Investor Presentation - January, 2019 - Mexichem
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Investor Presentation January, 2019
Forward-Looking Statements
In addition to historical information, this presentation Mexichem has implemented a Code of Ethics that rules its
contains "forward-looking" statements that reflect relationships with its employees, clients, suppliers and
management's expectations for the future. The words general groups. Mexichem’s Code of Ethics is available for
“anticipate,” “believe,” “expect,” “hope,” “have the intention consulting in the following link:
of,” “might,” “plan,” “should” and similar expressions http://www.mexichem.com/Codigo_de_etica.html.
generally indicate comments on expectations. The final
results may be materially different from current expectations Additionally, according to the terms contained in the
due to several factors, which include, but are not limited to, Securities Exchange Act No 42, Mexichem Audit Committee
global and local changes in politics, the economy, business, established a mechanism of contact, which allows that any
competition, market and regulatory factors, cyclical trends in person that knows the un-fulfilment of operational and
relevant sectors; as well as other factors that are highlighted accounting records guidelines and lack of internal controls of
under the title “Risk Factors” on the annual report submitted the Code of Ethics, from the Company itself or from the
by Mexichem to the Mexican National Banking and subsidiaries that this controls, file a complaint which is
Securities Commission (CNBV). anonymously guaranteed. The whistleblower program is
facilitated by a third party. The telephone number in Mexico
The forward-looking statements included herein represent
is 01-800-062-12-03.
Mexichem’s views as of the date of this press release.
Mexichem undertakes no obligation to revise or update The website is: http://www.ethic-line.com/mexichem and
publicly any forward-looking statement for any reason unless contact e-mail is: mexichem@ethic-line.com.
required by law.”
Mexichem’s Audit Committee will be notified of all complaints
for immediate investigation.
2
Mexichem’s Growth Strategy
Mexichem at a Glance pg. 4
Adding Specialty Products and M&A pg. 12
Acquisition for the Fluent Business Group
Acquisition for the Vinyl Business Group
Margin Growth vs Organic Volume Growth pg. 20
Backward Integration to Reduce Cost of Production pg. 24
Vinyl and Fluor Business Group Outlook pg. 28
Improving Outlook for PVC
Fluor Business Group
NAFTA impact on Mexichem pg. 34
Lower Capex Cycle and Solid Balance Sheet pg. 37
Mexichem of the Future pg. 40
Management Team pg. 45
3
Mexichem at a Glance 4
Business Snapshot
Operations
41 countries
Sales
>22,000
employees
>100 countries
>$6.7 billion*
Consolidated Annual
137 Revenues
production plants
17 2
R&D labs fluorite mines
* Note: Includes sales of Netafim as of 2017 (Proforma). All numbers includes Netafim figures
5 .
A major transformation over the past 15 years...
2003 TODAY
Revenues(1)
$312 million 21x Consolidated Revenues
$6.7 billion*
EBITDA(1)
$50 million
24x Adjusted EBITDA
$1.2 billion*
Market Cap(2) Market Cap(2)
$167 million 32x $5.4 billion
Notes:
1) Reported figures under Mexican GAAP and converted into dollars using an FX of 10.8 MXN/USD
2) 2003 market cap figures as of 12/31/2003; Market cap as of 01/07/2019. *All figures are as of 2017 and includes the integration of Netafim (Proforma)
8
Strong Track Record of Disciplined Acquisitions
(27 acquisitions since 2003)
4
Sylvin Technologies
Specialty PVC resins
Fluorita de Mexico
Camesa trade name becomes Mexichem
43% of Mexichem (Camesa subsidiary)
Quimica Fluor
Fluorita de Rio Verde 1
2 1,405
1,106
830 962 899 910 926
818
645
392 472 457
189 228
50 72
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LTM 3Q'18
1.9x 2.5x 0.5x 0.7x 1.6x 1.2x 1.0x 1.3x 1.1x 0.7x 1.0x 2.2x 1.0x 1.8x 1.2x 1.91x
Success at integrating new acquisitions has boosted sales and EBITDA and has made EBITDA (US$mm)
Mexichem a leader within the industries it operates 3
Net debt/EBITDA
Source: Company filings. 1) 3Q18 considers Netafim’s integration since February 7th, 2018. 2) Figures for 2017 do not consider EBITDA from Netafim.
3) Net debt in 3Q’18 and 2017 includes US$0.6 million and US$0.9mm, respectively; in 2016 includes US$1.4mm and in 2015 US$21.4mm,
7 corresponding to letters of credit and suppliers’ credits exceeding 180 days, which, only for the purposes of the covenants of the Cebures and our
revolving credit facility, are considered financial debt, although they are not recorded as debt in our balance sheet 4) Acquired in 2018.
Mexichem Business Groups
Global Leader in Plastics and Chemicals
Fluor Ethylene
Value Chain Value Chain
Fluorspar Pipes and fittings
PVC & Specialty Resins
Hydrofluoric acid Irrigation systems
Compounds &
Refrigerants Plasticizers Datacom
Aluminum fluoride Derivatives Geosynthetics
JV with
Revenues: $830 mm Revenues: $2,476 mm Revenues: $4,158 mm
EBITDA: $351 mm EBITDA: $614 mm EBITDA: $534 mm
LTM 3Q18 EBITDA margin: 24.8% EBITDA margin: 12.8%
EBITDA margin: 42.3%
Proforma 24% of consolidated EBITDA 43% of consolidated EBITDA 38% of consolidated
Specialty products EBITDA 13% of Specialty products EBITDA 12% EBITDA
Consolidated of Consolidated
Note: Revenues and adjusted EBITDA margin correspond to LTM 3Q18. All figures are before intercompany eliminations.
* Includes Netafim figures proforma (12 months of results). For statutory purposes, Netafim is consolidated since February 7th, 2018.
8
Vertical Integration
Ensuring Supply to Mitigate Volatility & Increase Cost Competitiveness
Ethylene Chain Overview
- One of the largest PVC resin and leading player in piping worldwide
Compounds
Chlorine &
Salt
Caustic
PVC Resin
VCM
Sylvin Technologies 63% of LTM
Specialty Resin
consolidated
Ethane Ethylene
proforma EBITDA* in
Fluent 3Q’18
Mexichem products On-going joint ventures
VOLATILITY
+ VERTICAL INTEGRATION THROUGHOUT THE VALUE CHAIN
–
Commodity companies trade at an average Specialty material companies trade at an
EV/EBITDA multiple of 5.8x to 8.0x average EV/EBITDA multiple of 9.0x to 13.8x
9
Vertical Integration: Fluor Business Group
40% Sold to Market 100% Sold to Market
Sulphuric
Acid
HF Refrigerant
Gases
Fluorspar
Aluminum Strategy:
Fluoride Downstream integration to
higher value added
60% Sold to Market products
100% Sold to Market
+ VOLATILITY
VERTICAL INTEGRATION THROUGHOUT THE VALUE CHAIN
–
Commodity/Chemical Companies trade at an
average EV/EBITDA multiple of 9.0x to 11.0x
Source: Company filings
10Mexichem’s Markets and Product Categories
Netafim’s contribution
BUSINESS UNITS MARKETS SERVED PRODUCT CATEGORIES EXAMPLES
Others Pipes & Fittings (PVC,
Infrastructure
Energy
10% Polyethylene, Polypropylene)
4% 15%
Telecom Geosynthetics (woven &
12% non-woven)
32% Datacom & Infrastructure
Agricultural Irrigation systems
27% Housing
From 3% to 27% if we Driplines, sprinklers and
FLUENT were to include other irrigation products
Netafim
Others 3% Automotive 3%
Industrial 5% Base Chemicals
Wire & Medical 4% Specialty Resins
Cable Home, lawn &
20% PVC Resins
Garden 4%
Compounds
PA & Plasticizers
60% Phosphates
Building &
VINYL Construction Other Chemicals
Technical
Propellants Aluminium
Fluorspar Met Grade
8% 5% Building and
Construction Fluorspar Acid Grade
Air Conditioning 14%
Chemicals
Hydrofluoric Acid
3%
26% Anhydrite
*1% Aluminum Fluoride
26% corresponds to Refrigerants
FLUOR 17%
Energy Medical propellants
Refrigeration Medicals
Technical Propellants
Source: Company fillings, Markets as % of pro forma 2017 revenues of combined entity
Note: Netafim’s agricultural contribution includes Landscape (c.1%) and Mining (c.1%)
11Adding Specialty Products
M&A
12Acquisitions for Fluent Business Group
Wavin and Dura-Line
Wavin EBITDA Margin (1) Dura-Line EBITDA Margin (1)
(% of Total Revenue) (% of Total Revenue)
20.0% 25.0%
22.4%
14.3% 20.0% 17.3%
15.0% 13.7% 17.2%
12.0% Margin 2018 = 16.5%
10.3% 10.9% Margin 2018 = 12.5% 15.0% 14.8% 14.0% 13.5% Margin 2015 = 14.8%
9.7% 13.3%
10.0% 9.2% Margin 2013 = 9.3% 9.7%
10.0%
4.3%
5.0%
5.0%
0.0%
0.0%
1Q 2Q 3Q 4Q
1Q 2Q 3Q 4Q
2013 2014 2015 2016 2017 2108 2015 2016 2017 2018
Note:* Includes Wavin Africa, Overseas, China, Australia and Middle East Note:* Includes USA, Canada, Oman, Mexico, South Africa and Czech Republic
(1) (1) The 4Q15 EBITDA figure includes the effect of discontinued operations
EBITDA figures exclude restructuring costs and a benefit of US$17MM in 4Q13
A global leader in the supply of plastic pipe A global leader in high-density polyethylene
systems and solutions for both, above, and conduit duct and pressure pipe solutions.
below ground applications. Allows for expansion in Telecom, Datacom and
Has close to $1.3 billion in annual revenue. Energy Piping markets.
Targeting opportunities in Europe, Asia Adds presence in India, South Africa and the
Pacific and Middle East. Middle East.
13Acquisition for Fluent Business Group
Netafim to incorporate ~higher value-added products
A global leader of technologically
advanced irrigation solutions.
Transformational acquisition in specialty products
and industrial solutions with specific expertise in
water.
Leader in advanced technology irrigation
solutions.
Consistent with the company’s growth strategy
into higher value-added products, increasing
Fluent’s portfolio of specialty products.
Expands global footprint by strengthening
presence in key markets such as U.S., India, and
LatAm, and opens new regions such as Middle
East, Africa and Australia.
Revenues in 2017 were close to $950 million and
EBITDA Margin of 14%.
Brings strong R&D and technically advanced
capabilities.
14Acquisition for Vinyl Business Group
Vestolit
Vestolit EBITDA Margin
(% of Total Revenue)
16.0% 14.4%
14.5%
14.0%
Margin 2018 = 12.4%
11.6% 11.2%
12.0%
10.1%
10.0% 8.4% 8.8% Margin 2015 = 8.8%
7.8%
8.0%
6.0%
4.0%
2.0%
0.0%
1Q 2Q 3Q 4Q
2015 2016 2017 2018
Europe’s 6th largest PVC manufacturer.
Europe’s only manufacturer of High Impact Suspension PVC (HIS-PVC) for
weather-resistant windows and is Europe’s Third-largest producer of
paste PVC for floors and wallpapers.
Keeping with the strategy of becoming a global, vertically integrated
company with a focus on high-end, specialized products.
Expands European footprint by entering a new market segment and
acquire new technology.
15Building Mexichem’s Specialty Products Portfolio
Specialty PVC Resins Producers Worldwide (Kton)
500
400
CAPACITY (KMT)
300
200
100
-
Mexichem Westlake Formosa Hanwha INEOS LG Group ChemChina Saint-Gobain Alain de Open Gate
Group Group Krassny Capital
Source: IHS 2017
16Acquisition for Vinyl Business Group
Vinyl Compounds to incorporate ~40 m in sales to Compounds Business Unit
U.K. leading supplier of PVC compounds
Adds scale to Mexichem’s U.K. operations.
Targeting opportunities in India and Southeast Asia.
Expands the portfolio of specialty products.
Enabled further vertical integration of Compound Business through stabilizer technologies
and recycled PVC capabilities.
Brings synergies to Vinyl Business group through Vinyl Compounds’ PVC resins and
plasticizers.
Key drivers for the demand are related to:
o Building & Construction
o Consumer Goods
o Footwear
17Acquisition for Vinyl Business Group
Sylvin Technologies Inc. ~29 m in sales to Compounds Business Unit
A niche PVC compounds manufacturer based in Denver, Pennsylvania
Customer-focused business model.
Serving a broad range of industries, such as: automotive, general purpose/industrial,
specialty, medical, building and construction and wire and cable market.
A strong team and application development capabilities.
Sylvin’s key raw materials are PVC resin, plasticizers and stabilizers, which should bring
synergies to Mexichem’s Vinyl operations.
18Improvement of Profitability Ratios
Mexichem WACC ~7.5%
ROE (%) 15.2%
ROIC (%)
Mexichem Group Mexichem Group
9.5%
8.2%
9.8%
6.5% 6.7%
8.7%
7.0%
2015 2016 2017 LTM Sep 2018 2015 2016 2017 LTM Sep 2018
ROE: Income from continuing operations / Adjusted Average Equity from continuing operations.
ROIC: Adjusted NOPAT for continuing operations/Adjusted Equity from continuing operations + Liabilities with cost – Cash.
Income from continuing operations and NOPAT (EBIT-taxes) consider trailing twelve months.
19Margin Growth vs Organic
Volume Growth
20Driving Margin Growth Vs. Volume Growth
Closer To Our End Consumers -Fluent
Chlorine &
Salt
Caustic PVC Resin
VCM Compounds Fluent
Specialty
Ethane Ethylene
21
21Focus on Higher Margin Products
In 2016 we discontinued operations of pressure pipes and shifted that capacity
to Datacom pipes
Datacom pipes have higher
margins than pressure pipes
22Cross selling of Products (Netafim, Fluorspar in
Brazil, HIS-PVC in Latam)
The company cross sells products
with attractive margins in other
regions, among others:
1) Fluorspar and refrigerant gases
in Brazil,
2) HIS-PVC (high impact modified
polyvinylchloride copolymer) a
Vestolit product in LatAm, and,
3) Expects to sell PVC pipes to
Netafim.
The broad high vale-added portfolio
product is expected to expand with the
acquisition of Netafim.
23Backward Integration to
Reduce Production Cost
24Vertical Integration: Ethylene
Ethylene is our Most Important Raw Material
Ethylene Price Components
Polyethylene’s Cost Structure
December 2014 PE Pipe Cost Structure
Ethane Others Ethylene Margin Others
27% 10% 63% Ethylene 82% 18%
PVC’s Cost Structure
PVC Pipe Cost Structure
Others
Ethylene 29% 71%
December 2017
Ethane Others Ethylene Margin
38% 22% PVC Resin Cost Structure
39% Others
Ethylene 39% 61%
Ethylene Cracker (JV w/ OXY) =
VCM Cost Structure
• ~70% of the Vinyl’s Group ethylene needs. Ethylene 49%
Others
51%
• ~90% of the NA Vinyl’s Group ethylene
needs.
Source: Company fillings,
*Once Ethylene cracker is fully operational.
25Vertical Integration: Ethylene
Estimated PVC Cost-Curve by Region, USD/Metric ton and million metric tons
Europe Northeast Asia (KTJ) Middle East Northeast Asia (China) Former USSR
South America North America Africa Asia and Pacific
Global demand:
~48 MM metric tons
Cash cost per ton Acetylene based (2021)
1,000
800
600
Before
400
200
0
The cracker positions Mexichem on the lowest part of the cost-curve globally
Source: McKinsey petrochemical models, IHS
1 2021 capacity are estimates from HIS. 2 Effective capacity is given as 90% of nameplate capacity
26Ethylene, Ethane, Caustic soda & PVC resin prices
Source: IHS
27Vinyl and Fluor Business
Group Outlook
28Improving Outlook for PVC
Global Supply, Demand and Operating Rate
70,000 100
90
60,000
80
50,000 70
(‘000 MT)
60
40,000
50
30,000
40
20,000 30
20
10,000
10
0 0
2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Total Capacity ('000 MT) Total Demand ('000 MT) Operating rate (%)
Source: IHS
29Improving Outlook for PVC
There is limited additional global PVC capacity being built in the next 4 years
~4.5 million metric tons
PVC Global Capacity Expansions
5.0
4.0 India,
China,
Million Metric Tons
3.0
China, Philippines,
India Egypt China,
2.0 Egypt,
Baltics
1.0
0.0
-1.0
-2.0
11 12 13 14 15 16 17 18 19 20 21
North America Northeast Asia ROW Hypothetical NAM Hypothetical Europe
30 Source: IHSImproving Outlook for PVC
PVC is the third most popular plastic in the world and the largest sourced
material in the Building & Construction market, followed by PE & PP
Building &
19.7%
Construction
Packaging 39.9%
Automotive 8.9%
Electrical &
5.8%
Electronic
Others 25.7%
31 Source: Plastics - The facts 2016 by PlasticsEuropeImproving Outlook for PVC
China’s Share of Global Capacity is 44%
PVC Capacity
70,000
60,000
50,000
(‘000 MT)
40,000
30,000
20,000
10,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Worldwide China
Source: IHS
32U.S. International Trade Commission decision and
Price Behavior
After a year-long investigation process by the U.S. Department of Commerce, on
February 22, 2017 they announced that R-134a from China were being dumped in the
U.S. market at prices below fair value and prescribed antidumping duties ranging from
148.79% to 167.02%.
The American HFC Coalition believes the decision is fully supported by :1) The
industry developed R-134a to succeed earlier-generation refrigerants without any
negative impact on the ozone layer, 2) The industry invested substantial sums to
manufacture R-134a in the U.S. for automotive air-conditioning, stationary air-
conditioning, and other applications.
As a result of the dumped imports, the U.S. industry has suffered persistently low
price levels and poor operating results.
The imposition of antidumping duties is a positive step to restore conditions of fair
trade in this market.
As a consequence of the above mentioned R-134a refrigerant gas prices increased
approximately by 25% on average in 2017.
33NAFTA Impact on Mexichem 34
U.S. Fluorspar Demand – Supply Summary
U.S. Fluorspar Demand 2014 – 2017 U.S. Acidspar Supply
2014 2015 2016 2017
Spain /
Metspar 108 90 55 70 Others
China 3%
19%
Acidspar 291 331 310 330
Total 399 421 365 400
Fluorspar Vietnam
8%
Mexichem
• Metspar: 100% used as a fluxer in the steel South 58%
industry, particularly for stainless and Africa
specialty steels. 11%
Mexico
(Others)
• Acidspar: Aprox. 90% used for HF 1%
production (Honeywell, Chemours) and
10% for other applications. • Metspar: Mexichem is currently supplying
99% of total consumption (2016-2017).
• The U.S. does not produce Metspar and
has some small Acidspar mines (Hastie) • Acidspar: Mexichem supplies approx. 58%
that have not been producing in the last few of the US consumption. Other sources are
years, but are still in development. from Mexico (Muzquiz), Vietnam, South
Africa, China.
Source: Roskill, IM,USGS, Trademap Internal Analysis
35Mexichem’s Fluor exports/Vinyl’s imports to the U.S.
NAFTA tariffs and MFN tariffs from WTO (World Trade Organization)
Exports (MX-USA) Sales in 2017
Product Name NAFTA MFN USA US (MM)
Acid grade fluorspar low arsenic Ex. 3.70% N.A
Acid grade fluorspar (ceramic, fine and standard) Ex. Ex. $ 43.1
Aluminum fluoride Ex. 3.70% $ 17.5
HF Ex. Ex. N.A
Anhydrous HF Ex. Ex. $ 104.7
Metallurgic fluorspar (lamas, big stone, standard) Ex. Ex. $ 15.6
Sulfuric acid Ex. Ex. N.A
Total Sales to the USA $ 180.9
As % of 2017 total consolidated sales 3.1%
Imports (USA-MX) Purchases in 2017
Product Name NAFTA MFN USA US (MM)
Vinyl Chlorine Monomer (VCM) Ex. Ex. $ 364.9
Source: WTO and Company Filings.
36Lower Capex Cycle and Solid
Balance Sheet
37Ending a Capital Cycle
(in USD terms)
Capex
666
460
414
302 289
253 251
199
2011 2012 2013 2014 2015 2016 2017 9 M1 8
2018e figure includes CAPEX for NETAFIM.
38Manageable Debt Profile & Long-Term Maturity Profile Investment Grade
Fitch Ratings BBB
S&P BBB-
Moody’s Baa3
Long-Term Debt Schedule
US$MM, as of September 30th, 2018 Debt Average Life
14.1 years
Weighted Average
Cost of Debt 5.09%
Most Debt at Hold Co Level Alignment of Debt to Revenue Currency Conservative Leverage Ratios
Debt by Division (3Q18) Debt by Currency (Swapped, 3Q18)
1% 6% 3% Total Debt / EBITDA Net Debt / EBITDA
3%
3.0x 2.9x
24% 2.6x 2.6x 2.5x
2.4x
2.0x 1.9x 1.8x 1.9x
1.2x
90% 73% 1.0x
Holding Vinyl Fluor Fluent US$ Euro Others
2013 2014 2015 2016 2017 3Q18
US$1.5B revolving credit facility
Source: Company filings (100% available)
39 Third Quarter 2018 EarningsMexichem of the Future 40
We Have Created The World’s First Agricultural Brain
Based on 50 Years of Agricultural and Hydraulic Knowledge, NetBeat™ is the World’s First Automated Precision Irrigation System
NetBeat™ combines real-time
data with Dynamic Crop Models™
to personalize irrigation while minimizing water
programs and optimize yields and resource useNetafim
• Please see video (NetBeat and Ramthal Community in India)
- NetBeat™ - the first irrigation system with a brain!
https://www.netafim.com/49a475/globalassets/digital-farming/netbeat/netbeat_online_07.mp4
- Ramthal Community
https://www.netafim.com/48e8ab/globalassets/demo/homepage/empowering-regional-
prosperity-through-a-multi-stakeholder-agro-water-management-project.mp4
4244
Management Team 45
Executive Leadership Team (ELT)
Rodrigo Guzmán Perera Paresh Chari Ran Maidan, Carlos Manrique Rocha
Chief Financial Officer (CFO) President, Fluent Business Group President and CEO,Netafim Ltd President, Vinyl Business Group
Daniel Martínez Valle Sameer S. Bharadwaj
President, Compounds Business Unit
Alejandra Rodríguez Sáenz
Corporate Vice-President, Human Capital
Pedro Martínez Puig
Corporate Vice-President, IT
Francisco Hernández
Corporate Vice-President, Legal
Chief Executive Officer President, Fluor Business Group
(CEO)
Mary Gorges Cristina Gil Jorge Luis Guzmán Mejía
Vice-president of Corporate Communications Director Corporate Affairs Corporate Vice-President, Internal Audit
46Thank You 47
APPENDIX 48
Brief Summary of Results (Q3 2018)
1 2 EBITDA by quarter (US mm)
mm US$ Third Quarter
Financial Highlights 2018 2017 %Var.
Net sales 1,785 1,503 19%
Operating income 270 201 34%
EBITDA 375 299 25%
EBITDA margin 21.0% 19.9% 107 bps
Net majority income 82 61 34%
Cash Flow before dividends 157 151 4%
Q'1 Q'2 Q'3 Q'4
Free cash flow 83 71 17%
2013 2014 2015 2016 2017 2018
Quarter Sales EBITDA
3 mm US$ 3Q18 3Q17 %Var. 3Q18 3Q17 %Var.
Vinyl 621 579 7% 151 133 14%
Fluent 1,003 785 28% 140 107 31%
Fluor 210 177 19% 94 68 38%
Eliminations/ Holding (49) (38) 29% (10) (9) 11%
Mexichem Consolidated 1,785 1,503 19% 375 299 25%
49 Third Quarter 2018 EarningsSales by Region Destination 50 Third Quarter 2018 Earnings
Strong Performance by Business Group X% EBITDA margin
Vinyl Fluent Fluor 5,509 Vinyl Fluent Fluor
26% 644 * Constant currency & 9% 4,771
Revenues
4,360 Organic Revenue Growth 4,360
630
495 495
19%
3,093 8%
1,785 2,257 2,257 2,416
1,503 1,503 1,623
210 210
177 177
785 1,003 1,908 785 839 1,861
1,749 1,749
579 621 579 623
3Q'17 3Q'18 9M'17 9M'18 3Q'17 3Q'18 9M'17 9M'18
* Constant currency &
EBITDA Organic EBITDA Growth
20.5%
Vinyl Fluent Fluor Vinyl Fluent Fluor 21.6%
36% 1,128 24%
1,029
19.0% 44.1% 19.1%
284 22.0% 832
25% 829 18% 277 44.0%
20.1% 192
21.0% 192 38.8% 38.8%
19.9% 423 13.7% 337
375 44.8% 357 44.8% 13.9%
299 38.4% 309 13.7%
302 38.4% 312 13.8%
94 14.0% 94 14.7%
68 13.6% 68 14.0%
107 140 20.4% 464 24.3% 110 123 357 20.4% 458 24.6%
24.3% 357 24.2%
23.0% 23.0% 151
133 151 133
3Q'17 3Q'18 9M'17 9M'18 3Q'17 3Q'18 9M'17 9M'18
Note: Breakdowns consider figures before eliminations. Total figures consider eliminations.
Organic = means that it will exclude: i) Netafim´s results for the quarter; ii) CADE and Netafim Ltd. Acquisition related expenses; iii) Brazil Tax legal settlement benefit, and iv) FX translation effects without consider
any positive or negative effect from Venezuela.
51 Third Quarter 2018 EarningsEBITDA Evolution
55% 60%
of Group EBITDA of Group EBITDA
produced in Specialty produced in Specialty
Products Products
52 Third Quarter 2018 EarningsStrong Cash Generation Despite Seasonality
Third Quarter January - September
2018 2017 %Var. 2018 2017 % Var.
mm US$
EBITDA 375 299 25% 1,128 829 36%
Taxes paid (58) (34) 71% (190) (104) 83%
Net interest paid (49) (35) 40% (143) (107) 34%
Bank commissions (7) (8) -13% (30) (21) 43%
Exchange rate gains (losses) (8) (5) 60% (40) (17) 135%
Change in trade working capital (1) (2) (33) 0 N/A (294) (208) 41% 1) PMV's insurance A/R is not
Operating cash flow before capex 220 217 1% 431 372 16% included in trade working
capital calculation.
CAPEX (Organic) (61) (54) 13% (186) (149) 25%
CAPEX (Total JV) (2) (19) -89% (13) (105) -88% 2) Trade working capital
variation (Sep 18 vs Dec 17)
CAPEX JV (OXY share) - 6 -100% - 45 -100%
includes Netafim’s proforma
NET CAPEX JV (2) (13) -85% (13) (59) -78% results for comparative
purposes.
Total CAPEX (organic & JV) (63) (66) -5% (199) (208) -4%
Cash flow before dividends 157 151 4% 232 164 41%
Shareholders' dividend (74) (80) -8% (210) (132) 59%
Free cash flow 83 71 17% 22 32 -31%
PMV's insurance A/R - - 268 -
Free cash flow after Insurance 83 71 17% 290 32 806%
53 Third Quarter 2018 EarningsUSD in millions
Balance Sheet Balance sheet Sep 2018 Dec 2017
Total assets 10,318 9,759
Cash and temporary investments 879 1,900
Receivables 1,349 975
Inventories 904 675
Others current assets 310 403
Property, plant and equipment, Net 3,482 3,626
Intangible assets and Goodwill 3,137 1,910
Long term assets 257 270
Total liabilities 6,814 6,078
Current portion of long-term debt 368 45
Suppliers 1,449 1,362
Other current liabilities 930 723
Long-term debt 3,267 3,210
Long-term employee benefits 185 186
Long-Term deferred tax liabilities 197 231
Other long-term liabilities 418 321
Consolidated shareholders'equity 3,504 3,681
Minority shareholders' equity 889 878
Majority shareholders' equity 2,615 2,803
Total liabilities & shareholders' equity 10,318 9,759
54 Third Quarter 2018 EarningsIncome Statement
Third Quarter January - September
USD in millions
Income Statement 2018 2017 % 2018 2017 %
Net sales 1,785 1,503 19% 5,509 4,360 26%
Cost of sales 1,289 1,129 14% 3,964 3,289 21%
Gross profit 497 374 33% 1,545 1,071 44%
Operating expenses 227 173 31% 732 525 39%
Operating income (loss) 270 201 34% 813 546 49%
Interest expenses (income) & bank commisions 57 43 33% 173 129 34%
Exchange rate, net 12 3 300% 43 38 13%
Monetary position 20 (2) N/A (6) (4) 50%
Financial Costs 89 44 102% 210 163 29%
Equity in income of associated entity (2) (1) 100% (4) (1) 300%
Income (loss) from continuing operations
183 157 17% 607 385 58%
before income tax
Cash tax 54 34 59% 168 104 62%
Deferred taxes 8 28 -71% 22 47 -53%
Income tax 62 62 0% 190 150 27%
Income (loss) from continuing operations 120 95 26% 417 234 78%
Discontinued operations (1) (4) -75% 19 1 1800%
Consolidated net income (loss) 120 91 32% 437 236 85%
Minority stockholders 37 30 23% 113 56 102%
Net income (loss) 82 61 34% 323 180 79%
EBITDA 375 299 25% 1,128 829 36%
55 Third Quarter 2018 EarningsResults by Business Group
Third Quarter January - September
mm US$
Vinyl 2018 2017 %Var. 2018 2017 % Var.
Volume (K tons) 646 635 2% 1,944 1,916 1%
Total sales* 621 579 7% 1,908 1,749 9%
Operating income 99 84 18% 315 227 39%
EBITDA 151 133 14% 464 357 30%
*Intercompany sales were $48 million and $37 million in 3Q18 and 3Q17, respectively. And as of September 2018 and 2017
were $135 million and $134 million, respectively.
Third Quarter January - September
mm US$
Fluor 2018 2017 %Var. 2018 2017 % Var.
Sales 210 177 19% 644 495 30%
Operating income 82 56 46% 247 153 61%
EBITDA 94 68 38% 284 192 48%
56 Third Quarter 2018 EarningsResults by Business Group
Third Quarter January - September
mm US$
Fluent 2018 2017 %Var. 2018 2017 % Var.
Sales 1,003 785 28% 3,093 2,257 37%
Fluent LatAm 270 279 -3% 816 818 0%
Fluent Europe 349 357 -2% 1,086 1,006 8%
Fluent USA & Canada 152 120 27% 415 341 22%
Fluent AMEA 35 34 3% 118 108 9%
Netafim 206 - 669 -
Intercompany eliminations (8) (5) 60% (11) (15) -27%
Operating income 95 71 34% 297 203 46%
EBITDA 140 107 31% 423 309 37%
57 Third Quarter 2018 EarningsRevenues & EBITDA wo FX effect
3Q17 3Q18 3Q18 3Q18/3Q17
mm US$
Sales Sales FX Total % Var
579 Vinyl 621 2 623 8%
785 Fluent 1,003 52 1,055 34%
1,364 Ethylene (Vinyl + Fluent) 1,624 54 1,678 23%
177 Fluor 210 - 210 19%
(38) Eliminations / Holding (49) - (49) 29%
1,503 Total 1,785 54 1,839 22%
3Q17 3Q18 3Q18 3Q18/3Q17
mm US$
EBITDA EBITDA FX Total % Var
133 Vinyl 151 - 151 14%
107 Fluent 140 7 147 37%
240 Ethylene (Vinyl + Fluent) 291 7 298 24%
68 Fluor 94 - 94 38%
(9) Eliminations / Holding (10) - (10) 11%
299 Total 375 7 382 28%
58 Third Quarter 2018 EarningsRevenues wo FX effect - Fluent
3Q17 3Q18 3Q18 3Q18/3Q17
mm US$
Sales Sales FX Total % Var
279 Fluent LatAm 270 30 300 8%
357 Fluent Europe 349 10 359 1%
120 Fluent US/Canada 152 - 152 27%
34 Fluent AMEA 35 2 37 9%
- Netafim 206 10 216
(5) Intercompany Eliminations (8) - (8) 60%
785 Total 1,003 52 1,055 34%
59 Third Quarter 2018 EarningsIn 2017 We Achieved Record Results and Expect Another Year of
Strong Growth in 2018
In 2017 we met high-end of EBITDA guidance range
For 2018 we expect an EBITDA growth to be between 25%-30%
Revenue ($mm) Adj EBITDA ($mm) and Margin (%)
19.0%
16.0% 16.7%
$5,485 $5,584 $5,828 14.8%
$5,344 $1,106
$814 $895 $895
EBITDA
Margin
+9% +223bps
2014 2015 2016 2017 2014 2015 2016 2017
EBITDA1 – non-M&A capex ($mm) and Conversion (%)2
78.0%
74.0% 74%
69.7%
$817
Our cash conversión is above 70%
$722 asd
$657 $634
In 2017 FCF increased 123% from
(EBITDA – non
M&A capex) / $90m to $201m
EBITDA
2014 2015 2016 2017
60 Third Quarter 2018 EarningsCloser to Our End Customers Chlorine &
Housing Catalogue in Brazil: Salt
Caustic
VCM
PVC Resin
Compounds Fluent
Specialty
Ethane Ethylene
WATER FLOW SOLUTIONS WATER STORAGE SOLUTIONS
ACCESORIES
GAS SOLUTIONS
ELECTRIC SOLUTIONS
61
61Closer to Our End Customers Chlorine &
Infrastructure Catalogue in Brazil: Salt
Caustic
VCM
PVC Resin
Compounds Fluent
Specialty
Ethane Ethylene
SEWAGE SYSTEM SOLUTIONS HYDRAULIC SOLUTIONS
62
62Vertical Integration Tested in 4Q14
Prices of oil and ethylene falling rapidly
Chlorine &
Salt
Caustic
USD/ ton USD/ barrel VCM
PVC Resin
Compounds Fluent
Specialty
2,000 120 Ethane Ethylene
100
1,500
80
1,000 60
40
500
20
0 0
Jan-2010
Sep-2010
Jan-2011
Sep-2011
Jan-2012
Sep-2012
Jan-2013
Sep-2013
Jan-2014
Sep-2014
Jan-2015
Sep-2015
Jul-2010
Jul-2011
Jul-2012
Jul-2013
Jul-2014
Jul-2015
Mar-2010
May-2010
Mar-2011
May-2011
Mar-2012
May-2012
Mar-2013
May-2013
Mar-2014
May-2014
Mar-2015
May-2015
Nov-2010
Nov-2011
Nov-2012
Nov-2013
Nov-2014
Nov-2015
Ethylene-Spot USA (Left) PVC Export USA (Left) Crude Oil WTI (Right)
Source: IHS (formerly CMAI)
Vinyl Business Group Fluent Business Group
* EBITDA USD$MM * EBITDA USD$MM
8%
14% 10% 66
64
66% 5% ~30M USD 48
59%
22
4Q13 4Q14 4Q13 4Q14
* EBITDA without FX in 4Q14, and non recurrent effects of 4Q13
63Margin Expansions in 4Q15
Prices of oil, ethylene and PVC resins
Chlorine &
Salt
Caustic
USD/ ton USD/ barrel VCM
PVC Resin
Compounds Fluent
Specialty
2,000 120 Ethane Ethylene
100
1,500
80
1,000 60
40
500
20
0 0
Jan-2010
Sep-2010
Jan-2011
Sep-2011
Jan-2012
Sep-2012
Jan-2013
Sep-2013
Jan-2014
Sep-2014
Jan-2015
Sep-2015
Jul-2010
Jul-2011
Jul-2012
Jul-2013
Jul-2014
Jul-2015
Mar-2010
May-2010
Mar-2011
May-2011
Mar-2012
May-2012
Mar-2013
May-2013
Mar-2014
May-2014
Mar-2015
May-2015
Nov-2010
Nov-2011
Nov-2012
Nov-2013
Nov-2014
Nov-2015
Ethylene-Spot USA (Left) PVC Export USA (Left) Crude Oil WTI (Right)
Source: IHS (formerly CMAI)
Vinyl Business Group Fluent Business Group
Positive performance on PMV + Resins, compounds & derivatives Amid FX fluctuations, EBITDA margin expansions
EBITDA USD$MM
15% EBITDA USD$MM 12%
100
244% 74
100 8% 26% 83
66
5%
22
0 0
4Q14 4Q15 4Q14 4Q15
64Thank You 65
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