Kordsa Investor Presentation
Jun, 2020
Kordsa Investor Presentation Jun, 2020 Disclaimer The information - - PowerPoint PPT Presentation
Kordsa Investor Presentation Jun, 2020 Disclaimer The information and opinions contained in this The Company does not undertake any obligation, and document have been compiled by KORDSA Teknik disclaims any duty to update or revise any forward
Kordsa Investor Presentation
Jun, 2020
Disclaimer
External
The information and opinions contained in this document have been compiled by KORDSA Teknik Tekstil Anonim Şirketi (the “Company”) from sources believed to be reliable and in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness
purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or
statements by using such words as "may", "will", "expect", "believe", "plan" and
similar terminology that reflect the Company management’s current views, expectations, assumptions and forecasts with respect to certain future events. As the actual performance of the companies may be affected by risks and uncertainties, all opinions, information and estimates contained in this document constitute the Company’s current judgment and are subject to change, update, amend, supplement or otherwise alter without notice. Although it is believed that the information and analysis are correct and expectations reflected in this document are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially. The Company does not undertake any obligation, and disclaims any duty to update or revise any forward looking statements, whether as a result of new information or future events. Neither this document nor the information contained within can construe any investment advice, invitation or an offer to buy or sell the Company and/or Its group companies’ shares. The Company cannot guarantee that the securities described in this document constitute a suitable investment for all investors and nothing shall be taken as an inducement to any person to invest in or otherwise deal with any shares
information contained in this document is published for the assistance of recipients, but is not to be relied upon as authoritative or taken in substitution for the exercise
information in this document to, or cause it to be used by, any person or entity in a place where its distribution
employees shall have any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.
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Global Footprint
4 continents 12 facilities ~4,500 employees 2 R&D Centers 807 patent applications 194 patents
External
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Global Footprint
Confidential
Kordsa market position
producer in the US
SEC producer in LATAM
4 Regional footprint versus key competitors
Milestones
External
5
1973 - 2005 2006 2008 2010 2014 2015 2016 2017-2018 2019
Merging Acqusitions Global Technology Centre in Izmit The Reinforcer Start up of Indonesia expansion Best R&D Center Export Champion Brezilya GPTW 2 years in a row Second R&D Center @Composite Technology Center of Excellence AS9100 RevD Certified Kordsa Growth in Asia; Indonesia, Thailand, China Member of the TURQUALITY Global Brand Programme Commercialisation
Innovation Strategy Champion Sustainability Report received 2 Gold Awards from LACP Composite Technology Center of Excellence Fortune Global 100 100 Fastest- Growing Companies in Indonesia in 2016-2017 Growth in Composite Sector, Finalized the Acquisition
& AHT Finalized the acquisition of Axiom Launching CoKoon
Strategy House
External
6
External
Description End markets Selected end-market participants
Tire cord fabrics (“TCF”) Next generation fabrics Composite
tire reinforcement fibers and fabrics for radial and bias tires
by capacity @ NY66 TCF
by capacity @PET TCF
materials for green tires
Monofilaments
Resorcinol Formaldehyde Free Dipping
cords with superior properties
hybrid fabrics, and pre- pregs
for composite materials
thermoplastic and thermoset resins Construction
concrete reinforcement
Kordsa in Brief
7
Kordsa Investment Highlights
External
Market leadership based on longstanding strategic partner status with all global tire players Global footprint with large presence at growing regions Technology leadership at the cutting edge of reinforcement Growth in composite reinforcement market Growth opportunities from new businesses such as thin film and flexible electronics Strong cash generation and dividend payout Experienced management team with proven track record
1 2 3 4 5 6 7
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Must Win Battles
External
1.
Business Excellence
2.
Growth
3.
Innovation
a. Operational Excellence : Safe and reliable operations, competitive cost b. Digital Transformation: Data analytics and Artificial Intelligence, Robotics and Automations, Cybersecurity c. Effective Finance & Risk Management d. Commercial Excellence a. Growth in Tire Industry: Improve approved product base b. Growth in Composite Industry: Realization of growth business plan for composites, increase market penetration speed via acquisitions c. Growth in New Industries:
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a. Innovation in Material Science b. Innovation in Tire Technology c. Innovation in Composite Technology d. Effective Innovation Management
Products
Overview of The Tire Cord Fabric Value Chain
External
Raw materials Manufacturing Process Kordsa fabrics are developed for specific requirements and are custom made
Kordsa Products
Oil Derivative Ingredients For NY66 yarns:
(HMD)
For Polyester HMLS yarns:
components working under dynamic conditions
Spinning NY66 and PET HMLS Yarns Polymerisation
Twisting
Weaving Dipping
Greige Fabric Dipped Fabric
1
Global Automotive Market (Munits)
Market Dynamics - Tire
Confidential
11
Global Tire Market (Munits) Tire Reinforcement Market (NY6.6-ktons) Tire Reinforcement Market (PET-ktons)
21 21.9 15 15.9 16 16.2 24 24.2 19 19.9 20 20.4 23 23.3 17 17.6 18 18.0 16 16.5 11 11.7 11 11.9 3. 3.4 1. 1.8 1. 1.9 2019 2020E 2021E
APAC ex. China China EMEA North Americ ica South America
Growth ’19 vs ‘20: -25.1%
89.3 66.9 68.4
49 499.0 38 387.0 39 395.0 52 520.0 44 446.0 45 458.0 41 418.0 32 323.0 33 330.0 20 201.0 16 163.0 16 166.0 61 61.0 40 40.0 45 45.0 2019 2020E 2021E
APAC ex. China China EMEA North Americ ica South America
Growth ’19 vs ‘20: -20.0%
1.699 1.359 1.349
336.3 269.0 276.0 673.0 538.3 552.2 2019E 2020E 2021E
NY66 (ktons) PET HMLS (ktons)
Growth'19 vs 20 for NY66: -20.0% Growth'19 vs 20 for PET: -20.0%
RM Price Drivers - Tire
Confidential
NY Raw Material Trend (Indexed)
12
PET Raw Material Trend (Indexed)
Forecast Forecast
most of the large consumers have shut down indefinitely owing to Covid-19 related concerns
under control in mainland China, pressure
particular in Southeast Asia.
20 70 120 170 220 270 320 Jan-15 Aug-15 Mar-16 Oct-16 May-17 Dec-17 Jul-18 Feb-19 Sep-19 Apr-20 Nov-20 Jun-21 Benzene Propylene Butadiene Crude Oil 20 30 40 50 60 70 80 90 100 110 120 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20
Dollars per ton
MEG Asia Contract PX Asia Contract PTA Asia Contract Crude Oil Dubai
Source : IHS
External
Nature of customer relationship as key barrier to entry Leading market shares
Length of relationship Typical length of approval period(a) Co-development projects Global Tire Player 1
Since 1986 ~ 5 years
Global Tire Player 2
Since 1995 ~ 5 years
Global Tire Player 3
Since 1973 ~ 3 years
Global Tire Player 4
Since 1985 ~ 2 years
Global Tire Player 5
Since 1973 ~ 3 years
Global Tire Player 6
Since 1987 ~ 2 years
(a) For a new supplier
Strong barriers to entry for new comers
Market Leadership Based on Longstanding Strategic Partner Status with All Global Tire Players
Other %30 Kordsa %27 E %4 D %6 C %6 B %27
NY66 HDI Market Share 2019
Other %35 Kordsa %9 D %6 C %7 B %14 A %29
PET HMLS Market Share 2019
Source: Company Estimate
13
Capitalize on Global Footprint and Entrenched Supplier Status with All Key Tire Manufacturers - Segmental Progress
External
14
65% 65% 64% 64% 65% 65% 66% 66% 65% 65% 9% 9% 8% 8% 8% 8% 7% 7% 9% 9% 5% 5% 5% 5% 4% 4% 5% 5% 4% 4% 21% 21% 23% 23% 22% 22% 22% 22% 22% 22% 2017 2018 2019 2019 1Q 2020 1Q Glo lobal l Pla layers Regi gional l Pla layers Emergi ging g Pla layers Others
Composite Parts
Overview of The Composites Value Chain
External
Raw materials Intermediates Kordsa fabrics and prepregs offer cutting edge solutions for aerospace & automotive markets
Precursors & Fibers:
Resins:
due to improved material properties and weight savings
regulations as well as fuel-efficiency needs
Weaving Prepregging
15
Overview of The Composites Value Chain
External
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158.4 136.5
2019 - Actual 2019 - Valuation Expectation
NA Composite Revenues* (M$)
2019 - Actual 2019 - Valuation Expectation
* 2019 Full year performance of entities regardless of joining time to Kordsa
Market Dynamics – Composite
External
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Market Size ($M) – Global Carbon Fiber Market Size ($M) – Prepreg
1, 1,478 1, 1,593 1, 1,209 1, 1,437 1, 1,661 33 33 38 38 30 30 37 37 43 43 2018 2019E 2020F 2021F 2022F
Valu lue (M$) Volume (M lbs)
CAGR ‘18-’22 value : 3.0% CAGR ‘18-’22 volume : 6.4% 4,867 5,140 3,900 4,636 5,358 205 218 175 212 248 2018 2019E 2020F 2021F 2022F
Value (M$) Volume (M lbs)
CAGR ‘18-’22 value : 2.4% CAGR ‘18-’22 volume : 4.9%
Reinforced Concrete Structures
Overview of The Construction Reinforcement Value Chain
Confidential
Raw materials Manufacturing Process Kordsa’s Kratos Fiber Reinforcement are applied in Superstructure & Infrastructure Solutions
Major applications:
concretes
Oil Derivative Ingredients For NY66 Fibers:
(HMD)
For PP Fibers:
Spinning NY66 and PP Fibers Polymerisation
Twisting
Dipping Cutting Pucking
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Growth Opportunities: Construction
Confidential
Construction Reinforcement
significant superstructure, industrial and infrastructure reference projects.
Reinforcements are approved in significant government-funded infrastructure projects.
have increased. Technical Project Report service will be available for infrastructure projects.
3rd Bosphorus Bridge Toll Booths and Electronic Pass Areas (Non-Conductivity Concrete Reinforcement) KraTos Macro Reinforcement Samsun 2nd and 3rd Stage Light Railway Track Slab (Non- Conductivity Concrete Reinforcement) KraTos Macro Reinforcement Asyaport Tekirdağ Port KraTos Macro Reinforcement
Current Status
19
Key Financials
Confidential
Update on 1Q 2020 Results
* EBITDA Calculation: Gross Margin-OPEX+Dept & Amort
Kordsa continues to perform well based on its value strategy
TL Financials (MTL) USD Financials (MUSD) 1Q 2019 1Q 2020 D 1Q 2019 1Q 2020 D Sales 1,265 1,199
236 197
Gross Profit 257 215
48 35
Gross Margin (%) 20.3% 18.0%
20.3% 18.0%
OPEX (%) 8.1% 10.6% 3 pts' 8.1% 10.6% 3 pts' Operating Profit 181 115
34 19
Operating Profit Margin (%) 14.3% 9.6%
14.3% 9.6%
EBITDA* 198 153
37 25
EBITDA* Margin (%) 15.6% 12.8%
15.6% 12.8%
Net Income 111 62
21 10
Effective Tax Rate (%) 21.0% 8.2%
21.0% 8.2%
Net Income (%) 8.8% 5.2%
8.8% 5.2%
EPS (TL/100 shares) 0.48 0.30
0.10 0.05
20
Mar’20 Revenue Split By Product TCF & Yarn %80.2 Composite %18.1 Other %1.8 Asia %22 EMEA %32 NA %36 SA %10 By Region
External
Segment Reporting
Mar’19 Revenue Split By Product TCF & Yarn %84.8 Composite %12.0 Other %3.1 Asia %26 EMEA %31 NA %32 SA %11 By Region
21
Kordsa volume development(a) Comments
Well – Positioned to Enable Volume Growth
External
cord fabric capacity by 18 ktons
segment with global and emerging customers
(a) Volume development adjusted for divested volumes
Volume sold (2006 indexed to 100)
Light Vehicle Tire manufacturing market evolution Kordsa regional capacity development
NA %21 EMEA %32 APAC %41 NA %13 EMEA %25 NA %28 SA %20 NA %21 EMEA %38 APAC %59 EMEA %33 APAC %32 APAC %19 SA %4 SA %6 SA %9
2005 2005 2019 2019
22
100 100 146 146 156 156 165 165 158 158
2006 2016 2017 2018 2019
Technology Leadership at The Cutting Edge
Confidential
Strong focus on R&D Cutting edge new products
Sales from new products (US$m)
Selected collaborations(a) Leadership in Innovation and Technology
Rolling resistance improvements through
higher modulus for high performance tires
Protection layer for truck &
bus tires; reduces tire weight
7% higher tenacity and better fatigue
performance for aircraft tires (bias)
10% higher dimensional stability for better
tire performance (improved labeling)
T802 4G PET
(a) includes both, universities as well as individual academics from the names institutions23
listed among the best employers in the Bahia region of Brazil within the ‘Great Place to Work’ competition
Pirelli in terms of gloal presence and service level criteria
technology, the enviromentally friendly formula – co-jointly developed by Kordsa and Continental – that will replace the 80-year old formula
Cokoon Best Supplier Kordsa Brasil
52 42 45 64 53 2015 2016 2017 2018 2019
FX exposure
EUR %22 US$ %78
Revenue (Mar’20) Costs (Mar’20)
US$ %81 TL %7 BRL %3 IDR %8 Baht %1
costs + hard currency priced raw materials
volatility: (Revenue – raw material costs) tracked as a KPI by sales team
KPIs (main components are personnel expenses and energy costs)
Other %13 Raw Materials %57
Mar’20 expenses by nature
Distribution & Packaging %5 Energy Expenses %9 Personnel Expenses %16
Cost development (US$)
Well-Positioned for Strong Cash Generation and Dividends
External
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100 00 99 99 100 00 97 97 103 03 93 93 96 96 90 90 95 95 101 01 97 97 86 86 95 95
201 015 201 016 201 017 201 018 201 019Cost st per ton n (ind ndex exed) d) TCF NY Yarn PET Yarn 100 00 105 05 105 05 101 01 113 13
2015 2016 2017 2018 2019 Tota
(indexed)
Dividend distribution Gross profit
Well-Positioned for Strong Cash Generation and Dividends
External
EBITDA*
pricing with adjustment on raw material indexes)
margins over the medium term
(“SG&A”) cost reduction initiatives across all business units
adjacent businesses
257 215
100 200 300Mar'19 Mar'20
(TLm)198 153
50 100 150 200 250Mar'19 Mar'20
(TLm)68 61 58 67 68 49
20 40 60 80 2014 (paid in 2015) 2015 (paid in 2016) 2016 (paid in 2017) 2017 (paid in 2018) 2018 (paid in 2019) 2019 (paid in 2020) (TLm)% margin % of sales
Comments
20.3% 18.0% 15.6% 12.8% EBITDA* = Gross Profit – OPEX + Depreciation/Amortization25
What we have for Sustainability
Confidential
2 6
Kordsa's Financial Policy
External
EBITDA margins Dividend policy Reoccurring Creep Capex
Kordsa is targeting progressive improvement in EBITDA margins over the medium term Distribution of all the distributable profits
Kordsa Consolidated TFRS (IFRS) net income
The distribution decision is agreed taking into consideration the sizable fixed asset purchases, acquisitions, covenants of current liabilities and the Company’s mid and long term strategies, national and global economic conditions USD 23 million
27
We Reinforce Life
Reinforcing 2 out of every 3 aircraft tires and 1 out of every 3 automobile tires produced in the world
2016 – 2019 Financial Trend (MTL)
Confidential
3
1,908 2,485 3,947 5,137 293 339 621 747 178 212 339 378
2016 2017 2018 2019
Revenue EBITDA Net Income (parent)
YE 2019 Highlights (FX Rates)
Confidential
3 1
5.93 5.92 5.76 5.57 5.81 5.66 5.74 5.74 5.94 5.97 6.23 6.52 6.62 6.60 6.55 6.21 6.44 6.18 6.38 6.32 6.65 6.58 6.86 7.22
Apr'19 May'19 Jun'19 Jul'19 Aug'19 Sep'19 Oct'19 Nov'19 Dec'19 Jan'20 Feb'20 Mar'20
USDTRY (end rate) EURTRY (end rate)
100.00 99.88 97.13 95.43 104.90 105.55 101.49 107.06 102.16 108.22 114.03 131.77 100.00 99.44 96.27 96.44 95.96 95.80 94.52 94.65 94.43 97.48 99.03 102.31 100.00 101.20 99.48 98.67 100.15 99.71 98.54 99.21 97.79 96.11 100.13 115.14
Apr'19 May'19 Jun'19 Jul'19 Aug'19 Sep'19 Oct'19 Nov'19 Dec'19 Jan'20 Feb'20 Mar'20
IndexedUSDBRL (end rate) IndexedUSDTHB (end rate) IndexedUSDIDR (end rate)