Petkim Petrochemical Holding Corp. Presentation to Analysts
23-24 September 2010
AGENDA
1 I World Economy & Petrochemical Industry 2 I A Glance at Petkim 3 I Investments 4 I Growth Plans and Strategies 5 I Key Financials
2
World Economy & Petrochemical Industry Economic Growth in Selected Economies (%, yoy) 2010 2011
Emerging Ec on. 2,5
2,6 6,8
2009
2,4
2010
6,4 9,1 10 9,6 9,4
3,3 2,9 1 1,3
US -2,4
EU -4,1
2,4 1,8
5,7
4,3 4,1
2011 7,1
6,1 4,2
3,6
-0,2
Japan Russia -5,2
8,4
China
India
-7,9
Braz il
2 3,4
Turkey C&EE -4,7
-3,6
World
Source: IMF, World Economic Outlook(WEO), September 2010
Source: CMAI
DUE TO THE CRISIS GROWTH RATES DECELERATED IN ALMOST EVERY REGION OF THE WORLD. BUT RECOVERY IS EXPECTED FOR 2010 400
SLIGHT RECOVERY IS OBSERVED BEGINNING FROM THE SECOND HALF OF 2009. MODEST GROWTH IS OBSERVED IN 2010.
ICIS Petrochemical Index (IPEX)*
%90
250 200
Fiyatlar ($/MT)
300
South Asia
India
RECOVERY IS EXPECTED IN OPERATING RATES AS GLOBAL DEMAND IMPROVES. Global Basic Chemicals and EBIT Contribution
Crude Oil Naphtha Gasoline Price Expectations
350
North Asia
Source: CMAI
1.200
200
1.000
150
800
100
600
50
400
0
200
-50
0
Dollars Per Metric Ton
Marjlar ($/MT)
2009
Advanced Ec on. -3,2
Regional & World Ethylene Operating Rates (%)
World Economic Growth Rate (%)
-100
Oca.06 Oca.07 Oca.08 Oca.09 Oca.10 Oca.11
150 Mar.05 Oct-05 May.06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Haz.10 Source: CEFIC
Nafta-Ham Petrol Benzin (CIF NWE)
Ham Petrol (Brent) Nafta (CIF NWE)
Source: CMAI
THE ICIS PETROCHEMICAL INDEX ROSE TO 299 IN JUNE 2010, A GAIN OF %90 OVER THE FEBRUARY READING OF 157.
OIL PRICES ARE EXPECTED TO REMAIN BETWEEN USD 75-85 RANGE IN 2010. NAPHTHA AND GASOLINE PRICES ARE EXPECTED TO FOLLOW CRUDE OIL.
Source: CMAI
FUTURE EARNINGS ARE EXPECTED TO STRENGHTEN WITH THE CONSOLIDATION, M&A IN INDUSTRY AND SUCCESSFUL ECONOMIC STIMULUS
* An indicator of average change in world petchem prices for basket of 12 essential petchem products in US, WE and Northeast Asian markets
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AGENDA
1 I World Economy & Petrochemical Industry 2 I A Glance at Petkim 3 I Investments 4 I Growth Plans and Strategies 5 I Key Financials
4
PETKİM
5
Petrochemicals from Naphtha ETHYLENE LDPE Bags, greenhouse covers, film, cables, toys, pipes, bottles, hoses, packaging
AROMATICS
ETHYLENE
VCM - PVC - EDC Pipes, window and door frames, blinds and shutters, cables, bottles, construction materials, packaging film, floor tiles, serum bags CA-CAUSTIC SODA Textile, detergent
PROPYLENE C4
HDPE Packaging film, construction and water pipes, bottles, soft drink crates, toys, jerry cans, barrels MEG Polyester fiber, polyester film, antifreeze
AROMATICS
NAPHTHA-LPG
BENZENE, TOLUENE Detergent, white goods, Solvents, explosives, pharmaceuticals, cosmetics
C4
PROPYLENE
BUTADIENE Rubber Automobile tire
PP Knitting yarn, sacks, carpet thread, ropes and hawsers, table cloths, napkins, doormats, felt, hoses, radiator pipes, fishing nets, brushes, blankets
O-X - PA Pigments, plasticizers, synthetic chemicals, polyester P-X - PTA Polyester fiber, polyester resin, polyester film
ACN Textile fibers, artificial wool, ABS (Acrylonitrile Butadiene Styrene) resins
6
Company Overview • • •
PETKİM
• •
FACILITIES
• • • • •
MAIN FEEDSTOCK PRODUCTS
PRODUCTION
15 main plants, 8 auxiliary units Located in Aliağa near Izmir Sits on a land of 19 mn sqm Harbour, water dam, power generation unit (226 MW) Adjacent to Tüpraş Aliağa Refinery • •
• •
Established in 1965/Second complex commissioned in 1985 The sole petrochemical producer in Turkey 25% domestic market share and well positioned assets in an ever growing market USD 921 mn net sales (H1 2010) USD 68 mn EBITDA (H1 2010)
Naphtha, LPG, C4, Condensate Main product goups: olefins, polyolefins, vinyl chain, aromatics and other basic chemicals
1.564 th. tons of gross production realized in H1 2010 Realized capacity utilization rate of 95,4% (planned as 96% in 2010)
7
Petkim’s Ownership Structure Share Information (30 July 2010) Closing Price (TRY/Share) Market Cap (mn TRY) Market Cap (mn $)
2,19 2.190 1.456
Free Float (%)
Ownership Profile
38,7
PA 10,3%
Source: Reuters
Stock Price Performance 210 SOCAR Turcas 51,0%
190
Free Float 38,7%
170 150
Strong
130
Performance
110 90 Dec-09
Jan-10
Feb-10
Mar-10
PETKİM
Apr-10
May-10
Jun-10
Jul-10
Privatization process was completed in May 2008. SOCAR&Turcas Consortium acquired 51% stake in Petkim at an amount of USD 2.04 bn.
ISE 100
Source: Reuters
8
Petkim: The Strong & Tangible Symbol of Economical & Strategical Partnership
TURCAS is the first privately-owned petroleum company in Turkey focusing on distrubution of oil products and energy investments through its international strategical partnerships
SOCAR, with large-scale investments in Azerbaijan is one of the world’s oldest petroleum companies. SOCAR is a shareholder and major supplier of the 50 million ton capacity BTC crude oil pipeline and the BTE natural gas pipeline, which transports 6,6 billion cubic meters of natural gas to Turkey
PETKİM A BRIDGE LINKING AEGEAN TO CASPIAN
9
Products and Capacity PETKIM ALIAGA COMPLEX START-UP 1985
Product Capacities (thousand tons)
PLANT CAPACITIES Thermoplastics Capacity 713,000 ton/yr Fiber Raw Materials Capacity 249,000 ton/yr Other Products1 Capacity 954,000 ton/yr
TOTAL Capacity 1,916,000 ton/yr
1 Ethylene (520,000), VCM (152,000), PA (34,000), Chlorine (100,000), Benzene (134,000), MB (10,000), Plastic Products (4,000)
ETHYLENE
520
PROPYLENE
240
C4
140
PY-GAS
390
AROMATICS
320
BENZENE
134
P-X
136
O-X
50
CHLORINE
100
VCM
152
PVC
150
LDPE
323
HDPE
96
PP
144
MEG
89
ACN
90
PTA
70
PA
34
Power (MW)
226
10
Petkim: Production & Sales Net Sales (thousand tons) 1600 1400
1.371
1.391
Net Sales (million USD) 2000
1.442
1800
1671
1.795
1600 1400
1200 1000 800
685
1.342
1200
764
921
1000 800
600
390
400
379
385
200
560
600 400
333
451
470
200
0
0
2007
2008
2009
H1 09
H1 10
Q2 09
Q1 10
P-X 6%
Other 2% PY-GAS 1% LDPE 20%
C4 9%
PVC 10%
Benzene 10% PP 9%
2007
2008
2009
H1 09
H1 10
Q2 09
Q1 10
Q2 10
Breakdown of Sales Revenues H1 2010
Breakdown of Sales Volume H1 2010 PA C5 3% PTA 4% 5% MEG 5% HDPE 5% Costic 5% ACN 6%
Q2 10
PA PTA 3% 4% MEG 4% P-X 5% HDPE 6% Benzene 8% Other 9%
Costic C5 PY-GAS 1% 3% 0% LDPE 26%
ACN 11% PVC 9%
PP 11%
11
Petkim: Exports Exports Revenues by Years (million USD)
Breakdown of Exports Revenues by Product Type H1 2010 Other 8% MEG 4% P-X 4%
PVC 2%
PTA 2%
600
Benzene 32%
523
500
410 358
400 300 200
ACN 9% LDPE 15%
100
C4 24%
347 234
217 129
84
113
121
0 2005 2006 2007 2008 2009 H1 09 H1 10 Q2 09 Q1 10 Q2 10
Breakdown of Exports by Region H1 2010 Others 7%
Asia-Far East 30%
Mid-East, Africa 6%
• Petkim products are exported to nearly 60 different countries • Benzene, C4, LDPE, Py-Gas and P-X are the main exports products.
USA 11%
EU Countries 46%
• The second exporter in chemical industry in Turkey in 2009. • Share of export in total sales H1 2010 is 25%
12
Petkim: Product Prices & Cost Breakdown Petkim Thermoplastics and Naphtha Price Changes
Petkim EBITDA Performance (million USD) 115
Index (2007 January=100) 250
99
95
200
68
75
150
54
55
35
100
35
39 29
50 Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Thermoplastics
Jul-09
15
Jan-10
Naphtha
-5
-4 2008
Naphtha Cost
Cost Breakdown*
Product Prices
1.500
Energy 9,1%
1.250 1.000
Others 9,8%
H1 10
Q2 09
Q1 10
Q2 10
2000
1500
Labour 6,4%
750
H1 09
Raw Material and Product Prices (USD/ton)
Raw Material and Product Prices (USD/ton)* 1.750
2009
1000
500 250
Raw Materials 74,7%
0 LDPE
HDPE
PP
MEG
PVC
* As of June 2010
500
0 Jan-08
Jul-08
Jan-09
Naphtha
Jul-09
Jan-10
Unit Price
13
Petkim: A Remarkable Turnaround Driven by Operational Efficiencies W. Europe Ethylene Capacity Utilitization Rates • Feedstock flexibility (switching from Naphtha to LPG/C4) • Fuel flexibility in power generation • Maximization of capacity utilitization (95%) • Restructuring and rejuvenation of labor force • Initiatives for energy efficiency improvement • Process optimization (APC, DCS implementation) • Increasing trading opportunities
Efficiencies on Marketable Production Per Capita Marketable Production Per Capita (ton) (Left Axis)
600
# of Employees (Right Axis)
Petkim Ethylene Capacity Utilitization Rates (%) Person
7000 6000
500
5000
400
4000
300
110 105 100 95 90 85
3000
80
200
2000
75 70
100
1000
65
0
0 2001 2002 2003 2004 2005 2006 2007 2008 2009
Low capacity due to incidental shut-down
60 Jan Feb Mar
Apr May 2008
Jun Jul 2009
Aug Sep Oct Nov Dec 2010
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AGENDA
1 I World Economy & Petrochemical Industry 2 I A Glance at Petkim 3 I Investments 4 I Growth Plans and Strategies 5 I Key Financials
15
Capital Expenditures and Planned Capacity Increases Capital Expenditures of Petkim (million USD)
•
154
160
•
140 120 100 80
78
72
60
66 50
74 56
54
Maximizing production of LDPE, where Petkim has a competitive advantage
•
Optimizing processes in the plants ( implementation of Advanced Process Control and Distributed Control Systems) Investments to enhance egergy savings and operational efficiencies on existing plants (such as rehabilitation work for the furnaces of the aromatics plant)
•
20 20 10 P
20 09
20 08
20 07
20 06
20 05
20 04
20 03
0 20 02
•
46
40
Moderate gearing of capital investments instead of fully financing with equity as it has been in the past Increasing capacities of existing plants with minor capexsmart debottlenecking investments
Planned Capacity Increases (th ton) Plants
Ethylene LDPE-T PA PTA
Current Additional Capacity Cap Increase 520 133 34 70
67 27 15 35
After Date Cap Increase 587 160 49 105
2012 2011 2012 2012
16
Investment Highlights PETKIM
1998-2009 CAGR
Dominant producer 25% market share
Thermoplastics demand 6,5% GDP growth 3,0%
Growth Potential in the Domestic Market Therm oplastics Dom estic Grow th (%)
Petrochemicals Domestic Demand (thousand ton) GDP Grow th (%)
30
4000 3500
25
Thermoplastics
3000
20
2500
15
2000
10
1500
5
1000
Fiber Raw
500
0 1998
-5
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-10 -15
2015 E
Plastics Consumption per Capita •
One of the fastest growing markets
•
An attractive market, the second biggest importer of petrochemicals after China
•
More than 6000 small and medium sized companies are active mainly in packaging, construction and automotive fields
•
Petrochemical market size 6-7 billion USD
Kg/capita U.S.A W.Europe Turkey Republic of China World Brazil India
2007
2008
2009
90 78 45 30 25 23 6
75 69 43 28 24 25 5
76 70 45 30 24 27 6
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AGENDA
1 I World Economy & Petrochemical Industry 2 I A Glance at Petkim 3 I Investments 4 I Growth Plans and Strategies 5 I Key Financials
18
Growth Plan and Strategy
DOWNSTREAM • ADVANTAGES OF WIDE PRODUCT RANGE • HIGH VALUE ADDED SPECIALTY CHEMICALS • STRATEGIC PARTNERSHIPS WITH CUSTOMERS OR OTHER INVESTORS (CLUSTER MODEL)
UPSTREAM
4 PILLARS OF GROWTH PLAN ENERGY PRODUCTION
SYNERGY WITH SOCAR&TURCAS REFINERY
LOGISTICS & TRADING 19
Short Term Growth Plans Feedstock Flexibility
Energy
Logistics
• Increasing LPG utilization in feed slate of cracker
• Energy saving program
• New distribution centers
• Utilization of Fluid Catalytic Cracking (FCC) and C4 stream
• Opportunity for importing NG from Azerbaijan
• Increased transportation by rail
• Setting up an advanced “steam cracker” model for the utilization of different feedstocks and the factory optimization
• Power generation from wind
Trading Sales&Marketing
• Potential strategic partnership opportunities in port business • Capability for storage facilities leasing
Business Transformation
• Meeting total needs of customers
• Reviewing the current performance
• Product trading that will be conducted from Aliaga and also from new logistic centers
• Assessing potential improvement areas in organization, maintenance, energy, HSE and operations
• New financial instruments to promote sales
• Improving IT infrastructure with ERP and integrated Manufacturing Execution System (MES)
Capacity Increase Capacity increase by: • Ethylene and thermoplastics revamping • Debottlenecking and modernization • Maximizing asset utllitization
20
Mid to Long Term Growth Plans TO REACH 40% MARKET SHARE WITH “DOWNSTREAM” INVESTMENTS –VALUE SITE • Available infrastructure for potential investments • Double digit demand growth in the Turkish chemical sector • Increasing competitive advantage with sinergies created • New investment opportunities with local and foreign companies • Cluster Model
SECURING FEEDSTOCK WITH THE REFINERY INTEGRATION SOCAR&TURCAS AEGEAN REFINERY • Allocation of 130 ha area for the refinery investment • 10 million tons /year crude oil capacity • Product slate: naphtha, LPG, diesel, kerosene, jet fuel (no gasoline) • 30% investment cost reduction due to existing infrastructure • Creation of synergy with the vertical integration • Feedstock security for Petkim • Additional revenue from services to the refinery
21
Growth Plan and Strategy GROWING WITH LOGISTICS INVESTMENTS LOGISTICS ¾ ¾ ¾ ¾ ¾
¾
To become one of the key logistics main terminals in the region High capacity potential of container handling High capacity potential of liquid and dry cargo handling High capacity of logistics support units Direct access to national railway hubs and national transit ways and highways Tank Farm
ADVANTAGES ¾ ¾ ¾ ¾
Increasing harbour capacity and utilization rate Storage of various solid, liquid, and gas chemicals Paving the way for potential investments on transportation Import and export opportunities for chemicals
Exclusivity agreements have been signed with one of the industry-leading companies, APM Terminals BV, for the development of Petkim port, and negotiations are currently continuing.
22
Cluster Model CHEMICAL INDUSTRY PARKS •
Providing the highest level of vertical integration between petrochemicals and refinery,
•
Co-existing small to medium enterprises, supporting industries, R&D, and technology development centers,
•
Opportunity to source the feedstock directly from nearby plant and supply output ‘over-thefence’ to end users.
•
Sharing infrastructure, facilities, repair and maintenance, utilities and other services, optimising land use,
•
Cost savings on raw materials, transportation, storage etc. by sharing existing infrastructure
•
Achieving competitiveness by sharing logistics, energy and human resources.
23
Chemical Park Cluster Models MARL Chemical Park (Germany)
Cluster Models
Antwerp (Belgium)
Wilton International Teesside (England)
MARL Chemical Park (Germany) Wilton International Teesside (England) Shangay Chemical Park (China) Jurong Island (Singapore) North-Pas de Calais (France) Point Lisas Industrial Estate (Trinidad) Zeitz Industrial Park (Germany) Dow Value Park (Germany) Antwerp (Belgium) Chemical Alliance Zone (USD)
24
JURONG-Singapore Today
Year 1960
JURONG ISLAND’S KEY FIGURES Total Sales (billion USD) Land (hectare) # of Operated Plants (unit) # of Labour Refinery Capacity (million barrel/day) # of Crackers (unit) Electricity Generation Capacity (mw)
~75 3.200 95 30.000 ~1,3 5 4.650 25
PETKİM & Jurong International • The world's most successful petrochemical
park, Jurong Island, is a man-made landmass created from seven islands, in which a number of chemical companies co-exist. • Petkim signed a consultancy contract with
JURONG International Pte Ltd. (JURONG) which has established the cluster model of Jurong Island Chemical Park in Singapore and planned chemical park fields in more than 40 countries. • A Master Plan study is being conducted by
JURONG in order to ensure the most efficient use of the existing land and infrastructure and to establish a chemical park that will integrate the value chain of upstream, downstream, energy and logistics.
26
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AGENDA
1 I World Economy & Petrochemical Industry 2 I A Glance at Petkim 3 I Investments 4 I Growth Plans and Strategies 5 I Key Financials
28
Income Statement (Million USD) (IFRS ) 2007 Net Sales Cost of Goods Sold (-)
Financials 2008
2009
1H 09
1H 10
2Q 09 1Q 10
2Q 10
1.671
1.795
1.342
560
921
333
451
470
(1.514)
(1.822)
1.269
(515)
(840)
(310)
(420)
(421)
(27)
73
45
80
23
31
Gross Profit (Loss)
157
Gross Profit (Loss) Margin
9,4%
-1,5%
5,4%
8,1%
8,7%
6,9%
7,0%
10,4%
Operating Expenses (-)
(74)
(72)
(44)
(20)
(28)
(13)
(13)
(15)
Other Operating Income/(Expenses),net
(20)
(3)
(3)
1
(4)
(1)
(3)
Operating Profit/(Loss)
63
(102)
26
26
48
12
17
31
Financial Income/(Expenses)
(11)
(20)
16
2
(5)
4
-
Profit/(Loss) Before Taxation
52
(122)
41
28
43
16
18
Deferred Tax
(1)
34
(2)
-
2
Net Profit/(Loss) for the Period
51
(117)
75
26
43
18
14
29
EBITDA
128
(4)
99
54
68
35
29
39
EBITDA Margin
7,7%
7,4%
9,7%
7,4%
6,4%
8,4%
5
-0,2%
2
10,5%
(4)
49
(6) 25 4
29
Financials Balance Sheet (Million USD) Cash&Cash Equivalents Trade Receivables
(IFRS)
31/12/2008
31/12/2009
30/06/2010
19
116
140
149
224
215
Cash&Bank Debt (Million USD) 150 105 100
115
208
206
Other Current Assets
11
19
14
Current Assets
293
567
575
Non-Current Assets
830
836
807
1.123
1.403
1.382
Financial Liabilities
19
58
57
300
Trade Payables
89
265
225
200
Other Payables
58
52
69
Short-Term Liabilities
166
376
351
-100
Long-Term Liabilities
60
51
56
-200
Shareholders’ Equity
897
975
975
1. 123
1.403
1. 382
TOTAL LIABILITIES
52
43
Inventories
TOTAL ASSETS
116
50
19 19
19
140 99
58
58
Q4 09
Q1 10
39
57
9
0 Q4 08
Q1 09
Q2 09
Cash
Q3 09
Q2 10
Bank Debt
Receivables, Inventories and Payables (Million USD) 400
100 0
-300 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Trade Receivables
Inventories
Trade Payables
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Disclaimer This presentation is confidential and does not constitute or form part of, and should not be construed as, an offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of Petkim Petrokimya Holdings A.Ş. (the “Company”) or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group nor shall it or any part of it form the basis of or be relied on in connection with any contract, investment decision or commitment whatsoever. This presentation has been made to you solely for your information and background and is subject to amendment. This presentation (or any part of it) may not be reproduced or redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant person’s professional advisers) or published in whole or in part for any purpose without the prior written consent of the Company. This presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which the Company operates. By their nature, forwardlooking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analyst expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. The contents of this presentation have not been verified by any authority. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information contained herein and no reliance should be placed on it. None of the Company, their advisers, connected persons or any other person accepts any liability for any loss howsoever arising, directly or indirectly, from this presentation or its contents.
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Investor Relations We welcome your questions, comments and suggestions. Our corporate headquarters office address is: Petkim Petrochemical Holding Corp. PO. Box.12 Aliağa, 35801 İzmir/ TURKEY To contact us with respect to shareholding relations for individual and corporate investors, please call directly or send an e-mail to Ms. Füsun UGAN Finance Manager Tel :+90 232 616 1240 (Ext:4575) Direct :+90 232 616 6127 E-mail :
[email protected] Mr. Şafak AYIŞIĞI Assistant General Manager (Finance) Tel :+90 232 616 1240 (Ext: 2150) Fax :+90 232 616 2297 E-mail :
[email protected] Mr. Hayati ÖZTÜRK General Manager Tel :+90 232 616 1240 (Ext:2040) Direct :+90 232 616 2297 Fax :+90 232 616 8519 E-mail :
[email protected] Also, please visit our web site at www.petkim.com.tr for further information and queries.
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