GIL 2014 Latin America - Chemicals, Materials and Food Track

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GIL 2014: Latin AmericaThe Global Community of Growth, Innovation and Leadership

30 January 2014São Paulo, Brazil

Chemicals, Materials & Food

Industry Track

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GIL 2014: Latin AmericaThe Global Community of Growth, Innovation and Leadership

30 January 2014São Paulo, Brazil

Roberta Gamble, Partner

From Commodity to Specialty

Impact and Trends on the Chemical Industry in LATAM

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CMF Industry Track Agenda

1. Growth Challenges for the LATAM Chemical industry, what are the trends today and what will it be tomorrow

2. Case Study Presented by Evonik

3. Panel Discussion – From Commodity to Specialty – what is the trend in LATAM?

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2012 2020

153.0

260.0

6.9% CAGR

5.9% CAGR

2012 2020

23.0

33.2

2012 2020

10.5

17.0

4.7% CAGR

6.2% CAGR

Chemical Industry in Latin America: 2012 x 2020 (billion US dollars)

The LA chemical industry is expected

to grow from US$294 billion to

US$466 billion in the 2012–2020

period.

2012 2020

35.0

55.2

The Latin America Chemical Industry is expected to grow by 6.0% from 2012 to 2020, being Brazil and Colombia the fastest growing countries in the region

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Mega Trends

Impact and Trends on the Chemical Industry in LATAM

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Definition of Mega Trends

Business Process Outsourcing

Health, Wellness, and Well Being

Trends Covered In This Report

Urbanization – City as a Customer Social

Trends

Innovating to Zero

New Business Models

Economic Trends

Connectivity and Convergence

Future Infrastructure Development

Future of Renewable Power

Social Programs

Multilatinas

Source: Frost & Sullivan analysis.

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1995 2000 2005 2010 2015 2020 2025$0.000

$2.000

$4.000

$6.000

$8.000

$10.000

$12.000

$14.000

$16.000

Latin America’s GDP versus Population LevelsGDP To Reach $15.144 Trillion in 2025.

Population (million) 471 510 545 577 608 636 661

Real GDP (% growth rate) 0.7 4.4 4.6 6.0 5.8 5.2 5.4

Per Capita Income $3,829.5 $4,110.4 $4,868.1 $8,401.9 $12,086.7 $16,823.3 $22,927.3

$1.804$2.653

$2.095

$10.697

$7.348

$4.851

Note: GDP and per Capita Income at market prices

Source: IMF; World Bank; ECLAC; Frost & Sullivan analysis.

0.4%

4.4%

6.0%

6.5%GDP Forecast, Latin America, 1990–2025

No

min

al G

DP

(T

rilli

on

)

$ 15.144

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Engines of GrowthChile, Peru, and Colombia will Experience the Highest GDP Growth Rates in the Region by 2025.

Note: The figures denote GDP at current pricesSource: International Monetary Fund, World Bank and Frost & Sullivan

Brazil2011 - $2,476.65 Billion2025 - $5,436.55 Billion

Key Industries:Oil & Gas

AutomotiveAgriculture

Argentina2011 - $448.17 Billion

2025 - $1,097.74 Billion

Key Industries:Food Processing

AutomotiveLivestock

Agriculture

Mexico2011 - $1,151.25 Billion2025 - $2,826.54 Billion


AutomotiveAerospace

Peru2011 - $180.46 Billion2025 - $555.91 Billion

Key Industries:Mining

Natural GasFishing

Colombia2011 - $333.18 Billion

2025 - $1,041.88 Billion


CoalAgriculture

Chile2011 - $248.59 Billion2025 - $676.82 Billion

Key Industries:CopperFishing

Major Economies

Engines of Growth

Note: Engines of growth are those economies that will show the highest economic growth rates along the forecast period

1

2

3

GDP Forecast and Key Industries, Selected Countries, 2011–2025

Source: World, Bank; International Monetary Fund Database; Frost & Sullivan analysis.

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Infrastructure DevelopmentProjected Global Infrastructure Investment 2005-2030

North America

Asia/Oceania

Europe

Source: Morgan Stanley

Middle East

Latin/South America Africa

WaterPowerRoad & RailAir/Seaports

$22,610bn $9,000bn$7,800bn$1,590bn

Total

0

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

4,000

5,000

0

100

200

300

400

0

2,000

4,000

6,000

0

200

400

600

800

0

2,000

4,000

6,000

8,000

10,000

Projected Global Infrastructure Investment, 2005-2030

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Impact on ChemicalsTransportation infrastructure development will be a benefit for the chemical industry, as it will enable easier shipping of chemicals

Utilities infrastructure More important to the Chemical industry will be

development of global infrastructure for supply of electricity, water and other key utilities.

Polymers such as PE form a key part of water supply infrastructure, whilst water treatment chemicals ensure that the water supplied is of safe drinking quality.

A.Polymer producer Borealis has initiated a programme called "Water for the World", the goal of which is to provide sustainable solutions for the availability of safe water and sanitation.

B.An estimated 1 billion people on earth still have no access to clean water.

C.Improving this statistic must be a key global mission between now and 2020

Transportation infrastructure As one of the most important physical products

transported around the world, global trade in bulk chemicals will benefit from improved infrastructure such as the Trans Siberian Railway.

A Trans-Asian rail infrastructure will give access between major petrochemical production facilities in Singapore and Malaysia, and cheap end-product fabrication sites e.g. in Vietnam.

Opportunities also exist for chemical companies to supply materials for infrastructure building, such as Bayer's innovative development of PU foams for use in track foundations

These offer benefits both in terms of increasing the lifespan of the track, and in reducing the noise and vibrations caused by passing trains

• 20% of chemicals in the US are transported by rail• This percentage is higher for hazardous chemicals such as

chlorine, because of the inherent safety of rail transport• The figure is lower in Europe (8.8%), where sea transport is

more viable, and barge and pipeline infrastructure are more developed

• 20% of chemicals in the US are transported by rail• This percentage is higher for hazardous chemicals such as

chlorine, because of the inherent safety of rail transport• The figure is lower in Europe (8.8%), where sea transport is

more viable, and barge and pipeline infrastructure are more developed

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Impact in the Civil Construction Industry Construction sector is likely to grow at rates above 5% by 2020 in countries like Brazil and Peru

Colombia

Argentina’s civil construction industry is likely to grow at an annual rate of

4.2%

Argentina

FIFA World Cup 2014 and the Olympic Games 2016 will boost the civil

construction industry which will grow at an annual average of 6.5%

2.1 billion sq. meters need to be built in order to meet future demands for

27.7 million new dwellers

60% of the investment in new housing projects will come from private sources

BrazilMexico’s civil construction industry is

likely to grow at an annual rate of 6%

10 skyscrapers standing over 200m are planned or already under

construction

Mexico

Colombia’s civil construction industry is likely to grow at an annual rate of 4%

Peru

Peru’s civil construction industry is likely to grow at an annual average

rate of 9.7%

Source: Frost & Sullivan analysis

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Water Treatment:Investments in this area are expected to reach $75.5 billion by 2020

>$10.0 billion Investment in the country by 2020

Mexico

$1.7 billion Investment in Lima by 2014

$370 million – waste water treatment (16 plants) and

sewage

Peru

$25.0 billion investment in the country by 2020

Rio de Janeiro – From 56% to 80% of sewage treatment

São Paulo – 100% Universalization in 2020 for urban areas

Brazil

$9.5 billion Investment in Buenos Aires by 2020

Buenos Aires - 100% universalization by 2015

Sewage: from 59% to 95% coverage by 2020

Argentina

Source: Frost & Sullivan analysis

6.5% CAGR in industrial water treatment chemicals by 2020

5.1% CAGR in municipal water treatment chemicals by 2020

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COMMODITY vs. SPECIALTY

Advantages

Challenges

Growth Opportunities

Commodity Case Study

Specialty Case Study

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Chemicals Market: Market Share of Commodity vs. Specialty Chemicals by Region (World), 2009 and 2020

Analysis of Growth Opportunities Specialty Chemicals to Witness Faster Growth in Most Regions

• As is evident from the graph above, the next decade could be the decade of specialty chemicals. The % of specialty chemicals as part of the overall chemicals sales will increase in all regions to 2020

• Across the world, sales of specialty chemicals could grow twice as fast as the market. Similar to the overall chemicals sales, growth of specialty chemicals is highest is the Asia Pacific region at 9-10% (CAGR 2009-2020)

• Globally, specialty chemicals is expected to grow at a CAGR of 5-6% to 2020

North America Latin America MEAF Europe APAC

Commodity Chemicals

Specialty Chemicals

Commodity Chemicals

Specialty Chemicals

Commodity Chemicals

Specialty Chemicals

Commodity Chemicals

Specialty Chemicals

Commodity Chemicals

Specialty Chemicals

CA

GR

: 3

-4%

CA

GR

: 4

-5%

CA

GR

: 5

-6%

CA

GR

: 4

%

CA

GR

: 9

-10%

Ma

rke

t S

ha

re b

y V

alu

e (

%)

75

25

85

15

95

5

72

28

85

15

70

30

80

20

94

6

65

35

75

25

0

20

40

60

80

100

2009 2020

Source: Frost & Sullivan

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Commodity vs. Specialty: Advantages

Commodity Specialty

Large sales volume Basis for a wide range of

products Lower product prices with

moderate performance Poses opportunities for a

company to establish itself as market leader

Allows greater product customization

High profit margins (good results with smaller volume of sales)

Allows exclusive contracts with clients

Higher value added to the product

Growing market stage

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Commodity vs. Specialty: Challenges

Commodity Specialty

Large market concentration in the hands of a few competitors, which means a high barrier to entry

Price varies according to the fluctuation of oil prices

Low flexibility to change the characteristics of the product (and are generic solutions with standardized specifications)

Low customer loyalty Price driven market Mature stage market,

performing a moderate growth Less opportunity for innovation High volume of imports

Competitive market where differentiation portfolio is key to enter the market

High resistance of customers to buy the product due to its high prices

Demands large investments in R&D and technical support

Depends on the identification of market niches requirements, demanding higher performance solutions

Low market penetration in LATAM (opportunity?)

Constant updates on portfolio Lower dosage

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Commodity vs. Specialty: Case Studies

Commodity Specialty

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Commodity vs. Specialty: Commodity Case Study

• Largest producer of polymers in Americas• Why they’re successful

• Market leader in biopolymers• Major products are polyethylene and polypropylene (commodities)• 2011: acquisition of the polypropylene business of Dow Chemical• 2013: Acquisition of 70.59% of Solvay Indupa (manufacturer of PVC

and caustic soda – both commodities) for US$290 million• Braskem will increase its annual production capacity to 1.25 million

tons of PVC and 890 kton of caustic soda• Braskem recently invested around R$1 billion in a PVC plant in the

state of Alagoas

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Commodity vs. Specialty: Specialty Case Study

• Chemical company focused on specialties for Paints, Construction, Adhesives and Textile.

• Why they’re successful• Focused strategy around key end user markets• 2011: Acquisition of Süd-Chemie (specialty chemicals company) for

US$2.6 billion • Aims to achieve operating profit margins of more than 17% by 2015• 2012: Clariant invested close to 3% of sales in R&D, developing new

materials and products• 2012: Sale of textile chemicals, paper chemicals and emulsions

business (areas that accounted for 15% of company sales) for SK Capital – private equity fund – for $ 550 million

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Commodity vs. Specialty: What does your company have to consider?

Company’s Current Value Proposition

Commodity Specialty

High quantity production capabilities

Ease of production scaling – up and down based on demand, economy

Price competitive Supply-side agreements help

reduce costs, fluctuations

High technical ingenuity and innovation

Good communication of value proposition to client

Customized solutions Technical support

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Vertical Market Target

Commodity Specialty

Government Water/waste water Plastics Petrochemicals Mining Focus in meeting regulations Conservative mindset

Pharmaceuticals, Healthcare and Personal Care

Automotive Agrochemicals Marine paints & coatings But Price vs. Value still

critical

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“Specialties turn into commodities. That’s the natural evolution of things” (…) “Portfolio management is necessary

if we are to remain a real specialty chemical company.” Patrick Jany, Clariant's CFO

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Thank you!

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Case Study

Evonik.Power to create.

Reynaldo Sanna

São Paulo – January 30, 2014

About Evonik

Oil & Gas highlights

Q & A session

Evonik significant megatrends

Agenda

About Evonik


Q & A session


Agenda

January 2014 | Corporate presentation Page 30

Our position

Evonik - the creative industrial group from Germany - is one of the world's leading specialty chemicals companies.

An attractive company

• One of the global leaders in specialty chemicals

• AiM: Profitable growth and sustained value creation

• Main shareholders: RAG-Stiftung, CVC Capital Partners

January 2014 | Corporate Presentation Page 31

1843

2007

A worldwide presence


~7% of global sales

Key figures 2012

Sales* €13.4 billion

Adjusted EBITDA* €2.4 billion

Profitability (adjusted EBITDA margin) 19.0%

Return on capital employed (ROCE) 17.2 %

Employees as of Dec. 31, 2012 33,298


* excluding Real Estate

A common goal

Sustained and above-average profitability in all business operations.


• Evonik is one of the global leaders in specialty chemicals

• Most of sales are generated in areas where Evonik holds leading market postitions

• Strong integrated technology platforms

• Balanced spectrum of business activities and end-markets

• Close collaboration with customers

• Market-oriented research and development

Our focus:Specialty chemicals


About Evonik


Q & A session


Agenda

Our focus:Geared to megatrends

Megatrend = a significant, far-reaching, and sustained trend.

Megatrends:

• are long-term• are all-encompassing• send out signals in many areas of life• are generally global in scope

Significant global megatrends for Evonik:

• Health, Nutrition• Resource efficiency• Globalization


From trends to new markets

Identifying trends:What changes are visible?

Screening trends:Which are most important for Evonik?

Evaluating trends: Which changes can be utilized to enter high-growth markets?

Identifying a trend is not sufficient.Trends have to be utilized to shape the future.


Resource efficiency

• The world's population is growing by 73 million people a year.

• Global demand for energy will more than double by 2050. The main consumers of energy are industry, transportation and living.

• In 2030 fossil fuels will provide 90 percent of global energy requirements.

• The number of vehicles worldwide will roughly double to 1.9 billion by 2030.


placeholder visual

Who drives 5,000 kilometers without a drop of gasoline?

We do.


... and what do we do?

• Lower rolling resistance: Tires made with the latest silica-silane technology from Evonik have less resistance than conventional tires.

• The result: up to 8 percent less fuel consumption.



• Lightweight construction: Evonik is developing high-performance plastics that can replace conventional materials such as metal and glass.

• Example: ROHACELL®. Our rigid foam is used with carbon fibers in sandwich structures, thus reducing the weight of a vehicle by up to 70 percent compared to metal.

• Example: PLEXIGLAS®. High transparency and weather resistance; in windshields, side windows, and sunroofs, this glazing material can reduce vehicle weight by up to 50 percent compared to glass.



• DYNAVIS®: Evonik produces high-performance additives for hydraulic fluids that maintain their lubrication properties over a wide temperature range, improve engine performance and save fuel.

• VESTAMIN®: Crosslinkers from Evonik make wind turbines extremely tough because they ensure optimal curing/adhesion of composites.


About Evonik


Q & A session


Agenda

Date | Title of Presentation

Page | 51

Materiais Termoplásticos para a indústria de Óleo & Gas

VESTAMID® NRG na Camada de Barreira de Tubos Flexíveis

VESTAMID® NRG se distingue dos outros Nylons:

• Compatibilidade superior com metanol• Elevada ductilidade• Segurança superior em operação!

> 800 km de tubos flexíveis instalados e em operação desde 2006

VESTAMID® NRG é a única PA12 adequada para projetos de “liner” aplicados por compressão.

“Liner” de PA12 abre portas para a reabilitação de linhas de produção:

• Proteção à corrosão garantida • Máxima estabilidade do “liner” • Alternativa de excelente custo-benefício ao CRA

Possibilita a instalação de “liners” em grandes distâncias

Mangueiras multi-camada para Umbilicais

• Baixa permeabilidade• Elevada resistência química • Ausência de oligômeros

Date | Title of Presentation

Page | 52

Materiais Termoplásticos para a indústria de Óleo & Gas

VESTAMID® NRG em linhas de distribuição de gás natural

Tubos de PA12 não sofrem corrosão e podem substituir o aço carbono:

• Operação em pressões de até 18 bar • Maior velocidade e redução nos custos de instalação • Eliminação dos custos de manutenção Conformidade com a norma ISO 16486

Tecnologia de Termoplásticos Compósitos:

Produtos à base de PA12 para a produção de fitas e tubos compósitos

• Próxima geração de tubos flexíveis• Linhas de serviço / intervenção• Riser Termoplástico Compósito (TCR)• Peso leve.• Elevada resistência mecânica e à fadiga

VESTAKEEP® PEEK para componentes e “liners”:

Material alternativo para sede de válvulas, conectores, selos e “liner” (downhole) com vantagens em:

• Resistência ao impacto• Resistência mecânica em temperaturas elevadas

Page | 53Standard presentation (2013-22-04) | Coatings & Additives

High-performance additives and synthetic base oils for optimized automotive and industrial lubricants and fuels

• Additives for lubricants to influence viscosity, friction and paraffin crystallization at high or low temperatures

• Energy-efficient and high performance oil additives for engines, transmissions, hydraulic systems, and fuels such as biodiesel and heavy fuel oil

• Additives for refineries to increase oil yield and improve the quality of refinery waxes

• Synthetic base oils for synthetic automotive and industrial gear oil formulations such as heavy duty axle oils, manual transmission fluids and wind turbine gear oils

Oil Additives: Performance & efficiency-enhancing

VISCOPLEX® VISCOBASE®

Page | 54

Oil Additives: Main Drivers and Key Products

Viscosity improvers

Pour point depressants

Dewaxing aids

Synthetic base fluids

Cold flow improvers

Main products Main applications Main drivers

Automatic and manual transmission fluids

Hydraulic fluids

Biodiesel

Refinery products

Fuel economy

Higher demand in emerging regions also due to increased performance requirements

Bio-Fuels

Low Temperature Additives

Hydraulic Fluids: MEHF

Evonik approach to Oil & Gas market

Recoverable Shale Gas resources - Bn m3

Top Ten Oil Reserves

S.America: ~ 20% world's proven oil reserves

• Ongoing business: BL approach

• Focus in the Americas

• North America: shale gas

• South America: oil offshore

• New opportunities: Oil & Gas Industry Team

• Cross-BL approach

• Industry experts

• Regional NBD

• M&S Excellence support

Evonik Approach

Page | 56

Petrobras 2013-2017 Business Plan: investments of US$ 147,5 billion in E&P represents 62,3% of the total investment for the period

Page | 57

Petrobras 2013-2017 Business Plan: 2020 goal is to double the 2013 oil production volumes reaching 4,2 million bpd

Page | 58

General market feeling is not positive regarding Petrobras performance

Doubtful profitability in 2013 caused by high pressure on margins due to:

- Oil production does not follow Brazilian market demand.

- Gasoline price in Brazil does not follow the international prices.

InovaPetro: € 1,2 billion to attract investments in the Oil & Gas industry

Joint initiative: € 1,2 bn (2012- 2017)

Foment projects of R&D, innovation and local production aiming a sustainable local supply chain for Oil & Gas industry.

Opportunities & Actions

• Leverage investments on business opportunities aligned with Mega Trends• Be close to the largest oil offshore market player in the world • Increase presence in the Oil & Gas industry• Close(r) cooperation with Petrobras, potentially involving also Evonk direct

customers

Challenges Oil & Gas industry

• Missão empresarial e gestão Petrobras

• Logística do Pré-Sal

• Gestão de riscos

• Sustentabilidade

• Conteúdo local

• Biodiesel: B10, B15 …?

• …

!!!!!!!!!!!!

??

?

[email protected]: + 55 11 3146 4156

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