presentation of the norsk gjenvinning group

Presentation of the Norsk Gjenvinning Group Pareto Securities Nordic - PowerPoint PPT Presentation

Presentation of the Norsk Gjenvinning Group Pareto Securities Nordic Corporate Bond Conference 2017 Stockholm, March 7, 2017 Content I. The NG Group in a nutshell II. Our journey from 2012 III. Q4 2016 snapshot IV. The road ahead 2 The

  1. Presentation of the Norsk Gjenvinning Group Pareto Securities Nordic Corporate Bond Conference 2017 Stockholm, March 7, 2017

  2. Content I. The NG Group in a nutshell II. Our journey from 2012 III. Q4 2016 snapshot IV. The road ahead 2

  3. The leading waste management company in Norway  Norway’s largest waste management company with approximately 1,400 employees, 43,000 customers, 1.8 million tons of waste and NOK 4.1 billion in revenues  A key part of society's infrastructure, handling approximately 25% of Norway’s waste and recycling 85% of this into raw materials and energy to industries globally  Relentless cost- and capex reduction program completed to meet challenging market conditions. ‘NG Flow’, a three year industrialization program underway  Building the no.1 platform for a roll up of the Nordic waste management industry. High focus on compliance, risk management and sustainability/innovation 3

  4. The Norsk Gjenvinning Group – overview The largest waste management company in Norway Broad geographic coverage and strong local presence  Revenues Unparalleled, comprehensive geographic coverage from MNOK 1 North to South with a large number of sites across Norway 4091  Broadest range of services in Norway; the only player with total waste management business model 1808 1168 1147 1128 1110  1051 Number 1 position in all key segments 806 794 332  Innovator and leader in the provision of value RenoNorden Stena Ragn Sells Metallco Franzefoss Retura Hellik Teigen SAR Rekom added services  Centralized downstream sales and logistics Key facts  Volumes: 1.8 million tons  Market share: ~25% SWEDEN NORWAY  Recycling rate: 85%  Number of customers: 43,000  Number of employees: 1,400  Number of vehicles: 610 2 UK  Number of transports: 3.36 million per year DENMARK  ISO-certified operations 1 Source:, based on latest available data (2015), Retura is a franchise company of which revenue is sourced from the company’s website, and is not an exact figure 4 2 Including subcontractors

  5. A key part of society's infrastructure – what’s needed? Hub-and-spoke plant infrastructure  Large central processing hubs to recycle resources from waste - scale at plant level increasingly important Large scale logistics operation  Vast national plant network with  Large fleet of vehicles and strategic locations close to urban containers - Point-to-point centers and industrial clusters logistics, route collection and  specialized service vehicles ~NOK 6 billion mark-to-market in properties and fixed infrastructure  Scale in transportation of secondary raw material globally – on the road and at sea 5

  6. Key business areas Recycling Metals Industry & Offshore Household collection  Collection, sorting and treatment/  Collection, sorting and treatment/  Collection and treatment of  Collection of household waste recycling of mixed industrial recycling of all kinds of ferrous hazardous waste from Norwegian and Swedish waste, paper, plastics, wood and non ferrous materials, municipalities  Industrial services, including tank chips and other non-hazardous including vehicles and electrical  Pure logistics service based on cleaning, maintenance stops, waste fractions waste cleaning of oil separators, and public tender contracts with 5-7  Operation of municipal recycling high pressure suction year duration stations  Emergency services Key competitors Key competitors Key competitors Key competitors #1 #1 #1 #2 6

  7. NGs value chain perspective Customer focus Industrial optimization Upstream Collection Logistics between Plant operations Downstream sales sales logistics plants and downstream Service delivery Production Long-haul logistics Raw material sales/trader    Defined by customer Focus on high Focus on high  needs effectiveness and effectiveness and Focus on sales of right goods quality pick-up/delivery own and external  Focus on quality and to downstream precision to own plants goods at optimal customer satisfaction customers and downstream price customers Value chain flow tightly knit to create high gross margin at low cost  Quality of goods to be produced  Goods flow optimization  Means of production  Seasonal planning (storage)  Production planning 7

  8. Our basic role – the middle man Waste = resources astray! 7

  9. How do we help our customers create competitive advantage? Brevik Manhattan Waste based fuel Serox Kull Bauxitt 9

  10. ILLUSTRATIVE EXAMPLE: How do we make our money? Delta upstream/downstream = WASTE Regnskap GP 1 tonn OCC* 90/10 NOK/t Material- Upstream NOK/t Production NOK/t Downstream NOK/t Rev. Downstream income 1,350 recycling • Sorting • Logistics Paper 300 50 270 Upstream costs -300 A (metalls, • Processing • Sale of paper COGS 250 1,350 Downstream costs -270 paper, Gross margin (GM) 780 plastics) Production costs -300 Operating profit 480 GP – Production = OP + 1 tonn general waste NOK/t Energi- Upstream NOK/t Production NOK/t Downstream NOK/t Upstream income 1,150 recycling • Sorting • Logistics General waste 1,150 75 230 Rev. B Downstream income 40 (waste, • Processing • Sale of waste 225 450 Downstream costs COGS -680 woodchips, • Sale of fractions 40 Gross margin (GM) 510 food waste) Production costs -300 Operating profit 210 SERVICES/OTHER INCOME + Upstream NOK Production NOK Services/other income NOK • Vehicle costs Transport services 1,300 Rev. 800 Upstream income 1,400 C • Cost of equipment Rent of equipment 100 50 N/A Downstream costs N/A COGS Gross margin (GM) N/A Production costs -850 Operating profit 550 * Old corrugated containers 10

  11. Content I. The NG Group in a nutshell II. Our journey from 2012 III. Q4 2016 snapshot IV. The road ahead 11

  12. NG under new management – phases 2011 2012 2013 2014 2015 2016 2017 2018 Acquisition/ Clean up and growth Cost cutting Industrialization merger Context Context Context Context  Failed merger in  Emergence of large cases  High fixed cost geared  The most «obvious» savings Oslo compliance, risk, leadership for growth opportunities have been exhausted – time for more  Resistance  Dark clouds in the fundamental changes against the 100- horizon for Norway Focus in this phase  Starting to get better data per day program  Internal clean up function, have identified great  Change of (leadership and risk) Focus in this phase potential for increased CEO/ KL  Reorganization to increase  Cost cutting effectiveness focus  Continued leadership  M&A opportunities development Focus in this phase  Continued  Industrialization and reorganization effectiveness throughout the value chain  Organic growth 12

  13. A. Clean up and growth At the time of the acquisition: many known challenges, but also many unexpected events Known challenges Hidden challenges  Inferior profitability vs Shocking findings competitors  Financial fraud; corruption;  Organizational structure build theft around people and not the  Illegal handling of hazardous tasks goods  Divergent cultures as a result  Illegal waste exports of several acquisitions  Anti-competitive behavior  Limited cooperation and high degree of silo-  Serious breeches of thinking, high conflict level regulations  Limited understanding of joint goals and strategies . Decisions based on gut feel or for A very bad starting point political reasons  Lots of money to be made from illegal  Rumours as the most important communication handling of waste! channel  Industry where employees easily can take  Lack of consequence leadership advantage of illegal opportunities due to lack of follow up and control 13

  14. A. Clean up and growth Industry clean up: What have we done and what were the consequences? What did we do?  New direction – New Vision and Values  “Line in the sand”– Codes of Conduct and Amnesty  Clean up own back yard – 40 specific actions  Culture building What were the consequences?  100 MNOK compliance costs in 2013; 50 MNOK i 2014  44 % change of management in 18 months (including some major bread-winners)  Short term loss of business to competitors with lower costs due to “different compliance philosophy” What are the positive effects – so far…?  Employee pride = dedication and productivity  A strong voice for influencing industry development  Starting to get industry, politicians and customers on board

  15. A. Clean up and growth Systematic efforts to reduce risks Operational risk Contract risk Financial risk • • • Inventory reduction Scomi offshore contract Interest rate swap and control • • M3 landfill obligations FX • Gross margin • • Portfolio balance Metal hedging management - all • Long term contracts fractions with industrial • Increased insight into companies market drivers • … • Compliance (tracking of international goods etc.) • HSEQ • … 15

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