Strategy Presentation 30 NOV 2010

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November 2010

RECTICELStrategy Update

KBC – Small Cap Seminar30 November 2010

Olivier ChapelleChief Executive Officer

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November 2010

AgendaAgenda

1. Strategic Review Process

2. Strategic Observations

3. Polyurethane Market

4. Individual Business Line Strategies

5. Recticel Portfolio & Strategy

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November 2010

AgendaAgenda






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November 2010

Phase I – March May 2010

Insulation, Bedding, Flexible Foams, Automotive Interiors and Proseat teams have developed their respective strategic plans

Iterations and discussions with the Group, no Strategy consultant used

Management Committee meeting of 7/8 June dedicated to reviewing the Business Lines plans

Phase II – June 2010

The Group has assessed its overall situation, market, portfolio of businesses and growth opportunities, and has generated this strategy proposal

The recommendation is supported by the Management Committee

Strategic ProcessStrategic Process

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November 2010

AgendaAgenda






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November 2010

Through this exercise, we will try to provide answers to the following observations :

Recticel remains with a too high debt level, despite significant debt reduction over the last three years,

Recticel has insufficient financial means to properly invest in and develop its four business segments,

Recticel is currently concentrated in Europe (>95 % of sales),

Recticel is highly dependant on Insulation profits in Belgium, and exposed to the structural long term risks of the Automotive Industry.

Recticel Today : strategic observationsRecticel Today : strategic observations

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November 2010

AgendaAgenda






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November 2010

The global PU application market represented about €38Bn globally in 2009 :

About 11 million tons of raw materials were converted into PU applications worldwide

Pacific35%

CAGR 7%

NAFTA21%

CAGR 4%

Europe38%

CAGR 5%

Latin America6%

CAGR 6%

% in volumes : sources BASF & Dow

Polyurethane market : SizePolyurethane market : Size

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November 2010

Polyurethane : Leading Markets & ApplicationsPolyurethane : Leading Markets & Applications

Furniture & Bedding mattresses sofa & chair cushions, armrests office furniture

Building & Construction rigid foam insulation panels sprayed polyurethane rigid foam carpet backing and cushioning

Transportation seating foam, armrests, headrests fabrics back-foaming interiors skins : instrument & door panels steering wheels, roof liners energy absorbing foam acoustic foam (NVH) exterior panels interior & exterior coatings windows encapsulation

Coatings, Adhesives, Elastomers, Sealants glues, paints and protective coatings pipe coatings sports tracks and turf filter encapsulation sealants for windows shoe soles gloves

Appliances insulation

Footwear soles

Packaging

Textile

sources : BASF, Dow, Bayer, Huntsman

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November 2010

Construction22%

Transportation14%

Appliances/Electrical9%

Footwear7%

Textile4%

Packaging3%

Others11%

Furniture/Bedding30%

% in volumes : sources BASF & Dow

Footwear and Textile segments are mainly located in Asia

All other segments are represented in all four regions

Polyurethane : Leading Markets & ApplicationsPolyurethane : Leading Markets & Applications

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November 2010

Polyurethane Market : Global ShiftPolyurethane Market : Global Shift

Source: t, 2010

Asia

Europe

Americas

500

750

1000

1250

1500

1750

2000

2250

2500

2750

3000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Glo

ba

l MD

I De

ma

nd

('0

00

Te

s)

10

100

1,000

10,000

100 1,000 10,000 100,000

GDP / Capita (US$)

MD

I / C

apita

(g)

USEU

China

India

MDI Demand and Economic Growth 2015

10

100

1,000

10,000

100 1,000 10,000 100,000

GDP / Capita (US$)

MD

I / C

apita

(g)

USEU

China

India

MDI Demand and Economic Growth 2015

Global MDI (70% of isocyanates volumes)

2010 YTD5 volumes already higher than

pre-crisis 2008 YTD5.... !!(Source : Huntsman)

Investment Priorities in raw material capacities :

- #1 is Asia/China

- Selective in EU

- No more investments in USA (Sources : Huntsman, BASF, DOW,

Bayer)

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November 2010

Some worldwide MEGATRENDS have emerged, which are irreversible :

Environment protection, and Energy preservation

Building climate management : 22% of global energy consumption

From a “carbon footprint” standpoint : 1 oil barrel used to make PU insulation board will return 156 barrel over lifetime

Invest in insulation is today 6 times more efficient than in photovoltaics

Stronger & Lighter : everything that moves will have to be lighter

Global Megatrends : Positive PU contributionsGlobal Megatrends : Positive PU contributions

80

100

120

140

160

180

200

2002 2003 2004 2005 2006 2007 2008 2009 2010

General construction Insulation PU Insulation

Source : McKinsey & Co

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November 2010

Some worldwide MEGATRENDS have emerged, which are irreversible :

Demographics and Ageing

Nutrition of a growing and ageing population, eating more and more proteins (1kg of meat requires 100kg of vegetal + 1.5m³ of water…)

Water Supply in quality and quantity is becoming a strategic goal

Emergence of new economical super-powers, such as China, and to a smaller extent the other BRIC members and Middle-East

Luxury & Well Being for the fast developing middle/upper classes

Strong & Light for anything pertaining to Transportation means

Global Megatrends : Positive PU contributionsGlobal Megatrends : Positive PU contributions

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November 2010

The PU application market is very fragmented :

More than 100 foamers (Flexible Foam, Insulation, Seating) in Europe

Recticel (€1.3Bn), Inoac (€1.4Bn), Carpenter (€1Bn), Foamex (€0.5Bn), Vita (€0.6Bn), Foamline (€0.4Bn), Organica (€0.3Bn) together represent 13% of worldwide PU foaming market

By comparison, Bayer, BASF and Dow represent 50% of worldwide PU raw material market, resulting in tremendous power to control raw material pricing

Polyurethane Market : CompetitionPolyurethane Market : Competition

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November 2010

The Polyurethane applications market is attractive :

It is a large, regional (seldom global) market of €38 Bn

Asia now the largest PU market

CAGR of 5% globally, faster than GDP by 2% thanks to material substitution

Versatile, high performance material, enabling proper positioning

Average market profitability (Ebit) higher than 5%

Broad range of applications & segments, offering diversification opportunities and protection against cyclicality

Several applications are linked to worldwide Megatrends

Market : ConclusionsMarket : Conclusions

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November 2010

AgendaAgenda






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November 2010

STABILIZE & HARVEST through defensive set of measures

Pursue product/process development, maximizing the “appeal” of our technology & business

Maximize new program acquisitions, with adequate profitability (min. 30% contribution), re-utilizing existing idle assets

Follow our customers in China, on a 100% Recticel basis

Permanently adapt industrial footprint and capacity to customer needs

Maintenance or utilities investments only

Interiors : Strategic ScenarioInteriors : Strategic Scenario

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November 2010

Optimize & Redeploy through new automotive business propositions

Given the decline in value of the Foam Pads for seating applications, and our significant market share, stabilize sales and optimize profitability

Pursue R&D, and generate profitable sales growth with Trim Parts (headrests, armrests), EPP solutions, headliners, loadfloors…

Carefully evaluate customer request to be served in greater EU

Minimize investment needs & capital intensive applications

Permanently adapt industrial footprint and capacity to customer needs

Proseat : Strategic ScenarioProseat : Strategic Scenario

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November 2010

GROW with a combination of organic and external initiatives

Internal sales growth of 5% per year will be generated by :

Deployment of foam & product innovation throughout our brand portfolio

Significant supporting marketing budget

Focus on Nordic Countries, Switzerland

France will not be an area of focus in the coming years

Acquisition targets will be evaluated, with priority in Nordic Countries, UK and Eastern Europe

A project in China, jointly with Flexible Foam, will be set up and ready for decision by March 2011

Bedding : Strategic ScenarioBedding : Strategic Scenario

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November 2010

Rationalize & Upgrade with selective growth projects

Rationalize & Upgrade through

Plant shutdowns & Restructurings

Divestment from non-core small activities

Upgrading Investment plan

Growth initiatives

Agro-Foam segment

Innovative corporate projects launches

Expansion in China, jointly with Bedding

Potential expansion in Turkey

Flexible Foam : Strategic ScenarioFlexible Foam : Strategic Scenario

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November 2010

GROWTH as a combination of organic & external initiatives

Focus on Europe and Building

Internal sales growth of 8% per year will be generated by :

Continued development in Belgium

Commercial focus in France (Etics) and UK

Fix our Netherlands commercial organisation

Understand Germany, and prepare for Central Europe

Acquisition targets will be evaluated

Intensify R&D efforts to prepare the next Generation PUR/PIR products

Insulation : Strategic ScenarioInsulation : Strategic Scenario

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November 2010

AgendaAgenda






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November 2010

SWOT AnalysisSWOT Analysis

Strengths competitive raw materials prices low cyclicality (several end-use mkt) strong brands competent R&D integration foaming/bedding good coverage of Europe

Weaknesses highly leveraged financial structure over exposure to Automotive in EU relative lack of talents underperforming activities/assets “European only” automotive: lack of bargaining power

Opportunities development in BRIC’s substitution of competitive material in

applications linked to Megatrends regulatory environment in EU in

favour of insulation

Threats raw material supplier concentration product stewardship

fire resistance recyclability

fragmented competition automotive: insourcing by OEM’s & T1’s

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November 2010

9-Box Grid : positioning of the 5 Recticel segments9-Box Grid : positioning of the 5 Recticel segments

Competit Insulationiv Beddingit Flex Foamy

Proseat

Interiors

M a r k e t A t t r a c t i v i t y

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November 2010

Recticel : StrategyRecticel : Strategy

Keep Recticel focused on PU applications, focus on higher growth segments on a broader international basis :

Grow Insulation Solutions

Grow Bedding Systems

Rationalise and modernise Flexible foams, and seize selective growth area

Stabilize Automotive, make it a consistent contributor to Recticel success

Acquisition in Insulation

Acquisition in Bedding

Invest in China for Flex Foam, Bedding and maybe Insulation

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November 2010

Q & A

Thank you for your attention

Strategy Presentation 30 NOV 2010

Investor Relations

Transcript of Strategy Presentation 30 NOV 2010