Post on 04-May-2018
The largest CIS producer of starter batteries
IPO PresentationWarsaw, May 2011
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Important NoticeThe information contained in this document (the “Document”) has been prepared by WESTA ASIC S.A. (“WESTA”) and BG Capital, Ukraine (the “Financial Advisor”).
This Document presents information on the Company and is being issued to a limited number of parties. This Document does not purport to be comprehensive; the purpose of this Documentis to provide general information on the Company.
The Financial Advisor has not independently verified the contents of this Document. No representation, warranty or undertaking (express or implied) is made, and no responsibility or liability isor will be accepted, by WESTA and the Financial Advisor or by any of their respective affiliates, officers, employees or agents in relation to the adequacy, accuracy, completeness orreasonableness of this Document or any further written or oral information, notice or in relation to the reasonableness of any projection contained in such information, and any such liability isexpressly disclaimed.
Neither WESTA nor the Financial Advisor nor any of their affiliates undertake to provide the recipient with access to any additional information or to update this Document or to correct anyinaccuracies therein which may become apparent, and they reserve the right, without giving reasons, at any time and in any respect, to terminate negotiations with any of the recipients ofthis Document.
This Document does not constitute or form part of any offer or invitation or any solicitation of any offer for the sale or purchase of any securities or any of the businesses or assets described init nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. This Document is served for information purposes onlyand on the express understanding that the recipients shall use it only for the purpose set out above.
This Document is intended for a limited audience only and is not for public distribution, publication or disclosure to any third party. This Document and information contained herein shall betreated as strictly private and confidential under any applicable laws. This Document and its contents are confidential and must be treated in the strictest confidence and shall not be copied,reproduced, distributed or disclosed to any other person without the prior written consent of WESTA and the Financial Advisor.
In the European Economic Area this Document is only addressed to and directed at persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive(Directive 2003/71/EC) ("Qualified Investors"). In addition, in the United Kingdom, this Document is being distributed only to, and is directed only at, Qualified Investors (i) who haveprofessional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the"Order") and Qualified Investors falling within Article 49(2)(a) to (d) of the Order, and (ii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as"relevant persons"). This Document must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the EuropeanEconomic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this Document relates is available only to (i) in theUnited Kingdom, relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with suchpersons.
No securities of the Company will be registered under the United States Securities Act of 1933 (as amended) (the “Securities Act”), and may not be offered or sold within the United Statesexcept pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws ofany state or other jurisdiction of the United States. Any failure to comply with this restriction may constitute a violation of the United States securities laws. WESTA does not intend to conducta public offering of any securities in the United States.
By accepting this Document, the recipient agrees to be bound by the foregoing limitations.
The offer and distribution of this Document in certain jurisdictions may be restricted by law, and persons into whose possession any Document or other information referred to herein comesshould inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
If you have not received this Document directly from the Financial Advisor, your receipt is unauthorised. Please return this Document to the Financial Advisor immediately.
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Roadshow Team
Denys Dzenzers’kyyChief Executive Officer
Dmytro NikitinChief Financial Officer
Principal shareholder of Westa ISIC S.A.
Over 15 years of professional practice in the batteries business
MA in Business Economics from Dnipropetrovsk Construction and Architecture Institute
Degree in Economics Bonn, Germany
Oversees capital raising and relations with creditors
More than 10 years of industry experience
Graduate of Dnipropetrovsk Construction and Architecture Institute
Degree in Economics, Lakehead University, Canada
Viktor OstapenkoDeputy CEO
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Business Profile
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Company’s snapshot
A leading producer of SLI(1) batteries in the CIS and one of top 5 in Europe
16% market share in CIS countries
Concentrated on the aftermarket segment
Two modern battery workshops located in Dnipropetrovsk (commissioned in 2005 & 2010)
Own R&D institute
2010 battery sales totaled 4.3mn conventional units
Expected 2011 sales of 6.5mn conventional units
Key markets of expansion: Russia, EU (especially Poland), Middle East
(1) starter, lighting and ignition
Key financial indicators and ratios, USD mn
Source: Group data
2010 2009 2008
Revenues 154.3 83.0 144.6
EBITDA 55.3 16.6 34.1
EBITDA margin 36% 20% 24%
Net income 34.0 (23.3) (37.0)
Net margin 22% neg neg
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Key performance highlights
In the last 5 years, WESTA secured the top spot in the CIS market with about a 16% share
In 2009-10 production capacity grew 2.5x. In 2011-12 the Group plans to utilize the capacities in full and produce 7.6mn conventional batteries
2010 battery sales totaled 4.3mn conventional units, or 71% y/y growth
The significant growth of sales was not matched by growth in the number of employees (1.8k in 2010 vs. 1.7k in 2009)
2011 output is expected at 6.5mn conventional batteries, with the preliminary order book currently even larger
More than 70% of 2011 revenues are expected to come from export sales
Production of VRLA batteries set to start in 2011
92%84%
57%
86%
0.0
2.0
4.0
6.0
8.0
10.0
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011F
Capacity, mn conv. unitsCapacity utilization %
Capacity and utilization
Source: management information
Source: management information
Russia43%
Ukraine27%
Other CIS15%
Poland5%
Other EU9%
Asia and Africa
1%
2010 sales structure, units
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Group’s structure
WESTA rewards entrepreneurial leadership as a cornerstone of long-term value creation
Excellent relations with creditors and perfect credit history demonstrate WESTA’s adherence to:
• Transparency and compliance
• New shareholder structure with a Luxemburg holding company
• Reliability of financial information
• Audit of 2008-2010 IFRS accounts by Deloitte
• Operating efficiency
• Rule of Law
• Compliance with applicable law: Legal review by Baker & McKenzie
WESTA ISIC S.A. (Luxemburg)
WESTA DNEPR LLC (CYPRUS)
LLC Techkomplekt(Ukraine)
LLC Westa Industrial (Ukraine)
JSC WESTA-Dnepr(Ukraine)
LLC IES (Ukraine)
Westa Group Structure
Source: Group data
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SLI Batteries Market
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WESTA’s key markets
WESTA’s key markets are Russia, Ukraine, other CIS countries and Poland
WESTA sells 98% of batteries in the aftermarket segment which is :
7-10 times larger
less cyclical
much more profitable
than the OEM segment(1)
(1) OEM – Original Equipment Manufacturer segment
Aftermarket demand,
thousand of conventional units(1) WESTA's share
Ukraine 3,714 31%
Russia 16,061 12%
Other CIS 3,675 18%
Poland 5,184 4%
Other EU 58,520 1%
Asia and Africa n/a n/a(1) Conventional battery is measure that enables to unify all the range of products (which varyfrom capacity of 44Ah to 225 Ah) to the analogue of 60Ah battery as the most widespread product.As battery’s cost and price correlate perfect with its capacity (which is mainly defined by leadcontent), it is possible to unify all the range of batteries to a unified measure. For instance, a single180Ah battery is equivalent to three 60Ah (conventional) batteries
50%
16% 26%7% 1%
0%
20%
40%
60%
80%
100%
Ukraine Russia Other CIS Poland Other EU
Expected market shares in 2011
WESTA Other
Westa’s key markets in 2010
Source: management information
Source: management information
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Developed network of distributors
WESTA batteries are sold mainly through a network of exclusive distributors
On the biggest markets, i.e. Russia and Ukraine, WESTA has several dealers
The 15 largest distributors accounted for 71% of 2010 sales
To avoid competition between dealers, each dealer has dedicated brands
WESTA built long term relations with its clients
Prices can vary for each order, depending on lead prices
The only payment option for new distributors is prepayment
Long-term customers purchase batteries on deferred payment terms
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2011 order book is already collected
Battery sales 2011 order book structure
Source: management information
Russia39%
Ukraine28%
Other CIS14%
Poland6%
Other EU10%
Asia and Africa
3%
Source: management information
In 2010 the new production capacities were loaded by 30%
In 2010 the total capacity utilization was 57%
In 2011 the preliminary production plan implies 86% capacity usage
2.7 2.5
4.3
6.5
145
83
154
268
0
50
100
150
200
250
300
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2008 2009 2010 2011F
Mn conv. units
US$ mn (RHS)
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Expected growth of the global market
Global battery market volume reached 350mn conv. units in 2009
Europe and the CIS account for 30% of the global market
Projected average annual growth rate over the next 5 years is 7-8%
CIS car penetration is set to growth rapidly:
Car penetration remains 2-2.5x below EU countries
Car fleet expected to grow to 77.4mn by 2016(5.1% y/y)
Asia, Middle East and Africa:
Due to a harsher climate, car batteries are replaced every 1-1.5 years vs. 3-5 years in the EU
1%
2%2%
7%10%
11%
31%
36%
Westa
Fengfan
Fiamm
East Penn
GS Yuasa
Exide
Other
JCI
Global players (2010 production), conv. units
Source: management information
Battery demand, ‘000 conv. units
0
20 000
40 000
60 000
80 000
100 000
120 000
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Ukraine
Russia
CIS other
Europe
Source: management information
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WESTA’s competitive strengths
Advantage: Cost of production• Vertical integration: lead preparation, plastic body, acid
preparation, charging • Know-how (fast-charging, reliable, long-lasting)• Low energy & utilities costs• Low labor costs
Top quality and performance standards• WESTA batteries match or outperform quality and performance
standards set by global industry leaders • WESTA’s brands are the most demanded in the CIS
Proven competent management• Launched 8 starter battery factories (production and recycling)• All facilities built within 2 years and loaded at full design capacity
in only 2 more years
Strong R&D base• Over 50 patents re. lead-acid energy storage solutions• Dozens of integrated production efficiency solutions• Design and manufacturing of spare parts for production lines
Market control advantage:• 10% import duty on starter batteries in Ukraine, 15% in Russia • Imported batteries are not price competitive in CIS due to FX
effect and transportation costs
19.122.7
1.7
4.3
0
5
10
15
20
25
30
WESTA EXIDE
Production costs SG&A
23%
16%
Cost comparison (2009): WESTA vs. Exide, EUR/unit
Source: management information
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Lead: A major cost component of SLI batteries
Lead accounts for ca. 70% of the production cost of a lead-acid starter battery
WESTA purchases lead mainly from primary and secondary producers in Russia, Ukraine, Kazakhstan, and the LME depending on price
The recycling rate for batteries is 96.5% which stands behind a large secondary market for lead
In the coming years WESTA is looking into reducing production costs by constructing / acquiring a lead recuperation plant
Soft lead41%
Lead alloy25%
Other14%
COS alloy8%
Insulating case7%
Separator tape5%
Production cost breakdown, %
LME lead price, USD/t
Source: Bloomberg
Source: management information
0
500
1000
1500
2000
2500
3000
Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11
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Key Financials
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Financial Statements’ summary
Source: Group data, based on audited financial statements Source: Group data , based on audited financial statements
P&L statement summary, USD mn2010 2009 2008
Net revenue 154,3 83,0 144,6
y/y growth 86% -43% n/a
Gross profit 50,6 21,4 41,4
Gross margin 33% 26% 29%
EBITDA 55,3 16,6 34,1
EBITDA margin 36% 20% 24%
Profit before tax 22,2 -22,2 -44,8
Income tax 11,8 -1,1 7,9
Net income 34,0 -23,3 -37,0
Net margin 22% neg neg
Cash flow summary, USD mn
2010 2009 2008
Operating cash flow 53,2 17,9 40,8
Incl. working capital change -14,9 -14,8 -27,0
Investing cash flow -12,1 -35,8 -58,3
Financing cash flow 34,5 45,4 72,9
Total cash flow 7,4 -5,3 -12,5
2010 2009 2008
Non-current assets 194,2 171,9 136,7
Current assets 142,4 98,9 90,3
Inventories 19,0 14,1 17,8
Trade receivables 48,3 45,2 31,0
Cash and cash equivalents (1) 21,7 18,6 23,2
Total assets 336,6 270,9 227,1
Equity 1,2 -35,0 -0,2
Non-current liabilities 152,0 174,1 157,6
Interest-bearing debt 152,0 162,8 147,8
Other 0,0 11,3 9,7
Current liabilities 183,4 131,7 69,7
Trade payables 30,2 12,0 19,7
Interest-bearing debt 149,2 112,6 43,1
Other 4,0 7,0 6,9
Total equity & liabilities 336,6 270,9 227,1
Net debt (2) 279,4 270,8 167,7
(1) Cash, cash equivalents and other financial assets
(2) Net debt = (Interest bearing debt - cash, cash equivalents and other financial assets)
Balance sheet summary, USD mn
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Debt: Restructured for 5 years
Westa has accumulated USD 301mn in loans and borrowings as ofend-2010, which were used to finance the company’s capex projects(construction of new production facilities), as well as for workingcapital (launch of production and products distribution).
Westa recently restructured most of its debt to prolong repaymentsfor most debt facilities until 2015-2016.
While as of end-2010, USD 144mn of the company’s outstandingdebt was classified as short-term and current portion of long-termdebt, after the restructuring the company is scheduled to repay onlyUSD 15mn of outstanding debt this year.
Debt repayment schedule, USD mn
Source: management information
66%
19%
15%
VTB Bank
UkrExim Bank
Other
Loan structure by lenders, Dec. 31, 2010, USD mn
Purchase of
equipment
Construction and
infrustructure Working capital
WESTA-DNEPR JSC 66 000 18 984 5 363
WESTA-INDUSTRIAL LLC 52 272 20 567 15 380
Industrial Energy Systems LLC 3 772 6 628 0
Techkomplekt LLC 0 0 105 747
Total loans and borrowings 122 044 46 179 126 490
144
57
40 36
1115
5143
5061
70
0
20
40
60
80
100
120
140
160
2011 2012 2013 2014 2015 2016
Pre-restructuring
Post-restructuring
Source: management information
Use of loans and borrowings as at December 31, 2010, USD ‘000
Source: management information
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IPO: Reasons for the offering and use of proceeds
Initial investments in VRLA projects, USD mn
VRLA batteries sales outlook
Use of Proceeds
Development of production facilities – USD 29.4 mn
Remaing proceeds will be spent to repay the most expensive portion of debt
Cost of equipment 17,5
Cost of infrastructure and instalation works 8,7
Working capital requirement 3,2
Total 29,4
Estimated net proceeds from the offering of up to USD 67 mn
Net proceeds will be used to finance the Group’s production development and debt reduction program
Source: Group data
2012 2013 2014 2015
Sales, 000' conv. units 200 300 400 500
Sales, USD mn 14,3 21,6 28,9 36,3
Interest rates on borrowings
Source: Group data
Source: Group data
0%
5%
10%
15%
20%
25%
30%
0 50 100 150 200 250 300
Interest rate on debt
Debt outstanding, US$ mn
Average interest rate
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Valve-regulated lead-acid batteries (VRLA)
WESTA plans to enter VRLA market as part of its development strategy: “enter an established market with a cost-competitive product”
VRLA batteries are used in industrial and consumer segments as an uninterruptable power supply (UPS), they are also used as starter solutions for premium segment automobiles
WESTA plans to enter the market through a well tested distribution chain
CIS annual consumption of VRLA batteries is estimated circa 10 mn conventional units (or USD 1.4bn). European market volume is estimated at USD 4.3 bn.
VRLA energy solutions are new to CIS producers. With very few small local producers in the CIS, most of the demand is covered by imports, providing an entry opportunity for WESTA.
Protective import duties in Ukraine, Russia and other CIS markets form a significant price advantage for CIS players over importers.
WESTA plans CAPEX into the VRLA line of circa USD 30 mn, including first year working capital – USD 3.2 mn. The project will be financed from IPO proceeds and should pay off in 3 years and will serve a smooth transition into the next strategic development stage – industrial use batteries.
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Further development plans
Logical extension to Stage 1 and 2
Demand is not seasonal
Primary market – CIS
Stage 1 (2005-10)Starter Batteries
Stage 2 (2011-12)VRLA Batteries
Top-5 global producer
Top-3 in Europe
#1 in CIS
Lead-Acid Energy
Solutions
New Energy Solutions
Stage 3 (2012-13)Industrial Batteries
Build on the existing production platform and use tested distribution network
Capitalize on cost advantage and import substitution opportunities
Stage 4 Wind & Solar Solutions
Energy solutions for hybrid-electric and 100% electric vehicles
Already patented technologies in the field of Li-Ion batteries
Stage 5 Li-Ion Batteries
Evolution into complex green energy solutions:
• Wind gen-n + Storage
• Solar gen-n + Storage
• Wind + Solar + Storage
Already patented technologies, developed product designs, and effective prototypes
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0% 10% 20% 30% 40% 50% 60% 70%
Exide Technologies
Johnson Controls
Exide Industries
Enersys
Yuasa
WESTA
Projected sales growth 2010/2011, %
Strategy: Top-3 EU, Top-5 global producer
WESTA is already the largest SLI producer in the CIS and Europe by capacity
The Group holds a 1.2% share of the global market (350mn units in 2010)
Within the next 2-3 years WESTA is set to become the largest producer of starter batteries in Europe and the CIS, and to secure its place among the world's top-5 producers
WESTA is able to expand further and increase annual capacity to 10mn units at existing facilities and infrastructure
Production capacities as of 2010, mn conventional units
Source: management information
0
2000
4000
6000
8000
Westa (Ukraine)
Varta (Germany)
Fiam (Italy)
Russian Batteries (Russia)
Ista (Ukraine)
Source: management information
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IPO Details
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Offering structure
ISSUE PRICE Determined through book-building but not higher than PLN 17.30
OFFERING STRUCTURE Offer Shares – Up to 11,033,333 newly issued shares
FREE FLOAT Up to 25%
Warsaw Stock Exchange
Prospectus approved by the CSSF and the PFSA
Public offering in Poland, including retail investors
Private placement to selected investors in certain jurisdictions outside Poland and
United States, where such an offering may be lawfully conducted
LOCK-UP Company and the Principal Shareholder - 12 months from the Settlement Date
BG Capital JSC and BG Trading Limited - Lead Managers
Dom Maklerski BZ WBK S.A. - Co-Lead Manager and Offering Agent
LISTING
DISTRIBUTION
SYNDICATE STRUCTURE
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Key IPO dates
Publication of Prospectus on or about May 17th
Institutional Book-building May 25th - May 27th
Subscriptions by Retail Investors May 25th - May 27th
Pricing and Initial Allotment Date on or about May 27th
Subscriptions by Institutional Investors May 30th - June 2nd
Allotment Date on or about June 6th
Settlement Date on or about June 7th
Delivery Date on or about June 8th
Listing Date on or about June 15th
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Contacts
Nick PiazzaBG Capital, CEOnpiazza@bgcap.ge+38 044 200 84 01
Jan RekowskiDom Maklerski BZ WBK S.A.jan.rekowski@bzwbk.pl+48 604 57 43 37