ACQUISITION OF SCHIRM

Transcription

1 ACQUISITION OF SCHIRM ACQUISITION OF SCHIRM Replace pic/ use one of factory DATE NOVEMBER October 2017

2 AGENDA 1. CONTEXT AND INVESTMENT SUMMARY 2. ABOUT SCHIRM 3. FINANCIAL INFORMATION 4. OPPORTUNITIES 5. INCORPORATION INTO AECI Investment highlights

3 1 CONTEXT AND INVESTMENT SUMMARY

4 3 CONTEXT: 1H17 RESULTS PRESENTATION Global mining activity gaining momentum» Positive for Group s Mining pillar» New contracts and increased market share» Footprint expanded» Good order book for mining chemicals No significant improvement in SA manufacturing sector anticipated to year-end However:» Good opportunities in Water» Agriculture and Food businesses seasonal stronger 2H historically» Rainfall patterns will affect agricultural sector performance Pursue further footprint and market expansion Strong pipeline of acquisitions Focus on working capital and capex management, and costs Accelerate growth through Innovation projects, including AECI.GO

5 4 STRATEGIC PILLARS

6 5 INVESTMENT SUMMARY Schirm is a contract manufacturer of agro and fine chemicals with a European and US footprint Largest provider of external agrochemical formulation services in Europe Total production volume of tpa 4 synthesis units 55 formulation units 81 packaging units 800 permanent employees Integrated offering across synthesis, formulation and packaging AECI s first major acquisition in Europe Geographic diversification Earnings diversification

7 6 INVESTMENT CASE Market leader in provision of formulation services for agrochemicals in Europe Extension of Schirm s manufacturing and distribution expertise Long-standing relationships with blue-chip customer base Substantial investment in capex over past two years to deliver growth Seasonal benefits Supply chain opportunities Enhanced geographic and product diversity Currency diversification in earnings

8 7 GEOGRAPHIC FOOTPRINT USA GERMANY Lübeck 1 Wolfenbüttel 5 5 Ennis (Texas, USA) 2 3 Schӧnebeck Baar-Ebenhausen 4

9 2 ABOUT SCHIRM

10 9 SCHIRM S HISTORY: EXPANSION OF VALUE CHAIN AND FOOTPRINT Schirm established - focus on pharma repacking services Agrochemicals formulations Acquired by Lehnkering 2000: acquisition of formulation plant, Ennis Imperial acquires Lehnkering and all subsidiaries, incl. Schirm Agrochemicals packaging Acquired Schӧnebeck site 2002: first MPP synthesis plant in Schӧnebeck 2008: acquisition of Wolfenbüttel business Other milestones» 13: new extrusion facility, Wolfenbüttel» 15: new blending and repacking facility, Baar-Ebenhausen» 16: new fungicide formulation centre, Schӧnebeck» 17: new synthesis capacity, Schӧnebeck» 17: new Henkel plant, Wolfenbüttel

11 10 SCHIRM FOOTPRINT DETAILS Lübeck Formulation units: 5 Packaging units: 15 Production volume: t Schönebeck Synthesis units: 4 Formulation units: 7 Packaging units: 16 Production volume: t Ennis/Texas Formulation units: 26 Packaging units: 16 Distribution storage: m 2 Production volume: t Wolfenbüttel Formulation units: 6 Packaging units: 12 Production volume: t Baar-Ebenhausen Formulation units: 11 Packaging units: 22 Production volume: t

12 11 VALUE CHAIN COMPETITIVE ADVANTAGE AND ENHANCED FINANCIAL STABILITY - ENTIRE VALUE CHAIN Synthesis Formulation Packaging Description Process engineering, scale-up and synthesis of organic compounds Broad range of reaction types Formulation of active ingredients Wide range of technical capabilities Packaging and labeling of liquid and solid products in all pack sizes Services include hazardous substances No. of units Production Volume (tpa) Current: 2 400t Expanded: 5 400t 6 400t t t

13 12 REVENUE AND SERVICE SPLIT BY END-MARKET APPLICATION BY PRODUCTION SERVICE Agrochemicals 80% Fine chemicals 20% Synthesis 7% Formulation 53% Packaging 40%

14 13 CUSTOMERS: LONG-STANDING RELATIONSHIPS FOCUSED ON END MARKETS WITH ATTRACTIVE GROWTH RATES, SUPPORTED BY GLOBAL MEGATRENDS PRODUCT SPILT KEY PRODUCT CATEGORIES (~ %) Revenue: 91m Herbicides 50 Mid-term market growth (~ %) 3 Fungicides Insecticides Other Agrochemicals 80% KEY CUSTOMERS

15 14 CUSTOMERS: LONG-STANDING RELATIONSHIPS FOCUSED ON END MARKETS WITH ATTRACTIVE GROWTH RATES, SUPPORTED BY GLOBAL MEGATRENDS PRODUCT SPILT KEY PRODUCT CATEGORIES(~ %) Revenue: 21m Biocides 20 Mid-term market growth (~%) 5 Personal care 20 6 Adhesives 15 4 Rubber 10 4 Other 35 Fine chemicals 20% KEY CUSTOMERS

16 15 PRODUCTION FOOTPRINT BY SITE Revenue ( m) % of total revenue Schönebeck Baar- Ebenhausen Lübeck Wolfenbüttel Ennis/Texas 44,239 15,013 19,417 14,513 19,517 Product split (%) Agrochemicals Fine chemicals Utilisation (%) Synthesis Formulation Packaging Distribution storage Highlights State-of-the-art synthesis facility, including pilot plant Development department Competence centre for fine chemicals formulation Small fillings Competence centre for granulation Powder and granule fillings Competence centre for liquid formulation Liquid fillings Full range of formulation and filling portfolio Optimally located to capture southern US market

17 16 LÜBECK KEY FACTS 7 573m 2 Property size 121 Employees t Production volume in 2015/ m 2 Production area 63% Capacity utilisation 5 Formulation units: 3 solid, 2 liquid

18 17 WOLFENBÜTTEL KEY FACTS m 2 Property size 150 Employees t Production volume in 2015/ m 2 Production area 51% Capacity utilisation 6 Formulation units: 2 solid, 4 liquid

19 18 SCHÖNEBECK KEY FACTS m 2 Property size 256 Employees t Production volume in 2015/16 7 Formulation units: 3 solid, 4 liquid m 2 Production area 62% Capacity utilisation 173m 3 Reactor volume (synthesis) 4 Synthesis plants, including 1 pilot plant

20 19 BAAR-EBENHAUSSEN KEY FACTS m 2 Property size 126 Employees t Production volume in 2015/ m 2 Production area 38% Capacity utilisation 11 Formulation units: 10 solid, 1 liquid

21 20 ENNIS, TEXAS KEY FACTS m 2 Property size 213 Employees t Production volume in 2015/ m 2 Production area m 2 Distribution warehouse 71% Capacity utilisation 26 Formulation units: 13 solid, 13 liquid

22 21 LEADERSHIP TEAM Dirk Unterstenhӧfer Alfred Ludorf Dr. Karsten Mielke CEO CFO Senior Manager Business Development Years in industry: 22 Joined Schirm in 95, rejoined in 14 Previously Head of Supply Chain at Cheminova Germany ( 13 14) and Commericial Director at StӓhlerTec Germany ( 09 12) Years in industry: 23 Joined Schirm in 92, re-joined in 09 Previously Controller at Lehnkering ( 89 92) and Head of Controlling at Hellweg ( 05 09) Years in industry: 19 Joined Schirm in 12 Previously Senior Business Manager at CBW Chemie ( 98 11)

23 3 FINANCIAL INFORMATION

24 23 PURCHASE CONSIDERATION Purchase consideration of 110,5m (incl. cash of 6,5m) Purchase Consideration Equity Loan Cash Wolfenbuttel Business (CMS) 396 Wolfenbuttel Property

25 24 TRANSACTION CONSIDERATIONS Imperial to retain certain warehousing and distribution operations on Schӧnebeck and Wolfenbüttel sites» AECI has entered into a separate agreement to lease warehouse space» AECI retains the option to acquire the warehouse campus in Schönebeck for a maximum amount of 9m» Entered into 25-year lease on Wolfenbüttel property ~ AECI to pay Imperial a pre-payment fee of 3,5m Transaction structured as a locked-box» Effective date of 30 June 17» Subject to a separate trade working capital adjustment mechanism» Trade working capital pegged at 25m ( 21m at 1 July 17)

26 25 FINANCIAL POSITION AT 30 JUNE 17 Fixed assets Net working capital Cash Other liabilities Less: Loan - ICL Net Assets per SENS Fixed assets include 25m expansion capex Other large liabilities comprise mostly pension liabilities

27 26 RECENT FINANCIAL PERFORMANCE JUNE YE Revenue EBITDA EBITDA% 13,5% 12,8% 12,3% Plants largely seasonally-utilised, hence strategic capex in 16 and 17 Majority of earnings typically generated January to June» Objective: create July to December season - fine chemicals and other geographies Favourable finished goods storage contracts negotiated with Imperial Enhanced earnings derived from the rental prepayment of 3,5m

28 27 CAPITAL EXPENDITURE Capex in FY16 and FY17 expected to deliver future earnings growth» Synthesis plant, Schönebeck» Fungicide formulation centre, Schönebeck» Formulation plant, Wolfenbüttel Maintenance capex 3m to 4m p.a Capex ( m) 2,2 4,3 1,0 12,1 8,1 5,6 1,5 0,6 2,8 2,2 2,3 6,6 13 / 14A 14 / 15A 15 / 16A 16 / 17E Maintenance Schonebeck Expansion Other expansion capex

29 28 ENTERPRISE VALUE Enterprise Value EBITDA - June 2017 Multiple Historic earnings New expansion capital expenditure TOTAL ,8 7, ,8 9,1 Target Euro IRR for new capital expenditure between 15% and 18% AECI s gearing projected to 60% post two acquisitions Acquisition expected to be earnings accretive to AECI from FY18 Marginal negative impact on RONA initially

30 30 CONDITIONS PRECEDENT AND TIMING Approval by German Federal Cartel Office (national competition regulator) Approval by German Federal Ministry of Economics and Energy Approval by the SARB Registration iro transfer of Wolfenbüttel property and municipal authority waiving its statutory rights of pre-emption Transaction expected to close in 1Q18

31 31 CURRENT OWNERSHIP STRUCTURE 100% Wolfenbüttel Contract Manufacturing Business Schirm GmbH Schirm USA Wolfenbuttel Lübeck Schӧnebeck Baar- Ebenhausen Ennis/Texas

32 32 POST-ACQUISITION OWNERSHIP STRUCTURE 100% AECI Mauritius 100% Schirm USA Wolfenbüettel Lübeck Schӧnebeck Baar- Ebenhausen Ennis/Texas Wolfenbüettel Contract Manufacturing Business

33 4 OPPORTUNITIES

34 34 OPPORTUNITIES AECI Group already sells key products to European market Step-out in Europe and US Supply to North Africa Formulation in Germany (vs shipping directly from SA) could deliver efficiencies, savings Schirm s knowledge and resources in dealing with complexities of the REACH and European agrochemical regulations may be beneficial Potential efficiencies - supply formulated product via Germany (vs SA) Schirm expertise to optimise current formulations Formulation expertise Greater product efficacy, cost advantages Import replacement for AECI Beneficial seasonal effects on capacity Relationships with multinationals Expand current agrochemical portfolio Leverage Schirm s relationships with key multinational customers Secure favourable distribution terms for Africa Existing range of AECI products and services could be expanded into Europe

35 5 INCORPORATION INTO AECI

36 36 AECI ORGANOGRAM: POST-TRANSACTION

37 37 STRATEGIC PILLARS

38 THANK YOU