Discussions with Investors ING 11th Annual EMEA Forum in Prague December 2008 Cautionary Statement This document has been prepared by PEGAS NONWOVENS SA (the “Company”) solely for use at the Presentation. Any forward looking statements concerning future economic and financial performance of the Company contained in this Presentation are based on assumptions and expectations of future development of factors having a material influence on the future economic and financial performance of the Company. These factors include, but are not limited to, the legal environment, the future macroeconomic situation, the market competition, the future demand for nonwoven textiles and other related products and services and development of raw material prices. The actual development of these factors, however, may be different. Consequently, the actual future financial performance of the Company could materially differ from that expressed in any forward looking statements contained in this Presentation. Although the Company makes every effort to provide accurate information, we cannot accept liability for any misprints or other errors. In preparation of this document we used certain publicly available data. While the sources we used are generally regarded as reliable we did not verify their content. PEGAS does not accept any responsibility for using any such information. This document is provided for information and as a matter of record only. It does not constitute an offer to sell or a solicitation of an offer to buy or sell securities or other financial instruments in any jurisdictions or any advice or recommendation with respect to such securities or other financial instruments of the Company. The distribution of this document in certain jurisdictions may be restricted by law. This document may not be used for, or in connection with, and does not constitute, any offer to sell, or an invitation to purchase, any securities or other financial instruments of the Company in any jurisdiction in which such offer or invitation would be unlawful. Persons in possession of this document are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. … every single detail … 2 September 2008 Agenda Company Introduction Strategic Objectives 9M 2008 Financial Performance 2008 Guidance 2009 Outlook Appendix … every single detail … 3 September 2008 Company Introduction … every single detail … 4 September 2008 Overview Annual Production Growth • Product: Spunmelt Nonwoven Textiles – PP/PE 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 • Experienced and Growing: since 1990 • 389 Employees • 8 Production Lines • Approx. 70 000 tons production based on current product mix (2008e) 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 0 20 7 08 E • Luxembourg entity listed in Prague and Warsaw Production in tonnes • 100% Free Float Source: Company Data … every single detail … 5 September 2008 Products Nonwoven Spunmelt Textiles • Hygiene (87% production in 9M 2008) – Baby Diapers – Feminine Hygiene – Adult Incontinence • Technical (13% production 9M 2008) – Medical – Resistant textiles for Building Industry – Furniture – Agriculture – Filtration – Wipes … every single detail … 6 September 2008 Geographical Advantage Optimal Location • Central European Base • Low Cost Area (Staff costs and Energy) • Government Incentives • Room for Expansion in the current Production Site in Znojmo Znojmo … every single detail … Bučovice 7 September 2008 Meeting Market Needs • Highest Quality • Competitive Pricing • Continuous Development • Close cooperation with customers to identify and develop new products • On time delivery • Regular Increase in Production Efficiency • Flexibility … every single detail … 8 September 2008 Strategic Objectives … every single detail … 9 September 2008 Strategic Objectives Technological Leadership • • • To maintain technology leader position in Europe Develop and deliver technologically advanced products for the market To work with our customers and suppliers in developing new products ahead of the market Market Growth Opportunities • • • New capacity installations in line with market demand To have sufficient capacity to satisfy the leading European manufacturers Monitoring M&A opportunities to become most strategic supplier to global customers Delivering Financial Performance • • • Growing revenues in line with market growth To maintain our leading margin position in the industry Use cash flow to support expansion, repay debt and to pay out dividends … every single detail … 10 September 2008 First 9 Months and Q3 2008 Financial Performance … every single detail … 11 September 2008 9 Months and Q3 2008 Key Highlights • Financial Performance • • • • Markets and Business • • • • Growth & Technology • • … every single detail … Revenue growth of 22.1% yoy in 9M 2008 on the back of higher production output and annual growth in material prices EBITDA up by 0.8% yoy in 9M 2008 and by 4.7% yoy in Q3 2008 Profitability was mostly affected by CZK development, volatility of polymer price indices and higher stock levels related to a lower demand for technical materials High net profit of EUR 23.5 million in 9M 2008 mainly due to unrealized FX gains and lower interest expenses Steady net debt levels after the dividend pay-out and financial stability The polymer price decline should positively impact EBITDA in Q4 2008 Higher stock levels of finished products due to demand decline from the construction industry should continue also for the rest of this year Negotiations with customers for 2009 to-date are satisfactory in terms of committed volumes Finalisation of investment incentives conditions related to the possible construction of the next production line PEGAS will continue monitoring M&A opportunities Commercialisation of new R&D projects and anticipated launch of pilot equipment for plasma treated nonwovens 12 September 2008 9M and Q3 2008 Profit and Loss Statement (EUR’000s) Revenue Raw materials & consumables Staff costs of which Share price bonus Other net operating income/(expense) EBITDA EBITDA margin (%) Depreciation Profit from operations (EBIT) EBIT margin (%) FX gains and other financial income (net) Interest costs (net) Income tax expense Net Profit Net Profit Margin (%) Q3 9M 2007 2008 % change 2007 2008 % change 30,014 (19,464) (1,563) 35,421 (24,246) (1,809) 18.0% 24.6% 15.7% 90,731 (57,373) (4,326) 110,768 (75,651) (4,929) 22.1% 31.9% 13.9% (50) 11 n/a (107) 489 n/a 317 9,304 31.0% (3,058) 6,246 20.8% 5,467 (1,699) (174) 9,840 32.8% 378 9,744 27.5% (4,358) 5,386 15.2% (4,469) (1,634) 982 265 0.7% 19.2% 4.7% (3.5pp) 42.5% (13.8%) (5.6pp) n/a (3.8%) n/a (97.3%) (32.1pp) 1,162 30,194 33.3% (9,110) 21,084 23.2% (690) (8,148) 239 12,485 13.8% 246 30,434 27.5% (12,636) 17,798 16.1% 13,066 (4,805) (2,561) 23,498 21.2% n/a 0.8% (5.8pp) 38.7% (15.6%) (7.1pp) n/a (41.0%) n/a 88.2% 7.4pp Note: Unaudited consolidated financial results in accordance with IFRS. 9M 2007 Results include the one-off revenue from the arbitration proceeds of Euro 1.03 million … every single detail … 13 September 2008 Cost Composition Cost Breakdown in 9M 2007 Staff costs 6% Cost Breakdown in 9M 2008 Electricity 5% Staff costs 5% Other raw materials and consumables 9% Electricity 6% Other raw materials and consumables 8% Depreciation 13% Depreciation 14% Polypropylene & polyethylene 67% • • • • Polypropylene & polyethylene 67% Overall cost level impacted by additional production capacity, higher prices of raw materials and energy and CZK appreciation Staff costs positively impacted by the fair value of phantom share option plan in 9M 2008 Polymers and electricity up by 30.8% and 62.2% yoy respectively, due to higher consumed volumes based on the new production line and higher energy prices Depreciation higher due to the new line and CZK appreciation … every single detail … 14 September 2008 Balance Sheet (EUR’000s) Sep 30th, 2007 Dec 31st, 2007 Sep 30th, 2008 Unaudited Audited Unaudited 204,965 120,735 84,230 36,962 10,195 26,200 567 241,927 82,550 132,210 117,225 14,912 73 27,167 19,156 45 7,966 224,708 137,355 87,353 39,171 12,416 26,244 511 263,879 93,885 128,799 116,508 12,190 101 41,195 33,218 1,427 6,550 230,948 136,591 94,357 45,967 15,437 30,165 365 276,915 113,621 117,735 104,777 12,957 1 45,559 23,946 2,487 19,126 Non-current assets Property, plant and equipment Intangible assets incl. goodwill Current assets Inventories Trade and other receivables Bank balances and cash Total assets Total share capital and reserves Non-current liabilities Bank loans due after 1 year Deferred tax Other payables Current liabilities Trade and other payables Tax liabilities Bank overdrafts and loans • • Sep 30th, 2008/ Dec 31st, 2007 change in % 2.8% (0.6%) 8.0% 17.3% 24.3% 14.9% (28.6%) 4.9% 21.0% (8.6%) (10.1%) 6.3% (99.0%) 10.6% (27.9%) 74.3% 192.0% Increase in inventories on the back of higher stock of raw materials and spare parts Stable net debt / net cash position after the dividend pay-out confirming strong and secure financial position of the Company Note: Unaudited consolidated financial results in accordance with IFRS … every single detail … 15 September 2008 Cash Flow Statement (EUR ’000s) Profit before tax Amortization/ Depreciation Foreign Exchange Nine Months to September 30th 2007 2008 Unaudited Unaudited Change in % 12,246 26,059 112.8% 9,110 12,636 38.7% 727 (3,891) n/a Interest Expense 8,343 4,816 (42.3%) Fair value changes of interest rate swaps (455) 219 n/a Other financial (expense) / income (414) 130 n/a Change in inventories (1,832) (2,025) 10.5% Change in receivables (2,105) (2,122) 0.8% Change in payables (2,229) 5,614 n/a (120) (1,774) 1,378.3% Income tax paid Net Cash Flow from Operating activities 23,271 39,662 70.4% Purchases of property, plant and equipment (18,678) (17,824) (4.6%) Net Cash Flow used in Investment activities (18,678) (17,824) (4.6%) Change in bank loans (11,817) (9,198) (22.2%) Change in long term debt (202) (100) (50.5%) Distribution (Dividends) (7,014) (7,845) 11.8% Interest paid (7,421) (4,711) (36.5%) 414 (130) n/a (26,040) (21,984) (15.6%) 22,014 511 (97.7%) (21,447) (146) (99.3%) 567 365 (35.6%) Other financial income / (expense) Net Cash Flow used in Financing activities Bank balances and cash at the beginning of the year Change in cash and cash equivalents Bank balances and cash at the end of the period Note : Unaudited consolidated financial results in accordance with IFRS … every single detail … 16 September 2008 CAPEX Development CAPEX Breakdown Q3 CAPEX Breakdown 9M € 3.5 m 20,0 € 0.7 m 2,0 3.5 0.4 0.3 0,0 Q3 2007 Expansion CAPEX 0.3 (4.8%) € 17.8 m 1.1 15,0 Euro million 4,0 Euro million € 18.7 m (80.0)% 10,0 18.4 16.7 5,0 0,0 Q3 2008 9M 2007 Maintenance CAPEX Expansion CAPEX 9M 2008 Maintenance CAPEX Source: Company data • • Expansion CAPEX in 2008 relates to the remaining payments for the 8th line project Full year 2008 CAPEX Guidance of Euro 18 million at constant currency of CZK/ EUR 26 … every single detail … 17 September 2008 2008 Guidance • The achieved results in the first nine months of 2008 indicate a strong position of the Company in its core market and an outstanding performance in a highly volatile financial and economic environment • Number of unforeseen developments had negative impacts on the financial performance to date - lower demand for technical materials, unexpected appreciation of the CZK and extreme polymer price volatility in 2008 • In Q4 2008 the Company will benefit from the decline in polymer prices • EBITDA for the full year is expected to exceed the one achieved in 2007, however the communicated guidance range might not be met … every single detail … 18 September 2008 2009 Outlook • Negotiations with customers to-date for 2009 indicate that production capacity should be sold out • Level of inventories should decline in Q2 and Q3 2009 • Anticipated further debt repayment to improve leverage if no other investment opportunities materialize • Rising operating costs and lower demand for technical materials leading to more competition in hygienic segment • Tailormade R&D projects to satisfy needs of key customers … every single detail … 19 September 2008 Appendix … every single detail … 20 September 2008 Relevant Market Overview - Spunmelt European Spunmelt (SM) Nonwovens (PP/PE) Market (2004-2009e) Tonnes 600 000 400 000 578 700 524 000 462 700 9,8% 9,4% 8,8% 8,0% 714 121 672 346 633 000 10,4% 15% 10,3% 10% 5% 200 000 51 300 37 100 54 200 70 000 56 000 73 500 0% 0 2004 2005 NW SM PP,PE • • • Market share in % 800 000 2006 2007 NW SM Pegas 2008f 2009f NW SM Pegas market share % Nonwovens spunmelt PP/PE market in Europe was growing 11% CAGR (2004-2007) PEGAS market share in Europe was rising by 14.7% CAGR (2004-2007) – faster than its core market as a result of regular capacity additions PEGAS market share in Europe is currently 10.4% based on 2008 production output Source: EDANA, PEGAS … every single detail … 21 September 2008 Market Overview - Hygiene European Nonwovens Spunmelt Hygiene Market (2004-2009e) 700 000 30,0% Tonnes 500 000 434 100 300 000 14,5% 227 000 16,4% 280 200 15,4% 14,3% 25,0% 413 139 382 536 354 200 318 900 400 000 565 005 538 100 501 100 472 700 16,1% 15,0% 15,6% 10,0% 200 000 5,0% 100 000 - 0,0% 2004 NW total Hygiene • • • • 20,0% Market share in % 600 000 593 255 2005 2006 2007 NW SM Hygiene 2008f 2009f Pegas market share SM Hygiene % European hygiene nonwovens market expanded 7.4% CAGR (2004-2007) European spunmelt hygiene nonwovens market grew 16% CAGR (2004-2007) PEGAS market share in European hygiene spunmelt market is anticipated to reach 16% in 2008 PEGAS’s production for the hygiene market grew 15% CAGR from 2004 to 2007 in line with the core hygiene market Source: EDANA, PEGAS … every single detail … 22 September 2008 Overview of European Production Capacity Installed capacity1 in % – 2008e EOP • BBA Fiberw eb 18% Others 23% Gulsan 4% Radici 4% Albis 5% Dounor 5% Av gol 7% • PEGAS 11% • Union 8% Fibertex 7% • Tesalca 8% PEGAS is no. 2 producer of spunmelt nonwovens in Europe in terms of installed production capacity European market has a stable surplus of exports over imports in spunmelt nonwovens, app. 98 thousand tonnes in 2007 Share of capacity base held by modern, state-of-art technology is expected to increase and equal approximately 87% in Europe at the end of 2008 driven by needs of hygiene customers European market is more fragmented than other region with over 30 producers in total Source: PEGAS, John Starr Note: 1) Installed spunmelt production capacity in Europe estimate, end of period 2008 … every single detail … 23 September 2008 Capacity vs. Demand in Europe Position of PEGAS • Supply vs. Demand proportion creates healthy market competition The annual capacity increase in the European spunmelt nonwoven market between 2003 – 2007 was approx. by 72k tonnes • In 2007, 49k tonnes were added in Europe. In 2008 and 2009 capacity is expected to increase on average by 39k tonnes • End market is growing by 5-6% p.a. (by 28-30k tonnes in spunbond hygiene demand), the difference is as usual balanced by less than 100% utilization of capacities and European exports • Structure of Capacity Increase is favourable for PEGAS … every single detail … • • 50% of new capacities to be added in 2008-2009 represent unattested technologies 37% of new capacities to be added in 2008-2009 represent new entrants into the industry Structure of new capacities to be added in 2008- 2009 is highly advantageous for PEGAS and represents new market opportunities for growth 24 September 2008 European SB New Capacity Overview 2006-2007 by Segment Total new capacity 96,000 tonnes Nonhygiene 20% 2006-2007 by Technology Reicofil technology hygiene 80% Other technology nonhygiene 20% 2008-2009 by Technology New entrants others 9% 2008-2009 by New Entrants Existing producers nonhygiene 10% Total new capacity 78,000 tonnes Reicofil technology others 15% Nonhygiene 31% New entrants hygiene 9% Existing producers others 10% Existing producers hygiene 72% Hygiene 80% 2008-2009 by Segment 2006-2007 by New Entrants Other technology hygiene 33% Hygiene 69% Reicofil technology hygiene 35% Other technology others 17% Existing producers hygiene 53% New entrants hygiene 16% New entrants nonhygiene 21% Source: John Star, Company data … every single detail … 25 September 2008 Revenue Breakdown by Product Q3 15.6% 21.9% 30 80 67.62 70 25 22.67 Revenues (EURm) Revenues (EURm) 9M 18.60 20 9.4% 16.0% 15 10 7.21 4.20 5 7.89 4.87 58.49 60 42.9% 50 40 19.4% 28.26 30 19.77 20 12.47 14.89 10 0 0 Non-hygiene Hygiene - commodity Q3 2007 Source: Company data • • Non-hygiene Hygiene - TA 9M 2007 Q3 2008 Hygiene - commodity Hygiene - TA 9M 2008 Sales for the hygiene industry in the first 9M 2008 accounted for 86.6% share of total revenues confirming a strong performance in this segment Rising share of technologically advanced materials on total sales - 25.5% in the first 9M 2008 up from 21.8% in 2007 Note: Company defines technologically advanced products as those with higher added value in terms of either higher margins or material properties that protect the Company from easy substitution of its products by its competitors. … every single detail … 26 September 2008 Revenue Breakdown by Geography1 Q3 9M (2.4%) 22 20.11 19.63 5.0% 58.7% 70 60 18 57.69 60.56 59.1% 14 9.66 10 95.8% 6 2 0.24 Revenues (EURm) Revenues (EURm) 15.33 47.02 50 40 29.56 30 (8.3%) 20 10 0.47 3.48 3.19 0 -2 WE CEE and Russia Q3 2007 Source: Company data • • Other WE Q3 2008 9M 2007 CEE and Russia Other 9M 2008 Sales in Western Europe remain a key focus with over 50% share on total revenues Sales in CEE and Russia substantially up due to increased sales to the Czech Republic and Poland Note: (1) Revenues by georgraphy are based on the final location of delivery … every single detail … 27 September 2008 Personal hygiene market in Europe • • • • • Baby care Multinationals (P&G, Kimberly-Clark, SCA, Johnson&Johnson, Ontex, etc.) Regional leaders (e.g. TZMO in femcare in Poland) Market leader (P&G) commands nearly 50% market share where the top three players control approximately 75% of the market Others 13% Ontex 10% Others 12% Kimberly-Clark 3% TZMO 4% Procter & Gamble 48% SCA 8% SCA 15% Ontex 10% Johnson & Johnson 15% Kimberly-Clark 14% Adult incontinence Others Tyco TZMO 11% 3% 2% Fater 3% Ausonia 3% Abena 3% Artsana 3% Indas 4% PaperPak Ontex 5% Hartmann 8% 15% We supply most of the key players in Europe Market consists of three major groups: - Baby care (70% of consumption) - Feminine care (10% of consumption) - Adult incontinence (20% of consumption) … every single detail … Procter & Gamble 48% Feminine care Source: Company 28 SCA 40% September 2008 Pass-through mechanism delays Development of PP Price Level1 Illustrative Pass-through Delays 1,300 Avg. 2006 1,158 1,200 2007 Avg. 2007 1,203 Sales/ raw materials in Euro Euro/ tonnes 1,250 1,150 1,100 1,050 Q1 Q2 • • • • Q4 Sales Costs of PP PP Composite Index Positive EBITDA impact 1,000 10/05 12/05 02/06 04/06 06/06 08/06 10/06 12/06 02/07 04/07 06/07 08/07 10/07 12/07 Q3 Negative EBITDA impact Avg. 2007 prices of polymers increased by 4% yoy Regardless of other factors impacting the total costs, polymer costs remain its key driver Changes in polypropylene prices are transferred to revenues with a delay according to the contracts with customers Negative EBITDA impact of the delays for 2007 was Euro 0.8 million Source: Company data Note: (1) PP price level calculated on internal documents of PEGAS … every single detail … 29 September 2008 PEGAS Organizational Chart … every single detail … 30 September 2008 Reporting Schedule and IR Contact Investor Relations : Tel: +420 515 262 450 Fax: +420 515 262 505 E-mail: [email protected] … every single detail … 31 September 2008
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