2016 Year End / Earnings Release Feb 21, 2017 - Kordsa | ?· 2017-02-23 · 2016 Year End / Earnings…

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<ul><li><p>Strictly confidential </p><p>2016 Year End / Earnings Release </p><p>Feb 21, 2017 </p><p>Keep </p></li><li><p>The information and opinions contained in this document have been compiled by Kordsa Global Endstriyel plik ve Kord Bezi Sanayi ve Ticaret Anonim irketi (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 or correctness. No undue reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. This document may contain forward-looking statements by using such words as "may", "will", "expect", "believe", "plan" and other similar terminology that reflect the Company managements 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 Companys 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 of the Company and its group companies. The 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 of judgment by any recipient. You must not distribute the information in this document to, or cause it to be used by, any person or entity in a place where its distribution or use would be unlawful. Neither the Company, its board of directors, directors, managers, nor any of Its employees shall have any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents. </p><p>Disclaimer </p><p>2 </p></li><li><p> APAC (Incl. China, India, Thailand, Vietnam) still has the </p><p>strongest growth with CAGR 5.5% </p><p> Automotive is expected to grow more than others in China, </p><p>India, Mexico and Thailand. </p><p> EU market still significantly below saturation, slower growth </p><p>is expected after a dynamic year of %5 growth. </p><p> Assembly in EU is expected to grow till 2023 with additional </p><p>plants and added capacity coming online </p><p>Global Automotive Market </p><p>Global LV Assembly M Units / Year </p><p>2016-2021E CAGR: 3,4% </p><p>Global Tire Market </p><p>Global LV Tire Production M Units / Year </p><p> 60% 60% 61% 62% 64% 67% 70% </p><p>3 </p><p>2016-2021E CAGR: 3,3% </p><p>Source: PWC Autofacts </p><p>Source: LMC Tyre Forecast </p><p>93 95 100 104 108 110 </p><p>2016 2017E 2018E 2019E 2020E 2021E</p><p>Ap exc China China EMEA NA SA</p><p>2016 2017E 2018E 2019E 2020E 2021EAP exc. China China EMEA NA SA</p><p>1,637 1,682 1,754 1,817 </p><p>1,871 1,931 </p><p>Market Dynamics </p><p> Tire Market is aligned with Automotive Market Growth Europe growth expected around 2.3% Mexico investments continue in 2017 mostly to supply </p><p>increasing N.American demand </p><p> LATAM expected to recover - but slowly after 2 years of poor performance </p><p> Chinese imports increase at all regions except US due to ADD</p></li><li><p>200</p><p>300</p><p>400</p><p>500</p><p>600</p><p>700</p><p>800</p><p>900</p><p>1000</p><p>2016 2017E 2018E 2019E 2020E 2021E</p><p>kton </p><p>Supply Demand</p><p>200</p><p>250</p><p>300</p><p>350</p><p>400</p><p>450</p><p>500</p><p>550</p><p>600</p><p>2016 2017E 2018E 2019E 2020E 2021E</p><p>kton </p><p>Supply Demand</p><p>Tire Reinforcement Market (PET HMLS) </p><p>Passenger &amp; LV tire driven growth </p><p>Tire Reinforcement Market (NY6.6) </p><p>Cap-ply grows, Agro &amp; Mining Tires demand is low </p><p> 60% 60% 61% 62% 64% 67% 70% </p><p> 2016-2021 CAGR: +3.5% </p><p> 2016-2021 CAGR: +2.5% </p><p>Source: Company Estimates </p><p>Source: Company Estimates </p><p>PET HMLS </p><p> Increasing rate of PET HMLS penetration to Agro tyres </p><p> Carcass demand grows with passenger &amp; light vechicle tire demand </p><p> Increased capacity utilisation drives investments </p><p> Significant quality differences of suppliers </p><p>Nylon 6.6 </p><p> 2017: Above 90 % capacity utilisation rates, good demand Cap ply demand grows with passenger &amp; light vechicle tire </p><p>demand </p><p> Still the preferred product in tire performance compared to PET and N6 </p><p> Slow growth in Chinese market </p><p> Low prices of caprolactam makes N6 use attractive in low end applications </p><p>Market Dynamics </p><p>4 </p></li><li><p>1. Operating Excellence </p><p>a. Continuing Cost Reduction Programs </p><p> Raw material diversification and improvement for best yields </p><p> Creep capex driving energy &amp; labor efficient production </p><p> TPM (total productive maintenence) initiatives at all locations </p><p>b. Lean Kordsa </p><p> High capacity utilization at all entities </p><p> Organizational Simplification decreasing OPEX and fixed costs </p><p>2. Profitable Growth in Tire Industry </p><p>a. Segmental focus in meeting different customer needs </p><p> provide better cost of use and value for customer (superior quality, sustainable supply, joint product development, </p><p>technical support, customised service level, commercial flexibility, geographical presence) </p><p>b. Offer more value added products (fabric vs yarn mix) </p><p>c. Increase new product sales including improved generations of tire products and non tire applications </p><p>d. Further investment in PET HMLS for new generation yarns </p><p>3. Profitable Growth in Adjacent Industries </p><p>a. Composites Excellence Center build up approval base, develop pace in commercial sales </p><p>b. Construction Reinforcement Business develop new application areas and partnerships </p><p>Must Win Battles </p><p>Focus on tire industry for profitable growth, selectively grow adjacencies </p><p>5 </p></li><li><p>Segmental Progress </p><p>50% </p><p>57% </p><p>60% </p><p>66% </p><p>13% 12% 12% 11% </p><p>6% 5% 6% 6% </p><p>31% </p><p>26% </p><p>22% </p><p>17% </p><p>0%</p><p>10%</p><p>20%</p><p>30%</p><p>40%</p><p>50%</p><p>60%</p><p>70%</p><p>2013 2014 2015 2016</p><p>Global Players Regional Players Emerging Players Others</p><p>6 </p></li><li><p>Regional Revenue Split Progress </p><p>36.1% </p><p>28.0% </p><p>22.3% </p><p>13.7% </p><p>38.6% </p><p>29.5% </p><p>17.4% 14.5% </p><p>36.0% </p><p>30.6% </p><p>18.4% 15.0% </p><p>EMEA APAC NA SA</p><p>2014 2015 2016</p><p>7 </p></li><li><p>2016 Revenue Split Progress by Products </p><p>71% 74% 76% </p><p>23% 18% 19% </p><p>7% 8% 5% </p><p>0%</p><p>10%</p><p>20%</p><p>30%</p><p>40%</p><p>50%</p><p>60%</p><p>70%</p><p>80%</p><p>90%</p><p>100%</p><p>2014 2015 2016</p><p>TCF NY Yarn Other</p><p>8 </p></li><li><p>Strong Focus on R&amp;D </p><p>10 28 </p><p>41 52 </p><p>42 </p><p>120 </p><p>1.2% </p><p>3.4% </p><p>5.2% </p><p>7.7% </p><p>6.6% </p><p>11.7% </p><p>0.0%</p><p>2.0%</p><p>4.0%</p><p>6.0%</p><p>8.0%</p><p>10.0%</p><p>12.0%</p><p>14.0%</p><p>0</p><p>20</p><p>40</p><p>60</p><p>80</p><p>100</p><p>120</p><p>140</p><p>2012 2013 2014 2015 2016 2021</p><p>In MM$ </p><p>Revenue From New Products (US$m) % of Total Rev.</p><p> Incl. Replacement products and incremental new products The products whose new product life cycle has been completed, transferred to conventional sales </p><p>portfolio </p><p>9 </p></li><li><p>2016 - Key Financials </p><p>In MMTL 2015 YE 2016 YE Change </p><p>Net Sales 1,735 1,908 10% </p><p>Gross Profit 315 397 26% </p><p>Gross Profit % 18.2% 20.8% 3 pts </p><p>Operating Profit 171 240 41% </p><p>Operating Profit % 10% 13% 3 pts </p><p>EBITDA* 242 288 19% </p><p>EBITDA* % 14.0% 15.1% 1 pts </p><p>Net Income 99 143 44% </p><p>10 </p><p>*EBITDA Calculation = Operating Profit - [Dep&amp;Amort] - [A]* - [B]** [A]* : FX Gain/Loss on trade Rec. &amp; Pay. [B]** Unearned finance inc/exp on credit sales </p></li><li><p>2016 - Balanced Sheet (Selected Items) </p><p>In MMTL Dec 31, 2015 Dec 31, 2016 Change </p><p>Cash and Cash Equivalents </p><p>18 39 </p><p>(21) </p><p>Account Receivable </p><p>297 372 </p><p>(75) </p><p>Other Current Assets </p><p>109 114 </p><p>(5) </p><p>Inventories </p><p>425 537 </p><p>(113) </p><p>Accounts Payable </p><p>(172) (284) </p><p>112 </p><p>Oth. Curr. Liab. (Excl. Borrowings) </p><p>(50) </p><p>(71) </p><p>21 </p><p>WCAP Turnover </p><p>3.2 3.5 - </p><p>11 </p></li><li><p>2016 - Free Cash Flow </p><p>In MMTL Dec 31, </p><p>2015 </p><p>Dec 31, 2016 </p><p>Change </p><p>EBIT*(1-t) 142 204 62 </p><p>Depreciation and Amortization 81 79 1 </p><p>Change in Working Capital (23) (124) (102) </p><p>Cash Used in Investing Activities (77) (134) (54) </p><p>Free Cash Flow** 124 26 (98) </p><p>* FCF: EBIT(1-Tax Rate) + Depreciation &amp; Amortization - Change in Net Working Capital - Capital Expenditure </p><p>12 </p></li><li><p>2016 - Dividend Distribution* </p><p> 32 </p><p> 76 </p><p> 35 </p><p> - </p><p> 68 </p><p> 61 </p><p> -</p><p> 10</p><p> 20</p><p> 30</p><p> 40</p><p> 50</p><p> 60</p><p> 70</p><p> 80</p><p>2011 2012 2013 2014 2015 2016</p><p>In MMTL </p><p> * Kordsa distributes all the distributable income subject to Gen Assembly approval. Basis of distribution is the lower of the Turkish solo tax books or consolidated TFRS net income. </p><p>13 </p></li><li><p>2016 - Operating Profit Bridge </p><p>14 </p></li><li><p>APPENDIX </p><p>15 </p></li><li><p>0</p><p>50</p><p>100</p><p>150</p><p>200</p><p>250</p><p>Jan</p><p>-14</p><p>Mar</p><p>-14</p><p>May</p><p>-14</p><p>Jul-</p><p>14</p><p>Sep</p><p>-14</p><p>No</p><p>v-1</p><p>4</p><p>Jan</p><p>-15</p><p>Mar</p><p>-15</p><p>May</p><p>-15</p><p>Jul-</p><p>15</p><p>Sep</p><p>-15</p><p>No</p><p>v-1</p><p>5</p><p>Jan</p><p>-16</p><p>Mar</p><p>-16</p><p>May</p><p>-16</p><p>Jul-</p><p>16</p><p>Sep</p><p>-16</p><p>No</p><p>v-1</p><p>6</p><p>Jan</p><p>-17</p><p>Mar</p><p>-17</p><p>May</p><p>-17</p><p>Jul-</p><p>17</p><p>Sep</p><p>-17</p><p>No</p><p>v-1</p><p>7</p><p>NY Material Trend </p><p>BZ BD PP OIL</p><p>Forecast </p><p>RM Price Drivers </p><p>Source: Company Estimates </p><p>16 </p></li><li><p>50</p><p>60</p><p>70</p><p>80</p><p>90</p><p>100</p><p>110</p><p>120</p><p>Jan</p><p>-14</p><p>Feb</p><p>-14</p><p>Mar</p><p>-14</p><p>Ap</p><p>r-1</p><p>4</p><p>May</p><p>-14</p><p>Jun</p><p>-14</p><p>Jul-</p><p>14</p><p>Au</p><p>g-1</p><p>4</p><p>Sep</p><p>-14</p><p>Oct</p><p>-14</p><p>No</p><p>v-1</p><p>4</p><p>Dec</p><p>-14</p><p>Jan</p><p>-15</p><p>Feb</p><p>-15</p><p>Mar</p><p>-15</p><p>Ap</p><p>r-1</p><p>5</p><p>May</p><p>-15</p><p>Jun</p><p>-15</p><p>Jul-</p><p>15</p><p>Au</p><p>g-1</p><p>5</p><p>Sep</p><p>-15</p><p>Oct</p><p>-15</p><p>No</p><p>v-1</p><p>5</p><p>Dec</p><p>-15</p><p>Jan</p><p>-16</p><p>Feb</p><p>-16</p><p>Mar</p><p>-16</p><p>Ap</p><p>r-1</p><p>6</p><p>May</p><p>-16</p><p>Jun</p><p>-16</p><p>Jul-</p><p>16</p><p>Au</p><p>g-1</p><p>6</p><p>Sep</p><p>-16</p><p>Oct</p><p>-16</p><p>No</p><p>v-1</p><p>6</p><p>Dec</p><p>-16</p><p>Jan</p><p>-17</p><p>Feb</p><p>-17</p><p>Mar</p><p>-17</p><p>Ap</p><p>r-1</p><p>7</p><p>May</p><p>-17</p><p>Jun</p><p>-17</p><p>Jul-</p><p>17</p><p>Au</p><p>g-1</p><p>7</p><p>Sep</p><p>-17</p><p>Oct</p><p>-17</p><p>No</p><p>v-1</p><p>7</p><p>Dec</p><p>-17</p><p>Polyester Raw Material Trend, MEG </p><p>MEG CFR AP Contract $/ton MEG CFR NEA Spot $/ton MEG Deliv.WE Contract /ton </p><p>Forecast </p><p>50</p><p>60</p><p>70</p><p>80</p><p>90</p><p>100</p><p>110</p><p>Jan</p><p>-14</p><p>Feb</p><p>-14</p><p>Mar</p><p>-14</p><p>Ap</p><p>r-1</p><p>4</p><p>May</p><p>-14</p><p>Jun</p><p>-14</p><p>Jul-</p><p>14</p><p>Au</p><p>g-1</p><p>4</p><p>Sep</p><p>-14</p><p>Oct</p><p>-14</p><p>No</p><p>v-1</p><p>4</p><p>Dec</p><p>-14</p><p>Jan</p><p>-15</p><p>Feb</p><p>-15</p><p>Mar</p><p>-15</p><p>Ap</p><p>r-1</p><p>5</p><p>May</p><p>-15</p><p>Jun</p><p>-15</p><p>Jul-</p><p>15</p><p>Au</p><p>g-1</p><p>5</p><p>Sep</p><p>-15</p><p>Oct</p><p>-15</p><p>No</p><p>v-1</p><p>5</p><p>Dec</p><p>-15</p><p>Jan</p><p>-16</p><p>Feb</p><p>-16</p><p>Mar</p><p>-16</p><p>Ap</p><p>r-1</p><p>6</p><p>May</p><p>-16</p><p>Jun</p><p>-16</p><p>Jul-</p><p>16</p><p>Au</p><p>g-1</p><p>6</p><p>Sep</p><p>-16</p><p>Oct</p><p>-16</p><p>No</p><p>v-1</p><p>6</p><p>Dec</p><p>-16</p><p>Jan</p><p>-17</p><p>Feb</p><p>-17</p><p>Mar</p><p>-17</p><p>Ap</p><p>r-1</p><p>7</p><p>May</p><p>-17</p><p>Jun</p><p>-17</p><p>Jul-</p><p>17</p><p>Au</p><p>g-1</p><p>7</p><p>Sep</p><p>-17</p><p>Oct</p><p>-17</p><p>No</p><p>v-1</p><p>7</p><p>Dec</p><p>-17</p><p>Polyester Raw Material Trend, PTA </p><p>PTA NEA CFR Contract $/ton PTA NEA C&amp;R Spot $/ton PTA Deliv.WE Contract /ton </p><p>, Forecast </p><p>RM Price Drivers </p><p>Source: Company Estimates </p><p>Source: Company Estimates 17 </p></li></ul>

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