Annual Investor Day December 5, 2006 Louis Bienfait Chief Financial Officer 1
Stahl Overview Stahl is a surface effects specialist, a leading global supplier of high value-added formulated products and services for leather and high performance coatings Stahl Performance Coatings Finish Colours & Tanning Products Shoe Finish Permuthane Picassian Polymers 185.4m 31.5m 6.3m 71.4m 12.3m 306.9m 2
Broad Applications Finish Finish Permuthane Permuthane Customers: Limited number of global automotive tanneries Thousands of local or regional tanneries Distributors/Agents (mainly Asia) Customers: Coaters supplying the following end use applications: Automotive interior, Synthetic leather (garment, footwear, etc), Textile, Flooring, Technical 3
Balanced Global Presence Region Region Americas 23% Europe 47% Asia Pacific 30% : 306.9m 4
Long Term Growth and Stable Margins Over the past 20 years, Stahl has demonstrated sales growth of 4-5% p.a. and stable gross margins Limited cycles due to fashion trends Stahl Stahl Index Index 1986 1986 250 Index 200 150 Asia crisis 100 50 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1986 CAGR: 4.2% September 11 5
Significant Growth Opportunities Following the recent streamlining of its operations, Stahl is well positioned to take advantage of growth opportunities Increased management focus Dynamic underlying markets Permuthane New services and technologies Expiry of non-compete agreements in China New plant in China Expanded organization Track record of acquisitions Acquisitions Strong platform for sector consolidation Performance coatings market is highly diversified and fragmented 6
Stahl is organized around 4 Divisions Average of 25 years of industry experience across top management Interim CEO P Beaumont COO CFO P Beaumont L Bienfait Executive President Finish RoW excl. Asia Pacific M Vaskovich Executive President Finish Asia Pacific R Hammond Executive President Colours & Tanning Products Global R. Walsham Executive President Performance Coatings Global J. Bouchard 7
Undisputed Leader in Finish World leader with outstanding brand name and reputation Finish Global Market Shares Finish Global Market Shares Strong competitive advantages Formulation skills of more than 200 technicians ( Golden Hands ) and technical service through 35+ service centres command sustainable premium prices vs. competition Fast response time through local infrastructure and decentralised organisation Lower cost base Strategically well positioned to take advantage of changing market dynamics Growth opportunities in China and Latin America Continued presence in Europe to remain close to luxury goods end-customers Others 44% TFL 4% BASF 9% Total : $1.2bn Stahl 21% Lanxess 10% Clariant 12% 8
High Value Add Products finishing is the highest value added segment within the leather processing value chain it is process critical but not cost critical Production Slaughter Houses Tanneries Distributors Manufacturers Raw Skins and hides Beamhouse Wet-End Finishing Shoes, automotive, garments, leather goods, furniture Processes Soaking Liming Bating Pickling Tanning Re-tanning Fat liquering Dyeing Drying Finishing Products Tanning Chemicals Dyes/Oils/ Syntans Finishes Main Players Full capability Some capability Service Required Margins 9
Solid End-Market Growth Chemicals Breakdown () and Growth ( 05-10 CAGR) End-Market End-market growth with limited cycles generated fashion trends chemicals market growth: c. 3% finishing market growth: c. 4% Automotive and furniture are the highest Goods 9% CAGR: 1.3% Automotive 13% CAGR: 5.9% Shoes 45% CAGR: 2.6% growth end-markets Stahl has a 35% market share in automotive upholstery Asia is the highest growth region (6.3%) Significant presence in Asia New plant in China Furniture 20% CAGR: 5.9% Garment 13% CAGR: 1.3% 10
Global Presence in Finish Finish Finish Region Region Finish Finish End-Market End-Market Americas 18% Europe 47% Furniture 15% Garment 13% Footwear & Goods 44% AsiaPacific 35% 2004 sales¹ 196.5mm Automotive 2004 28% sales¹ 196.5mm : 185m : 185m 11
Positive Industry Trends End- Market Developments Global shoe production expected to rise approximately 2% annually, with stronger growth expected for leather footwear Continued strong demand for luxury leather goods globally Global car leather production expected to rise driven increased penetration in midsized cars, especially in Europe Declining hide quality driving increased need for leather finishing Regional Developments Increasing demand for leather in emerging markets (furniture, car seats, shoes, etc.) driven increasing disposable income Migration of leather production to low cost locations in Asia, Central Europe and Latin America largely completed 12
Five End-Markets in Permuthane Permuthane Permuthane Region Region Asia 5% Permuthane Permuthane End-Market End-Market Textile 13% Floor Covering 3% Automotive 38% Americas 43% Europe 52% Technical 19% Synthetic 27% : 71m : 71m 13
Accelerated Growth Strategy Permuthane strategy has shifted from historically opportunistic, local approach to strategic global management Further strengthening of the position in the automotive sector (especially in Asia) Global Strategic Targets Non-compete expired in January allows access to rigid substrates coatings market Increasing demand for waterborne ecologically acceptable systems Colour coatings for auto interiors Expertise in PU dispersions and In Mould Coatings (IMC) Implementation Strengthened global and regional management Accelerated roll-out of selected areas of strength in Europe / US to Asia and South America 14
Attractive Portfolio of Related Businesses sales of 31.5m C&TP Products include quality dyestuffs, syntans, oils and auxiliaries used in tanning and dying of leather Syntans / oils segment offers attractive growth niches Shoe Finish sales of 6.3m Natural progression from Finish business Offers high growth opportunities e.g. through major market penetration in China with local production of new product range sales of 12.3m Picassian Polymers Products include formulated and non-formulated polymers Exploitation of available in-house polymer technology Growth opportunity following expiry of a non-compete agreement 15
Recent End-Markets Dynamics Issues Issues Stahl Stahl Actions Actions Tangible Tangible results results Automotive Weak demand with Big 3 US OEMs Focus on new products and new applications Established laboratory in Japan to address New positions in-mould coatings and new high solid applications Growing sales to Japanese transplants Japanese transplants world-wide Furniture Fashion driven weak demand after strong H1 2006, in wake of high hide prices Re-direction into new segments according to plan Reduced dependency of furniture industry swings Shoe & Garment Unfavourable fashion cycle for leather finishing (suede, nubuk, etc.) Global S&LG team emphasizing fashion incl. fashion ambassador Increased focus on shoe and leather goods in China as % market share well below normal Stahl share Fashion image re-established leading to strong absolute growth of S&LG sales New China plant to address domestic demand in China; invoicing from January 2007 30 new technicians in China Despite recent volatility in selected end-markets, Stahl is generating strong cash-flows based on strict cost and working capital management 16
Conclusions Market Leader Favourable Long- Term Trends Broad Diversification World market leader in leather finishing with 21% market share Market leadership for the past 20 years Increasing demand for finishing chemicals; limited cycles due to fashion trends industry is stable Broad diversification both geographically and in terms of end-markets no customer concentration Technical know-how and service capability are key High Barriers to Entry Global network of qualified technicians ( Golden Hands ) Customised product portfolio: high switching costs Excellent brand recognition and longstanding customer relationships 17