CIECH - Financial results for 3Q2016

Financial results for 1-3Q2016

Warsaw, 14 November 2016

2

1-3Q2016 – executive summaryWyniki finansowe za 1-3Q2016

PLN 647 m Adj. EBITDA

Sale of additional volumes of soda ash under the Soda +200 investment

Completion of the investment in the increase of production capacity of glassy sodium silicate at CIECH Vitrosilicon

Double of revenues from export sales of crop protection products

Introduction of the shares of the Company at the Frankfurt Stock Exchange market

25.4%EBITDA (Adj.) margin

+11.5%Adj. EBITDA growth

Adj. EBITDA - Normalised EBITDA for the 9-month period ended 30 September 2016 is calculated as EBITDA adjusted for untypical one-off events: fair value measurement of investment property: PLN 15.1 million; costs of unused production capacity: PLN -4.8 million; change in provisions: PLN 3.3 million; gain on disposal of non-financial non-current assets: PLN 2.3 million; other: PLN -0.6 million. Yoy growth

1. Major events in 3Q2016

2. Financial results for 1-3Q2016

3. Outlook for next quarters

4

The most important events for 3Q2016Major events

Implementation of a significant contract with

Solvay for supply of glassy sodium silicate

Beginning of negotiation of contracts for soda supply in 2017

Signature of a long-term agreement with CET for technological steam supply to CSR

Over 100% growth of export revenues of crop protection

products (yoy)

6

Another quarter of high EBITDA (Adj.)

[PLN million] 1-3Q2016 1-3Q2015 yoy 3Q2016 3Q2015 Yoy

Revenue 2 547.5 2 458.8 3.6% 853.9 800.7 6.6%

Gross profit on sales 771.9 669.5 15.3% 260.9 233.0 12.0%

Gross profit on sales margin 30.3% 27.2% 3.1 p.p. 30.6% 29.1% 1.5 p.p.

EBIT 498.2 380.4 31.0% 153.8 139.6 10.2%

EBIT margin 19.6% 15.5% 4.1 p.p. 18.0% 17.4% 0.6 p.p.

EBITDA 662.1 542.6 22,0% 208.4 191.3 8.9%

EBITDA margin 26.0% 22.1% 3.9 p.p. 24.4% 23.9% 0.5 p.p.

Adjusted EBITDA 646.9 580.0 11.5% 212.8 199.4 6.7%

Adjusted EBITDA margin 25.4% 23.6% 1.8 p.p. 24.9% 24.9% 0.0 p.p.

Net result 419.9 258.1 62.7% 155.6 119.3 30.4%

Net margin 16.5% 10.5% 6.0 p.p. 18.2% 14.9% 3.3 p.p.


Adj. EBITDA - Normalised EBITDA for the 9-month period ended 30 September 2016 is calculated as EBITDA adjusted for untypical one-off events: fair value measurement of investment property: PLN 15.1 million; costs of unused production capacity: PLN -4.8 million; change in provisions: PLN 3.3 million; gain on disposal of non-financial non-current assets: PLN 2.3 million; other: PLN -0.6 million.

7

Results vs. consesnsusFinancial results for 1-3Q2016

[PLN million] 3Q2016 Consesnsus Q3 2016 Range of forecasts Q3

Revenues 853.9 837.9 801.3 – 909.5

EBIT 153.8 146.6 142.8 – 154.6

EBIT margin 18.0% 17.5% 16.3% - 18.6%

EBITDA 208.4 202.5 198.0 – 210.7

EBITDA margin 24.4% 24.2% 22.6% - 25.4%

Adjusted EBITDA 212.8 202.5 198.0 – 210.7

Adjusted EBITDA margin 24.9% 24.2% 22.6% - 25.4%

Net result 155.6 112.4 101.7 – 125.3

Net margin 18.2% 13.5% 11.2% - 15.1%

Consesnsus PAP from 11/08/2016 based on 8 analysts’ foreceasts

59% 62% 61%71% 66% 66% 72% 71% 71% 71% 71%

27% 27%24%

19% 27% 25% 19% 22% 22%23%

20%

13% 10%12% 9%

5% 6%6%

5% 5%4%

7%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

8

Revenue

2014

845 814 799 786 817 841 801 814 826


2015 2016

867 854

Organic segment Glass and silicates segment Transport segment OtherSoda segment

9

Adj. EBITDA

77%

82% 86%

101%

82% 84%93%

92%

89%91% 94%22%

15%11%

17%9%

5%

15%

9%

8%4%

7%7%

9%

4%

6%

5%

3%

3%

4%

6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3


119 154 143 95 193 188 199 168 206 228

2014 2015 2016

213

Organic segment Glass and silicates segment Transport segment OtherSoda segment

10

Soda segmentFinancial results for 1-3Q2016

Q1 Q2 Q3 Q4In plus:

Higher volumes of soda sales

Maintenance of attractive selling prices of soda from Poland and Germany (in connection with the market situation and effective sales negotiations)

Favourable currency situation – weakening of PLN and RON

Change in the revenues structure in the direction of morespecialized products

Growth in dry salt sales volume, maintenance of sales volume prices despite strong competition

Lower prices of furnace fuel (coke) and power sources (coal, gas) yoy

Improvement of effectiveness of the soda production process

Favourable market situation – balancing of the European soda ash market with a trend for growth in demand

In minus:

Lower sales volume from Romania, mainly in consequence of stopping the installation in August and growth in technological steam prices

Poor conditions in the Chinese soda ash market resulting in the maintenance of low prices offered by Chinese soda suppliers in overseas markets in which the CIECH Group operates (during the first six months of the year)

Share in total revenues (main products)

Dense soda ash 42.2%

Light soda ash 13.0%

Salt 5.2%

Sodium bicarbonate 4.8%

Revenues [mPLN] Adj. EBITDA [mPLN]

536 590

557 614

574606

1 6671 810

2015 2016

158 183

158208

185

200501

591

2015 2016

+8.6%+17.8%

224 185

209202

154174

587 561

2015 2016

3319

18

17

10

9

61

45

2015 2016

11

Organic segment

In plus:

Crop protection products – higher sales in 3Q2016, mainly thanks to glyphosates sales in connection with favourableweather conditions; growth in export sales

Materials – growth in margin thanks to intensification of manufacture of products for specialized applications; optimization of the portfolio in the direction of higher-margin products; development of saturated polyester resin sales

Foams – growth in the sales volume as a result of an increase in demand of upholstery furniture producers

In minus:

AGRO products – lower sales of crop protection products y/y as a result of a drop in the domestic market (-5.4% y/y); shift in accounting of EU subsidies for farmers; pre-seasonal sales implemented in 4Q2015; drop in agricultural production profitability

Materials – lower revenues from unsaturated polyester resins sales (due to the lack of EU subsidies); aggressive price competition from other European and domestic producers

Foams – drop in PUR blocks prices


Resins 9.0%

PUR foams 6.9%

Plant protection products 5.8%


Q1 Q2 Q3 Q4

-4.4%

-25.6%


7 6

108

1113

29 27

2015 2016

37 38

50 36

5163

137 136

2015 2016

12

Silicates and glass segment

In plus:

Higher sales volume of sodium silicates from a new water glass production furnace

Improvement of results of sodium silicate sales from Romania as a result of the implemented modernization of the production installation implemented in 2015

Stabilization in the market of lanterns for vigil lights at the level of 2015.

Stable sales of potassium silicates despite a standstill in the segment of oil and gas exploration

Favourable influence of weakening of PLN towards EUR

In minus:

Standstill connected with the switching from the old to a new sodium silicate production furnace and start-up of the installation

Aggressive activities of the competitors in the sodium silicate market due to a significant underuse of the production capacity

Competitors’ readiness to continue to reduce prices

Growth in competition in the segment of glass packaging and the resulting reduction of sales volume


Glass blocks and packaging 2.6%

Sodium silicate in lumps 1.6%

Sodium water glass 1.0%


Q1 Q2 Q3 Q4

-0.8%-5.5%


29 32

34 31

31 25

9388

2015 2016

4,1 4,1

4,12,8

3,44,8

11,5 11,7

2015 2016

13

Transport segment

In plus:

Growth in revenues of CIECH Cargo as a result of an increased sales volume of soda from CSP

In minus:

Suspension of infrastructural investments and lower sales of services outside the Group (transport of aggregates)

Decreased purchases of coal dust by CIECH Soda Polska

Discontinuation of CIECH Transclean activity at the end of 2Q2016


Q1 Q2 Q3 Q4

-5.2%+1.4%


14

Debt

1 2611 479

1 213 1 183

1 361 1 332

3,9

3,5

2,72,3

1,81,6

2011 2012 2013 2014 2015 3Q2016

Net debt [mPLN] Net debt / Adj. EBITDA

[thousand PLN] At the end of 3Q2016 At the end of 2015

Debt ratio 61.3% 65.7%

Long-term debt ratio 44.4% 46.1%

Equity capital debt ratio 158.2% 191.5%

Gross financial liabilities 1 591 529 1 564 247

Net financial liabilities 1 332 417 1 361 312

The Group systematically reduces its debt. At the end of 1H16, the net debt index / EBITDA (Adj.) amounted to 1.6

Thanks to the refinancing of the debt, the Group’s costs of debt servicing were much lower


Methodology of calculated ratios consistent with the financial statement

15

Cash flow

[PLN million] 1-3Q2016 1-3Q2015

EBITDA 662 543

Working capital -6 -106

Interest paid -27 -62

Taxes paid -36 4

Others -44 -7

Cash flow from operating activities 549 371

CAPEX -381 -322

Other 43 8

Cash flow from investment activities -338 -313

Free cash flow 211 58

Debt financing -5 18

Dividend -150 0

Other 0 -40

Cash flow from financial activities -155 -22

Total net flow 57 36

Closing balance of cash 259 86


Operating activity

Change in the working capital:

• Change in the trade working capital

• Change in the other short-term items

Others include mainly an adjustment for the change in valuation of investment real estate and caverns

Investment activity

Higher expenses connected with the implemented investment programme

Financial activity

Payments under financial lease agreements

Payment of dividends

17

Challenges and way of further growth in soda segmentOutlook for next quarters

Negotiation of contracts for soda supply in 2017

Prices of energy sources, in particular gas

Influence of new Turkish capacities for European soda market

Further growth of salt business by development

of specialized products

Deveplopment of sodium bicarbonatefor specialistic use

18

Intensive expansion of organic segmentOutlook for next quarters

Expansion of productportfolio of foams

Expansion of application of our currentproducts driven by R&D

Strenghtening brandrecognition of CIECH

and Chwastox in Poland

Product development program18 new products in 2018-2021

Active ingredients swap deals with mid-sizedplayers in EU and further portfolio expansion

Another registration of active ingredientsin UE

Potential M&A projects

19

Other projectsOutlook for next quarters

Continuation of construction of the installation for

treatment of nitrogen and sulphur oxide fumes

Higher innovation thanks to R&D activities

Further expansion on global markets

Using newapplications of

silicates

This document has been prepared solely for informational purposes. It includes only summary information, is not exhaustive, and may not be used as a sole basis for any assessment or analysis. CIECH S.A. makes no guarantees (explicit or implicit) regarding information presented herein and such information, including forecasts, estimates and opinions, should not be unduly relied upon. CIECH S.A. does not accept any responsibility for possible mistakes, omissions or irregularities found herein. The document is based on sources of information which CIECH S.A. deems to be reliable and accurate, however, it does not guarantee them to be exhaustive nor to fully reflect the actual situation. This document does not constitute an advertisement or a public offer of securities. It may include forward-looking statements that involve investment risks or uncertainties and may significantly differ from actual results. CIECH S.A does not accept any responsibility for consequences of decisions made based on this document. The responsibility lies exclusively with the party using the document. This document is protected by the Copyright and Related Rights Act. Copying, publishing or distributing it requires prior written consent of CIECH S.A.

CONTACT FOR INVESTORS:Joanna SiedlaczekInvestor Relations Expert+48 669 600 567, [email protected]

Modern and diversified chemical group on a stable progress path

CIECH - Financial results for 3Q2016

Investor Relations

Transcript of CIECH - Financial results for 3Q2016