The largest CIS producer of starter batteries · starter batteries IPO Presentation ... Roadshow...

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


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



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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


Russia39%

Ukraine28%

Other CIS14%

Poland6%

Other EU10%

Asia and Africa

3%


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

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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


Battery demand, ‘000 conv. units

0

20 000

40 000

60 000

80 000

100 000

120 000

20

05

20

06

20

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20

08

20

09

20

10

20

11

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13

20

14

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15

Ukraine

Russia

CIS other

Europe


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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


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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


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


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


Use of loans and borrowings as at December 31, 2010, USD ‘000


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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


0

2000

4000

6000

8000

Westa (Ukraine)

Varta (Germany)

Fiam (Italy)

Russian Batteries (Russia)

Ista (Ukraine)


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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, [email protected]+38 044 200 84 01

Jan RekowskiDom Maklerski BZ WBK [email protected]+48 604 57 43 37

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