STRATEGIC UPDATE 2014 TJERK DE RUITER, EDDY VAN RHEDE 30/10/2014 VAN DER KLOOT, SVEN THORMAHLEN
Disclaimer This presentation contains forward-looking statements, based on currently available plans and forecasts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future, and Corbioncannot guarantee the accuracy and completeness of forward-looking statements. These risks and uncertainties include, but are not limited to, factors affecting the realization of ambitions and financial expectations, developments regarding the potential capital raising, exceptional income and expense items, operational developments and trading conditions, economic, political and foreign exchange developments and changes to IFRS reporting rules. Statements of a forward-looking nature issued by the company must always be assessed in the context of the events, risks and uncertainties of the markets and environments in which Corbionoperates. These factors could lead to actual results being materially different from those expected, and Corbiondoes not undertake to publicly update or revise any of these forward-looking statements. 2
STRATEGIC UPDATE Part 1 TJERK DE RUITER (CEO) 30/10/2014
Strategic Update 2014 Disciplined Value Creation 4
Corbion: Who we are today Leading market positions in Biobased Food Ingredients and Biochemicals Unique technology platform: fermentation of organic acids 11 production facilities across the globe Employees: 1,885 of which 226 in R&D Revenue (2013) of 744 M and EBITDA of 100 M Revenue and EBITDA 5-yr historic CAGR of 4% and 13% respectively 5
Timeline Extension of the sugar value chain Corbion: 80 years in the making 6
Corbion meets key global trends Food security Population growth Resource depletion FOOD ingredients provide safe and healthy food for a growing population, while preventing food waste BIOCHEMICAL ingredients provide solutions based on renewable materials and resource efficient processes 7
Purpose - Vision Mission 8
Lactic acid is our foundation 9
R&D AND TECHNOLOGY SVEN THORMAHLEN (CTO) 30/10/2014
Corbion innovation community 4%of net sales Research, development and application 226 fte (headcount year end 2013) Innovation Center - IC Biobased innovations -IC Foods - AC Biochemicals - AC Biomedicals - IC Operations - Central R&D Corbion total R&D cash spend (2013) Employee base Corbion innovation Consortia Partners Regional laboratoria at: Lenexa (US) Totowa (US) Sao Paolo (BR) Gorinchem (NL) Singapore (SGR) CRO s Corbion Network Academia Global reach 11
CorbionResearch supports its No.1 Ingredient Platform: Lactic Acid Lactic Acid is one of a small number of platform molecules Current applications for Lactic Acid are plentiful Corbion is uniquely positioned today to drive the Lactic Acid Economy to a new level. This unique capability opens the path to new business areas 12
Corbion slactic Acid organism 25 Years of Research and Development From thermophilicto extremo-philic: Corbion slactic Acid organism can thrive under extreme conditions The organism is self-regulating and extraordinarily stable under industrial fermentation conditions Research has focused on Increased yield and productivity Developing gypsum free technology Industrial Pilot Trial currently underway. Feasibility demonstrated A multi-year research roadmap is executed to significantly reduce future capex, energy and production cost 13
Functionality: Acidity and Anti-Microbial Acidification Anti-Microbial Acidification has been used for centuries to preserve and to provide a specific taste to food products. Corbion s acidification portfolio is designed to make food shelf-stable, safe and tasty. Corbion offers a unique tool The Listeria Control Model an online easy to use growth modeling system, adjustable for a wide variety of food items such as cooked meat, TRE meals, soft cheeses and salads. Additional nutritional value is provided by highly soluble minerals based on lactate and gluconate. Accurate prediction of Listeria growth saves valuable R&D cost and speeds up time-tomarket. Beverages Confectionery 14
Functionality: Purity and Chirality Purity Chirality Corbion sdownstream Processing allows production of ultra-pure lactic acid grades and derivatives (<1 part per billion in impurities) Corbionproduces pharmaceutical grades of L(+) Lactic Acid and derivatives. Corbion s fermentation know-how includes the production of stereochemicallypure L(+) and D(-) Lactic Acid (pure enantiomers). Pure enantiomers of lactic acid are valuable chemical building blocks for chiral synthesis of agrochemicals. They are also essential building blocks in highperformance stereo-complex Poly Lactic Acid. 15
Functionality: Polarity and Reactivity Polarity Reactivity Corbionis a leading manufacturer of lactylates, esters of lactic acid and fatty acids. In combination with other functional ingredients, and in particular enzymes for bakery applications, Corbionis an important partner to the North American baking industry. In collaboration with Novozymes, Corbion Research developed innovative anti-staling solutions. Lactic Acid has three chemical functionalities: carboxylic C-1 hydroxy C-2 chiral center C-2 These functionalities allow a wide range of chemical reactions and properties. Corbionunderstands the esterification of Lactic Acid to dimers, esters and polymers. 16
Polymer Expertise Resorbable Polymers CorbionResearch has extensive knowledge in the synthesis and purification of resorbable polymers. Corbionworks in close cooperation with partners in the areas of medical devices and pharmaceutical formulations. Corbionhelps create cost effective and patient friendly solutions in orthopedics, sutures, cardiovascular devices, tissue regeneration and drug delivery. Polylactid Acid Corbionhas in-depth knowledge about PolylacticAcid, PLA. Corbion is a pioneer in high-performance stereocomplex PLA. 17
Ongoing CorbionResearch to improve Performance and Sustainability High Heat PLA Improved heat performance Enables use of PLA for more demanding applications Commercially available Gypsum Free PLA Less chemicals Lower environmental load Significant improvement in Life Cycle Analysis Better economics 2G feedstocks for PLA Cellulose based Increased sustainability Reduce competition with food products 18
Corbion Biorefinery From Lactic Acid to Bio-Based Building Blocks Gypsum-free Fermentation opens access to bio-based building blocks. Succinic Acid production successfully demonstrated on industrial scale in Corbion Spain (JV with BASF). Obtained material is pure white, crystalline and polymer grade. Lactideproduction successfully demonstrated on industrial scale. Successful development of new microorganism strains becomes a critical capability for Corbion. 19
STRATEGIC UPDATE Part 2 TJERK DE RUITER (CEO) 30/10/2014
The strategy development process: June - October To embed commitment to new strategy, Corbion leadership extensively involved Multiple external strategy reviews already available for Biochemicals Ventures PLA Food Corporate Portfolio analysis Business analysis: Assessment of market attractiveness & business strengths Corbion structure Outcome: Strategy that generates sustainable value creation with full leadership support 21
Two business models, two approaches There are two kinds of businesses within Corbion, each with a different set of characteristics. Both have been geared toward top-line growth. We believe they each need a different approach. 22
New segmentation 23
Strategic Update 2014 Biobased Ingredients 24
Biobased Ingredients Food Provider of high-value add, biobased ingredients for the food industry Market leading positions in Bakery and Meat Biochemicals Biobasedalternatives for fossil based chemicals that have similar or better functionality, and are price competitive Market leader in Lactic Acid based solutions 25
Biobased Ingredients portfolio assessment Different priorities for different businesses 26
Strengthen the core 27
Improve performance in Biobased Ingredients 28
Focus on cash flow and return on investment 29
Strategic Update 2014 Biobased Innovations 30
Biobased Innovations 31
PLA Most attractive biopolymer on the market Unmatched Sugar economics Superior sustainability credentials Sugar input (kg) per 1 kg of polymer* 3.5 3.0 2.5 2.0 1.5 1.0 CO2 (kg) Emissions from production of polymers 0.5 PLA 0.0 PLA Bio Polypropylene Bio PET Bio Polyethylene LDPE Polyproylene PET *Theoretical yields Polystyrene Polycarbonate 0.0 1.0 2.0 3.0 4.0 5.0 Corbion PLA CO2 per kg of polymer could go to 0 if produced via gypsum-free production process 32
PLA Shale gas boom will increase PLA competitiveness Shale gas development heavily reduced USA gas prices to 3 $/MMbtu(Europe 9 $/MMbtu, China 13 $MMbtu) Naphta cracker vs Ethane cracker USA will become global cost leader in ethane production forcing shut down of less economically viable naphta crackers in Europe 7 ethane crackers to be built by 2017 8 mio tons/year capacity Causing shortage in longer chain carbon molecules (C4-C6) and favorable market conditions for PLA substituting PS and ABS 33
PLA High heat technology opens up new markets Complexity coffee capsules food service ware automotive dairy packaging fracking consumer electronics food service ware shopping bags fresh food packaging high heat PLA Functionality standard PLA 34
PLA Recalibrated view Analysis Global PLA market has grown by CAGR 23% in last 10 years to ~120 ktpa, despite falling short of earlier, optimistic, forecasts PLA market expected to grow to 600 ktaby 2025, requiring ~ 2x total current global Lactic Acid market capacity Corbion s Lactide-only strategy is not working - Risk/reward sharing in value chain is unbalanced - Chemical majors seek backward integration - Only suitable for pilot/demo PLA plants, which by definition are not economical in scale 35
PLA The opportunity is now Worldwide capacity is almost sold out Market seeking 2nd PLA supplier Corbion can leverage (existing) Lactic acid capacity across value chain Corbion has built up substantial market knowledge and product & application knowhow High heat PLA technology and GMO-free PLA would set us apart from competition By positioning as PLA player we won t be dependent on polymerization partners to develop the market Secures our market leading position in Lactic Acid position 36
PLA Our prudent investment approach Investment characteristics Build 75 ktpapla plant in Thailand ( 60 M investment over 2 year construction period) Investment will be made on disciplined financial criteria (NPV, DCF) Limited incremental expansion of PLA organization required Deriskrequirement: Build only if we have >25 ktvolume commitments Partner optionality remains open to share risk At full capacity PLA plant should deliver > 120 M in sales with > 22 M in EBITDA No near-term additional Lactic Acid capacity investments required as we will debottleneck to optimize existing asset base 37
Creating future growth platforms 38
Strategic Update 2014 Disciplined Value Creation 39
FINANCIAL UPDATE EDDY VAN RHEDE VAN DER KLOOT (CFO) 30/10/2014
Strategic Update 2014 Improved Financial Performance 41
Financial Framework Shifting priority from top line growth to cashflow growth and Investment returns 42
New Segmentation drives management focus and transparency 43
2013 results in new segmentation 44
Value creation in Biobased Ingredients Business 45
Productivity improvement program - Streamline. supporting EBITDA margin increase in Biobased Ingredients business 20 M cost savings identified in the Biobased Ingredients business, through Benchmark approach addressing all cost categories and based on disciplined execution of excellence programs in Operations, Commercial, Innovation and Support functions. Approximately 200 FTE reduction covering all functional areas Manufacturing footprint optimization including closure of Kansas powder plant (oneoff 10 M Capexin 2015) Savings run-rate to be realized in 2016 One-off costs: approximately 20 M (cash out in 2015/16) Streamline Supply Chain/Production Other Total Annual Savings run-rate in 2016 ( M) 12 8 20 FTE reduction 200 46
Value creation in Biobased Innovations 47
Disciplined Investment in Biobased Innovations Disciplined Investment execution Done only if and when the opportunity for clear positive business case arises Value creating (positive NPV) De-risking via upfront commercial commitments and/or partnering Progress monitored via disciplined stage gate process and project cost control Total EBITDA loss for BiobasedInnovations not expected to materially increase from current levels (2013: -/-14 M) Indicative Capex pipeline for Biobased Innovations: Capex Est. ( M) Remark PLA 60 Pending Commercial commitments and/or partner Other initiatives 20 p.a. Pilot / Demo R&D capitalization 48
Updated capex projections Limited maintenance and small expansion Capex in Biobased ingredients (average 35 M / yr). Continued R&D Capexin BiobasedInnovations (average 20 M / yr) Additional one-off investment anticipated for restructuring US manufacturing plant consolidation (2015: 10M). Figures exclude expansion Capex for major Commercial scale plants (e.g. PLA) 49
Corbion s Capital Structure* * As per 30 September 2014 50
Increase gearing of current strong balance sheet Current strong balance sheet Net Debt / EBITDA = 0.0 x (30 Sept 14) Outlook Net Debt / EBITDA at 1.5x over the investment cycle Temporary higher ratio up to 3x possible due to phasing of lumpy investments in Biobased Innovations Staying below covenant of 3.5x 51
Dividend policy and return to shareholders Dividend policy going forward: Payout of 35 45% (was 35%) of net profit adjusted for non-cash one-off items Periodically we will review our debt position in relation to our investment plans, and decide upon potential further distributions. 2015: 100 M additional return to shareholders: 1. Regular Dividend: 35% of net profit adjusted for non-cash one-off items 2. Intention to return additional EUR 100 M to shareholders. Further details to follow in early 2015 52
Segmentation & Targets 53
What we are offering An updated strategy - better capital allocation, better execution New structure enhances transparency of financial disclosure Focus on EBITDA, free cash flow and return on investment Biobased Ingredients strengthen the core Focus on selective growth opportunities Significant productivity gains (program Streamline) Growing EBITDA, strong operational cash flow and limited capex Biobased Innovations selective drive for growth Disciplined execution of investments in selected high potential growth platforms New market outlook and investment roadmap for PLA Revised dividend policy and commitment to return excess capital 54
Strategic Update 2014 Disciplined Value Creation 55
Back Up 56
Corbion s global footprint 57
Changes in segmentation reporting 58
Restated historical results in million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 2007 2008 2009 2010 2011 2012 2013 CAGR 08-13** Net Sales Food 137.4 149.8 146.9 139.5 133.6 144.2 149.2 448.1 473.7 514.1 556.2 555.4 591.7 573.6 3.9% Biochemicals 42.0 39.1 39.8 43.5 46.7 42.7 45.9 116.1 124.7 127.6 145.5 154.9 159.0 164.5 5.7% Biobased Ingredients 179.4 188.9 186.7 183.0 180.3 186.9 195.1 564.2 598.4 641.7 701.7 710.3 750.7 738.1 4.3% Biobased Innovations 1.1 1.1 1.8 1.6 2.4 1.4 3.5 3.3 3.4 1.7 3.1 4.1 3.1 5.5 10.2% Total 180.5 190.0 188.5 184.6 182.7 188.3 198.6 567.5 601.8 643.4 704.8 714.4 753.8 743.6 4.3% EBITDA Food 24.5 29.4 27.6 22.5 23.0 27.1 27.3 64.8 59.4 84.3 122.1 106.6 109.1 104.0 11.9% Biochemicals 8.5 7.9 8.0 7.1 9.8 10.0 9.6 15.5 18.9 22.1 16.1 22.5 25.1 31.5 10.7% Central costs -5.8-6.6-4.9-4.6-4.7-6.9-5.3-23.8-23.8-23.8-23.8-23.8-23.8-21.9-1.6% Biobased Ingredients 27.2 30.7 30.6 25.0 28.1 30.2 31.5 56.5 54.5 82.6 114.4 105.3 110.4 113.6 15.8% Biobased Innovations -3.4-3.3-4.4-2.7-3.1-3.5-4.0-1.1-0.2-2.9-3.2-6.1-9.2-13.9 124.9% Total Corbion 23.8 27.4 26.2 22.3 25.1 26.6 27.6 55.4 54.3 79.7 111.2 99.2 101.2 99.7 12.9% EBITDA margin Food 17.8% 19.6% 18.8% 16.1% 17.2% 18.8% 18.3% 14.5% 12.5% 16.4% 21.9% 19.2% 18.4% 18.1% Biochemicals 20.3% 20.3% 20.1% 16.3% 20.9% 23.4% 20.8% 13.3% 15.2% 17.3% 11.1% 14.5% 15.8% 19.1% Central costs Biobased Ingredients 15.2% 16.3% 16.4% 13.6% 15.6% 16.1% 16.2% 10.0% 9.1% 12.9% 16.3% 14.8% 14.7% 15.4% Biobased Innovations -320.0% -311.2% -244.7% -173.2% -125.7% -251.6% -113.2% -35.0% -7.1% -168.6% -102.6% -150.8% -291.9% -252.0% Total Corbion 13.2% 14.4% 13.9% 12.1% 13.7% 14.1% 13.9% 9.8% 9.0% 12.4% 15.8% 13.9% 13.4% 13.4% * Unaudited company data. **Sales CAGR: 2008 adjusted for intercompany sales to divested Bakery Supplies business. Central costs not available for Corbion before 2012. Assumed stable for comparison purposes. 59
Other financial items Effective Tax rate: 25% Interest charge expected to increase going forward driven by USPP and higher RCF utilization. Result participations comprises of: 50% share in SuccinityJV with BASF 31% share in BPF (Bio Process Facility) JV with DSM and TU Delft 33% share in Dutch Technology Fund 24% share in IcosCleantechFund II Possible non-cash asset Impairment in Q4 2014 as consequence of Strategy update. 60