Building the new Solvay: a value creative transformation Jean-Pierre Clamadieu Chief Executive Officer April 24, 2012
AGENDA 1 Strong fundamentals 2 A well defined strategy 3 A transformation already underway Capital Markets Day 2012 April 24, 2012 2 April 24, 2012
1 Strong fundamentals Capital Markets Day 2012 April 24, 2012 3 April 24, 2012
STRONG FUNDAMENTALS A major player in chemicals with compelling strengths Our strengths Within top 10 worldwide largest chemical players from developed markets 90% of sales in businesses ranking among the top 3 global leaders 12.7bn NET SALES 2011 Proforma 2.1bn REBITDA Global presence with 40% of sales in fast growing countries 825m* NET INCOME Diversified end-markets creating resilience through cycles Differentiated innovation focused on sustainable development Committed to operational excellence targeting best-in-class process efficiency 29,000 EMPLOYEES 55 Countries 656m** FREE CASH FLOW REBITDA: operating result before amortization, non recurring elements, financial charges and taxes * From continuing operations ** Cash flow from operating activities + cash flow from investing activities, excluding acquisitions and sales of subsidiaries and other investments + dividends from associates and JVs. Capital Markets Day 2012 April 24, 2012 4
STRONG FUNDAMENTALS Solvay in the global top league Largest chemical players from developed markets 2011 Revenue, EUR billions (3) Material Sciences (1) (2) (4) 9.4 9.2 8.8 8.7 9.9 12.7 12.7 12.5 11.7 10.8 14.2 15.7 21.5 20.2 27.1 SOURCE: Reuters; Chemical & Engineering News; Annual reports 1) BASF excluding Oil and Gas activities 2) Evonik excluding Real Estate activities 3) Proforma 2011 4) Consolidated revenues Capital Markets Day 2012 April 24, 2012 5 43.1 61.4
STRONG FUNDAMENTALS Strong global leadership positions World leader with 90% of its sales in businesses in which it is in the top 3 Specialty Polymers Silica & Rare Earth Systems Consumer Chemicals Essential Chemicals High Barrier Polymers, High-Performance Engineering Polymers & Compounds, Fluorinated Polymers High-Performance Silicas, Rare Earth Systems Specialty Surfactants, Phosphorus Chemistry & Diphenols #1 #1 #1 #1 Hydrogen Peroxide, Soda Ash & Sodium Bicarbonate Polyamide & Intermediates Vinyls & Acetow PA 6.6 Polymers, Intermediates & Engineering Plastics #2 #3 PVC, Cellulose Acetate Fiber Capital Markets Day 2012 April 24, 2012 6
STRONG FUNDAMENTALS Strong footprint in fast growing regions North America 17% 25 INDUSTRIAL SITES 3,400 Latin America 14% 10 INDUSTRIAL SITES 3,700 Europe 43% 40 INDUSTRIAL SITES 16,300 Asia Pacific / Rest of the world 26% 35 INDUSTRIAL SITES 5,700 Plastics & Chemicals Rhodia 40% OF NET SALES AND INDUSTRIAL ASSETS 32% OF HUMAN RESOURCES Capital Markets Day 2012 April 24, 2012 7
STRONG FUNDAMENTALS R&D capabilities boosted by open innovation network 2011 proforma figures 12 major worldwide R&D centers 1,700 R&D employees 218m 54m 322 net R&D investment in venturing new patents North America 222 people Atlanta Bristol Europe 1,219 people Paris Brussels Lyon Hannover Dombasle Milano Asia 188 people Seoul Vadodara Shanghai Latin America 82 people Paulinia Major worldwide R&D centers Collaboration with major academic institutions Venture Capital investments Capital Markets Day 2012 April 24, 2012 8
STRONG FUNDAMENTALS Resilience to cycles resulting from diversified end-markets 29% 18% 17% 2% 4% Agriculture, Forestry and Fishing 4% 4% 7% 15% Electricals & Electronics Capital Markets Day 2012 April 24, 2012 9
STRONG FUNDAMENTALS Best-in-class profitability 2011 REBITDA margin ranking REBITDA margin on sales (%) REBITDA (in m ) REBITDA / employee (in k ) (1) 18.2 2.6 79 (2) 16.9 4.9 66 (3) 16.3 2.1 71 (4) 15.0 9.2 107 (5) 14.4 1.0 64 14.3 1.3 60 13.2 0.8 39 13.1 1.1 70 13.0 5.6 100 11.4 1.8 31 Material Sciences 10.8 1.2 79 1 Excl. Real Estate 2 Excl. Pharma SOURCE: Annual reports 2011 3 Proforma FY 11, assuming Rhodia was consolidated into Solvay's accounts from 1 January 2011 4 Excl. Oil and Gas activities 5 Incl. Vinyls Capital Markets Day 2012 April 24, 2012 10
2 A well defined strategy Capital Markets Day 2012 April 24, 2012 11 April 24, 2012
STRATEGIC VISION Our ambition Build a strong leader participating in the reshaping of the global chemical industry Be a model of sustainable chemistry, attracting and growing the people who will imagine, engineer and make the solutions that meet the global challenges society faces, creating value for all our stakeholders Capital Markets Day 2012 April 24, 2012 12
STRATEGIC VISION A transformation geared towards value creation Portfolio thorough strategic analysis performed early 2012 Solvay s ability to extract value Solvay Chemical industry average Growth engines Priority to seize GROWTH: organic, innovation, external Areas of challenge requiring strategic position improvement Priority to operational excellence and disciplined cash management 24 business segments analyzed Value Creation potential of Industry / Market served Clear strategic intent for each portfolio component Capital Markets Day 2012 April 24, 2012 13
STRATEGIC VISION Value creation through differentiated strategic priorities Portfolio Strategic Management Energy Services Specialty Polymers 8% 16% Consumer Chemicals 16% 12% Advanced Materials Focus on growth opportunities Organic growth Innovation External growth Double-digit profit growth Outperforming the market Special Chemicals Polyamide 3% 8% 10% Vinyls 18% Essential Chemicals 9% Acetow & Eco Services Focus on cash management and strategic positioning improvement Improve contribution margin Reduce costs Enhance cash generation Regain strategic flexibility Secure sustained cash generation Capital Markets Day 2012 Proforma 2011 REBITDA breakdown by business (excluding New Business Development / Corporate Business Support) April 24, 2012 14
STRATEGIC VISION - AMBITION Focused on value creation Culture of Excellence HIGH PROFITABILITY ROBUST CAPITAL STRUCTURE REBITDA 3bn* by 2016 STRONG CASH FLOW GENERATION VALUE CREATION CFROI > WACC Leveraging on strong track record * At constant scope and assuming no major macroeconomic crisis Capital Markets Day 2012 April 24, 2012 15
3 A major transformation underway Capital Markets Day 2012 April 24, 2012 16 April 24, 2012
MAJOR TRANSFORMATION UNDERWAY Building a strong leader Integration well advanced Most workstreams completed by year-end Focus now on building the new Solvay Key levers Operational excellence Growth Innovation aligned with megatrends Geographical footprint External growth Focus on value creation Capital Markets Day 2012 April 24, 2012 17
OPERATIONAL EXCELLENCE Solvay & Rhodia combination: a powerful catalyst to unlock value Purchasing and Logistics Industrial & Supply Chain excellence 400m* by 2014 ---------- ~ 130m* in 2012 Operational excellence Action plans in progress Administrative & process efficiency Marketing & Commercial excellence (*) Vs. 2010 Cost base Capital Markets Day 2012 April 24, 2012 18
OPERATIONAL EXCELLENCE Purchasing & Logistics excellence Buy Cheaper, Buy Better, Buy Less Volume bundling Prices and contractual terms benchmarking Supplier rationalization Standardization Specification best practices PURCHASES Raw materials Energy Logistics & packaging Technical goods & services General expenses / IT / Insurance 250m by 2014 ---------- 75m in 2012 Make-or-Buy Team in place since Nov 11, led by J. Matias: 250 people mobilized in over 40 workgroups Capital Markets Day 2012 April 24, 2012 19
OPERATIONAL EXCELLENCE Administrative & process efficiencies Streamlined organization Horizon Processes redesigned to improve productivity 800 full-time employees Deployment completed by YE 12 150m* by 2014 ---- ~ 55m* in 2012 Integration synergies Streamlined global organization Unified corporate functions Deployment of "best in class" Global Business Services organisation 65m annual savings 85m annual savings Primarily impacting support functions (*) Vs. 2010 Cost base Capital Markets Day 2012 April 24, 2012 20
OPERATIONAL EXCELLENCE Industrial & supply chain excellence Developing the best tools to support excellence initiatives Overall Equipment Efficiency Excellence in Maintenance Yield Improvement Reduction of Fixed Costs Working Capital Management Improve competitiveness Reduce Capital intensity Maximize Free Cash Flow Capital Markets Day 2012 April 24, 2012 21
OPERATIONAL EXCELLENCE Marketing and Commercial excellence Value pricing for innovative solutions Pricing power Revenue synergies through cross-selling opportunities and faster project developments across markets and geographies Capital Markets Day 2012 April 24, 2012 22
SOLVAY S 6 INNOVATION PLATFORMS GROWTH - INNOVATION Innovation focused on growth megatrends SUSTAINABILITY GEOGRAPHIC SHIFT & NEW DEMAND PATTERNS MEGATRENDS DRIVING GROWTH IN CHEMICALS Climate Change Limited Resources Over 1bn new consumers Health & Well-being Renewable Chemistry Eco-Efficient Processes Sustainable Energy Solutions Organic Electronics Nanotechnologies & Advanced Materials Consumer Chemicals Cornerstone of Solvay s competitive differentiation Capital Markets Day 2012 SOURCE: McKinsey Growth Initiative April 24, 2012 23
GROWTH - INNOVATION Innovation fueling sustainable growth Sustainable Energy Generation Fuel cells: membranes & Membrane Electrode Assembly Digitalization Smart devices High mechanical performance polymers for complex parts Photovoltaic materials Organic Photovoltaic Storage Li-Ion battery offering New batteries (e.g. Li-Air) Energy storage through H 2 Driving megatrends Fossil fuel replacement GHG emissions reduction High performance chemicals in semicon fab s Organic Light Emitting Diodes materials for emerging displays Driving megatrends Electronic everywhere Information everywhere Capital Markets Day 2012 April 24, 2012 24
GROWTH - GEOGRAPHICAL FOOTPRINT Expanding industrial & human footprint in fast growing regions ~50% of Solvay investments over 2010/11 Middle East HPPO with (2015) Russia Rusvinyl (330 kt/y, 2013) & Surfactants JV with China Feixiang Specialty Polymers in Changshu Soda Ash JV in Tianjin Hydrogen Peroxide (50 kt/y) in partnership with Rare Earths Automotive Catalysis line in Liyang Surfactants (50 kt in Q1 12) in Zuhai Korea Joint R&D with EWHA University Brazil Hydrogen Peroxide (180 kt/y) India Vadodara R&D center Savil R&D (Q2 12) Thailand HPPO JV with (330kt/y, YE 11) Epichlorhydrine (100 kt in Q1 12) Growth investments aligned with geographic dynamics and strategic priorities Capital Markets Day 2012 April 24, 2012 25
EXTERNAL GROWTH Pursuing strategic bolt-on acquisition opportunities USA McIntyre 2009: Specialty surfactants Ajedium Film US 2008: Conversion of high performance resins into high value films Mississippi Polymers Technologies 2006: PARMAX Spotless track record Targeted Successfully integrated Outperforming initial expectations CHINA Feixiang 2010: Specialty amines INDIA Gharda s PEEK division 2006: Specialty grades of ultra-performance polymers PI industries Ltd s Technical Plastics 2011 Going forward, targeted bolt-on acquisitions aimed at: Strengthening positions in attractive business segments and regions Expansion into high value added downstream Market share gains Participating in the industry consolidation Financial flexibility allowing to be proactive Capital Markets Day 2012 April 24, 2012 26
Building the new Solvay: A value creative journey April 24, 2012
www.solvay.com Capital Markets Day 2012 April 24, 2012 28
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" www.solvay.com Capital Markets Day 2012 April 24, 2012 29