand
CHEMICALS
Competitiveness
Shut down of chloromethane unit, Bussi, Italy.
Restructuring of Girindus in Germany. Sale of activities in Kuensebeck to Central Glass.
REBIT/employee (EUR) 50000
25000
2007/2008
-350 FTEs
15 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Shut down of the HFC plant in Porto Marghera, Italy. Closure of Tarragona, Spain, site. Restructuring on the Hannover, Frankfurt and Wimpfen.
0 2003
2004
2005
2006
2007
CHEMICALS
Proactive Energy Management Î Î Î Î Î
Energy savings programs & Highly efficient technologies Diversifying solid fuels and sources Cogeneration power plants Long term contracts Group’s target : -20% energy consumption by 2020 Acquisition of a coal mine in Wyoming, United States (2008)
Long-term nuclear electricity supply contracts: Exeltium (2008)
Renewable combustible : biomass thermal power plant in France (2010)
16 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Steam/heat recovery from incineration in Germany.(2009)
High efficiency boiler Devnya (2009)
CHEMICALS
Raw materials integration to secure business growth Largely vertically integrated Î Independence in main feedstocks & raw materials Î Continued investments in this area e.g.: Torrelavega (Spain) – 2008 : start up of new quarry (120 years of limestone) limestone trona
salt brine
Soda ash
Sodium bicarbonate
Caustic soda
Chlorinated derivatives : organic (epichlorhydrin) inorganic
Ethylene (partly integrated)
chlorine hydrogen
Hydrogen peroxide
Peracetic acid Persalts Inorganic fluorides
fluorspar
hydrogen fluoride
HFC HCFC Feedstock
17 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Brazing, electronic, … Refrigerants, foam blowing agents, … Fluoromonomers
VCM
PVC
VDC
PVDC
PVDF PTFE PFA/MFA ECTFE FKM FFKM PFPE
CHEMICALS
Reduce environmental footprint Î Î Î
Implementation of best available technologies Active programs for CO2 emissions management & CO2 emissions reduction Group’s target: -20% of CO2 emissions by 2020 Epicerol – Less water, less emissions, less chlorine consumption pull out of oil value chain
SOLVAIR 300 – A new product for air pollution control that also improves GR plant environmental performance.
Replacing mercury cells in Rosignano and Tavaux
Solvay and ULB (Université Libre de Bruxelles) partner to improve BIR process CO2 efficiency
• Manage our participation in the EU Emissions Trading Scheme 3rd period (20132020)
R&D projects to reduce environmental footprint
• Registration phase of REACH for the products concerned.
18 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Electrochemistry … profitable and growing F. Constant, General Manager of SBU Electrochemistry
CHEMICALS
Vision and Strategy Summary
Epichlorohydrin business
Caustic Soda business
VISION
VISION
We grow our worldwide (merchant) market share to 25%, thanks to the new EPICEROL® process
STRATEGY
Hedge risk of growth in epichlorohydrin, diversifying in terms of geography (markets & currencies), technology & raw materials, backed up by solid and selected partnerships Continue to support developments by an effective R&D activity and enforce our IP worldwide Maintain status of non-integrated epoxy resins epichlorohydrin producer
20 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
We are a worldwide player We have a global customer approach (Pulp&Paper and Alumina
STRATEGY
Continuously strengthen a leadership position as a ECU/NaOH/PVC player Diversify and strengthen our market position to become a global caustic soda player Î
Reinforce position in Mercosur
Manage energy cost and mercury phase-out, optimizing industrial structure Develop technologies allowing efficient use of raw materials and minimization of effluents/residues (“close to zero effluent” concept)
EPICEROL® PROCESS
Growing Green…
CHEMICALS
Epichlorohydrin Worldwide market SOLVAY Epichlorohydrin producer number 4 worldwide (after Dow, Hexion, Bohai)
Production sites: France (Tavaux) - 40Kt/y Germany (Rheinberg) – 56 Kt/y
Composite materials Protective coatings
Expected growth
Demand in 2007 (Kt/y)
Bonding and adhesive
(CAGR 2007-20012) 8,5%
580
7,0%
70% of WW growth 325
310
expected WW CAGR=6.2%/y
3,0% 2,0%
60 Europe
NAFTA
Asia
Source: Solvay analysis
22 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
RoW
Europe
NAFTA
Asia
RoW
Source: Solvay estimates
CHEMICALS
Glycerin Alternative renewable feedstock Example: 0,7 ha rapeseed
1T biodiesel (green fuel to be mixed with standard diesel)
1T oil 0,1T methanol
0,1T
Biodiesel: acceptable sustainability, supported by certification
glycerin
Glycerin: by-product from biodiesel production process Æ available at affordable cost
500%
3000
Glycerin production
Propylene price €/T
(estimates)
400%
Glycerin price €/T
2000 300%
1000 200%
Source: ICIS, HBI, Solvay estimates
23 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
H2 2 008
2007
2006
H1 2 008
0%
2005
2012
2004
2011
2003
2010
2002
2009
2001
2008
2000
2007
1999
100%
0
CHEMICALS
The Epicerol® process A Solvay’s innovation, from lab to market
TAVAUX, France
2003, first idea about EPICEROL® Lab trials in Bruxelles (B) and pilot Plant in Tavaux (F) April 2007, startup of an industrial unit of 10kt/year of Epicerol® in Tavaux (F) U.S.A. “2007 Glycerine Innovation Award” American Oil Chemists’ Society
24 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
FRANCE “2007 Pierre Potier Prize” for Innovation in Favor of the Environment
U.K. “2008 Award for Innovatiion” Chemical Industries Association
35 patent applications
CHEMICALS
Solvay Biochemicals Thailand Growing Green…
Produce, market and sell 100,000 tons of Epichlorohydrin based on EPICEROL®
Main markets Korea China
Japan
Æ 10X less water used Æ 8X less chlorinated by-products Æ 2X less Cl2 consumed Æ closed-loop (salt recycling)
SBT
India
EPICEROL®, a GLCbased technology:
Thailand
Main application of Epichlorohydrin: epoxy resins
Solvay sales projection 250
historical projection 200
150
other projects under study
% 100
(2006 base 100%)
50
0 2006
25 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
2008
2010
2012
2014
Capturing 25% of the market growth 2007 Æ 2012 Start-up scheduled mid 2010
CAUSTIC SODA … profitable and growing
CHEMICALS
Caustic soda
Capacity (nameplate) Jan08 (kDMT/y) SOLVAY, a global player
Source : SOLVAY, 2008
Source : SOLVAY, 2008
9 plants in Europe, 2 in South America, 1 in Thailand (JV) 27 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Chlor-alkali
Worldwide market overview Supply/Demand (ECU)
ld or
af ta
fW R
Mercosur 3%
China slowly drifts away from focusing on exports, while environment gains in concern
to
asi
Middle East confirms some projects in Saudi Arabia and in Iran.
A
N
last, not least, environment is gaining in concern.
Pa
Î
0,8%
0,8%
es
the acetylene route PVC suffers negative impact of carbide price
r
Î
su
high freight costs hurt exports
co
Î
expected WW CAGR=3%/y
2,9%
er
introduces a new labour law, inducing domestic consumption to increase
M
Î
4,9%
pe
the government discourages export of energy intensive commodities
ro
Î
5,8%
Eu
In China,the fastest and only recent growing chlor-alkali region in the World
ci fic
Caustic soda demand expected CAGR 2007- 2012
Rest ot World 8%
Nafta 24%
Europe 20% Asia-Pacific 45% Source : SOLVAY, 2008
28 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Caustic soda
Worldwide market overview
2,8%
29 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
er
y
th
tr
O
is
C
he
m
ge
nc
pe er D
et
d an
Pu
lp
e
r
t Pa
tm
xt
en
i le
a
at er
Other 19%
Demand of caustic soda is expected to remain consistent
expected WW CAGR=3%
2,7%
1,8%
W
as well as by an increasing consumption of products that integrate caustic soda (consequence of an irreversible trend of a gradually more urban lifestyle)
3,3%
in
Î
4,8%
3,6%
m
Î
4,9%
Alumina: Massive expansion projects Æ 2000+ kt NaOH Pulp and Paper: Strong demand Æ 100+ kt NaOH Mining: Several projects Æ 300+ kt NaOH
lu
Î
tr ea
Demand of caustic soda is sustained by some specific markets:
A
Caustic soda demand expected CAGR 2007- 2012
Te
Demand NaOH
Detergence 6%
Alumina 11%
Water treatment 5%
Pulp and Paper 15%
Chemistry 36%
Textile 8%
Source : SOLVAY, 2008
CHEMICALS
Chlor-alkali
Worldwide market overview Supply/Demand (ECU)
The integration of chlorine derivatives production, tends to continue to increase provoking :
West Europe EUR/T 800
600
400
200
Î reduction of production of the Cl2
0
Liquid Caustic Soda Price
Energy prices continuously increase, reinforcing a even more responsible attitude in the market
Chlorine Value
8 ju il 0
08 ja nv
7 ju il 0
07 ja nv
6 ju il 0
06 ja nv
5 ju il 0
05 ja nv
4 ju il 0
04
-200 ja nv
molecule ex NaCl electrolysis Î consequently, fewer co-production of NaOH
ECU Value
North America (US) USD/T 1250
1000
750
500
250
30 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
0
Liquid Caustic Soda Spot Price
Source : ICIS
Chlorine Value
8 ju il 0
08 ja nv
7 ju il 0
07 ja nv
6 ju il 0
06 ja nv
5 ju il 0
05 ja nv
4 ju il 0
04
-250 ja nv
On the price side, a focus on caustic soda netbacks comes to light, to offset low chlorine valorisation
ECU Value
CHEMICALS
Caustic soda
Worldwide market overview
Global outlook
In the mid-term (2009 and 2010), caustic soda demand is expected to be more resilient than chlorine demand, enjoying of a relative stability in prices.
Industry cost structure has fundamentally changed, with the advent of high energy prices; cycles may continue but in a new (higher) price range!
Rebasing of caustic soda prices to a new high level
31 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
CHEMICALS
Electrochemistry
Key business issues 2001
2008
2011
Technology: conversion to Membrane
M ercury
M embrane
Reduce energy and raw materials consumption, optimize cost
Membrane conversion plan scheduled
M ercury
M embrane
M e rcury
M e mbrane
Î within regulatory constraints and
accordingly to voluntary agreements of the Industry Î taking into account economic life cycle of existing units, optimizing industrial structure
Solvay gets among the « Best in Class » in the Industry, with significant improvement in competitiveness 32 Solvay Investors Day – October 1, 2008 © 2008, SOLVAY S.A. N.V.
Source : PTAI, Solvay
“To the extent that any statements made in this presentation contain information that is not historical, these statements are essentially forward-looking. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties because of a number of factors, including general economic factors, interest rate and foreign currency exchange rate fluctuations; changing market conditions, product competition, the nature of product development, impact of acquisitions and divestitures, restructurings, products withdrawals; regulatory approval processes, all-in scenario of R&D projects and other unusual items. Consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements can be identified by the use of words such as "expects," "plans," "will," "believes," "may," "could" "estimates," "intends", "goals", "targets", "objectives", "potential", and other words of similar meaning. Should known or unknown risks or uncertainties materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly update any forward-looking statements"
