Capital Markets Day 2013 Financial Strategy Dr. Wolfgang Colberg, - PowerPoint PPT Presentation

Capital Markets Day 2013 Financial Strategy Dr. Wolfgang Colberg, CFO Ute Wolf, Group Finance Director Essen, 3 September, 2013

Consistent value creation at Evonik Strategic focus on Specialty Chemicals ✔ Strategic focus ✔ Sale of energy ✔ Divestment of ✔ Divestment of ✔ Exit from business on Specialty Carbon Black Colorants Real Estate Chemicals majority stake business business business ✔ Selected bolt- initiated executed Successful on acquisitions Listing Operational Excellence and Efficiency focus ✔ Short-term ✔ Company ✔ Efficiency ✔ Efficiency ✔ Short-term cost cost savings management program program savings of „On Track” „On Track 2.0“ € 40 m in H2 program system on EVA „ TaskForce “ basis completed initiated 2013 ✔ Efficiency introduced ahead of schedule program „On Track“ initiated 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 2

Strong track record of value creation Adj. EBITDA ( € m) and margin 1 (%) Adj. net income ( € m) 13.6% 16.1% 18.3% 19.4% 19.0% CAGR 44% CAGR 1 14% 2,768 1,256 2,589 1,155 2,365 974 1,648 1,607 2,410 1,056 360 271 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 EVA 2 ( € m) and ROCE (%) Net Financial Debt ( € m) 7.7% 7.7% 15.0% 18.7% 17.2% - € 2.2 bn 923 3,349 763 2,367 492 1,677 1,163 843 -323 -315 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Note: All figures without Steag (excluded from 2008A figures; not included in restated 2009A and 2010A). Steag result included at equity from March 2011 onwards. 1 Excluding Carbon Black 2 EVA= adj. EBIT- (average capital employed * WACC); WACC 10.5% Carbon Black Real Estate & IAS 19 adjustments 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 3

H1 2013 affected by challenging market environment and lower prices • Sales organically slightly below Sales (in € m) Adj. EBITDA (in € m) / margin prior year (-3%) Organic 18.9% 16.5% -3% • >60% of portfolio with growing growth -16% -5% volumes, but lower prices mainly in 1,289 6,835 1,079 Methionine and Butadiene 6,526 • Some important businesses impacted by temporary effects, e.g.: H1 2012 H1 2013 H1 2012 H1 2013  Methionine business impacted Adj. EPS (in € ) EVA (in € m) by bird flu in Asia  Lower volumes in Performance Intermediates due to planned -16% -47% maintenance shutdown 506 1.21 1.02 268 H1 2012 H1 2013 H1 2012 H1 2013 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 4

Outlook 2013 adjusted to reflect economic environment Outlook for Evonik in 2013 (continuing operations 1 ) • Global economic conditions to remain challenging • Growth expectations revised downwards, especially for EU and China Economic • H1 weaker than expected, global economic improvement predicted for H2 less environment pronounced than assumed at start of the year • Development of relevant markets expected to continue at weaker level seen in the first half of the year (previous expectation: economic upturn in H2) • Sales: ~ € 13 bn (2012: € 13.4 bn), slight yoy improvement in volumes in H2 2013; selling prices to stabilize at present level (previous: higher sales) Outlook • Adj. EBITDA: ~ € 2.0 bn (2012: € 2.4 bn) (previous: stable operating earnings) 1 Outlook based on continuing operations, i.e. excl. real estate activities in 2012 and 2013 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 5

Evonik: Positioned for strong financial performance ~ € 18 bn Sales 1 Ambitious long-term financial targets by FY 2018 > € 3 bn Adj. EBITDA (excl. M&A) Strengthened focus on ~ € 500 m On Track 2.0 savings 2 efficiency gains and cost savings > € 700 m incremental Investment program targeting 3 high-growth end markets Adj. EBITDA by FY 2018 Strong balance sheet Solid investment grade rating 4 and strict financial policy 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 6

Growth investments and efficiency gains 1 drive adj. EBITDA to > € 3 bn by 2018 Underlying Growth > € 3 bn • Focus on pricing power (value-based pricing, differentiation etc.) • Product innovation driven by close > € 0.7 bn customer relationships • Improved product and customer mix • Operating leverage (increased capacity utilization) ~ € 2.0 bn CAGR >8% (Net) Efficiency Gains • Execution of On Track 2.0 and realization of additional cost savings Partly compensated by: • Factor cost increases (energy, salaries, regulation etc.) Underlying (Net) Growth Adj. EBITDA Adj. EBITDA • Investments into growth markets as Growth Efficiency Gains Investments 2013 2018 basis for future growth (excl. M&A) 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 7

Efficiency and cost saving programs 2 well advanced On Track 2.0: Expected savings (in € m) Other • Continued successful execution of Business Services On Track 2.0 for continuous efficiency ~500 Site Services improvement Procurement • ~ € 140 m achieved in 2012 Operational Excellence • In H1 2013 another ~50 m realized • Additionally: cost management project to realize immediate and Group-wide short- term savings of ~ € 40 m in H2 2013 ~50 ~140 realized in H1 2013 2012A 2013E 2014E 2015E 2016E Total 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 8

Investment program with significant 3 contribution to financial targets 2018 Components of € 6 bn capex program > € 700 m incremental ~ € 4 bn adj. EBITDA by FY 2018 “Basis investments” ~ € 6 bn • Total of ~ € 2 bn, i.e. ~ € 400 m p.a. • Maintenance capex: ~ € 0.5 bn maintenance and regulatory compliance investments • Small investments: ~ € 1.5 bn mainly Operational Excellence and efficiency improvement measures Total capex Growth Small Maintenance 2012-2016 investments 1 investments 2 capex 3 1 Growth investments defined as investments above € 2.5 m into growth projects 2 Small investments defined as investments below € 2.5 m focused on growth or efficiency improvements 3 Maintenance capex includes maintenance and regulatory compliance investments 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 9

Investment program 3 Pipeline of attractive growth projects Selected approved projects Start of construction & exp. start-up Capex Segment Product area Location 2012 2013 2014 2015 Consumer, Feed amino acids: H2 > € 500 m Singapore Health & 2014 DL-methionine Nutrition Consumer, 2013 China & Personal & home > € 100 m Health & care ingredients Brazil 2014 Nutrition Consumer, 2014 Brazil & Feed amino acids: > € 100 m Health & L-lysine Russia 2015 Nutrition Resource ~ € 100 m Silica Globally 2015 Efficiency Isophorone and Resource > € 100 m China Q1 2014 Efficiency isophorone diamine Germany & Specialty > € 250 m C 4 chain 2015 Materials Belgium Specialty End 2013 > € 130 m H 2 O 2 for HPPO China or 2014 Materials 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 10

Disciplined and flexible 3 investment process Status of growth investments Disciplined and flexible investment process (as of June 30th, 2013) • Structured planning and approval process: • Strategic assessment considering competitive Spent Approved Planned position, market attractiveness, regional focus ~ € 4 bn ~25% ~25% ~50% and risk • Economic assessment using DCF-based investment evaluation • Strict internal hurdle rates and “competition” for Size of growth investment projects scarce resources • Capex allocation based on “strategic roles” of ∑: ~ € 4 bn € 2.5-10 m businesses (growth, financing, restructuring) ~10% € 10-25 m • Flexibility in execution, adapting to market situation: ~20% Review & potential re-scheduling of not yet approved > € 100 m ~50% projects with regards to timing of market entry • Balanced range of project sizes and types ~20% (e.g. debottlenecking, expansion, greenfield projects) € 25-100 m 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 11

Capex peak in 2014/15; 3 return to sustainable level thereafter Capex Planning and Adjusted D&A (in € m) 1 • Investment program Capex resulting in capex peak in Adjusted D&A 2014/15, leveling off ~1.500 Max. capex level thereafter • Flexibility in timing and Flexibility ~1.200 execution, e.g.: 1.018 Capex 2013 reduced to € 1.2 bn (from € 1.5 bn) • From 2017: ~600 591 Return to sustainable capex level, thereof ~ € 450 m basis investments 2 2012 1 2013 2014 2015 2016 Sustainable level 1 excl. Real Estate 2 Basis investments defined as small investments (below € 2.5 m focused on growth or efficiency improvements) and maintenance capex (maintenance and regulatory compliance investments) 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 12

Strict financial policy 4 Financial Policy Strive to Intend to keep Envisage maintain Total leverage robust solid ratio funding level investment below 2.5x 1 of DBO 2 grade rating 1 Total leverage defined as (Net Financial Debt + Funded Status) / Adjusted EBITDA 2 Defined benefit obligations 3 September, 2013 | Evonik Capital Markets Day 2013 | Financial Strategy Page 13