CSM Transformation

CSM Transformation
7 May 2012
Today’s announcement
§  Decision to transform CSM into bio-based ingredients company
§  Supported by full board
§  Transformation subject to shareholder approval
§  Going forward, CSM will consist of Purac and Caravan Ingredients,
and focus on bio-based ingredients
§  Bakery Supplies business will be divested
The evolution of CSM
2004
Purac
8%
Sugar
8%
Sugar
Conf'ary
21%
2011
Bakery
Supplies
Europe
33%
Bakery
Supplies
North
America
30%
Purac
13%
Future CSM
Bakery
Supplies
Europe
35%
Caravan
44%
Purac
56%
Bakery
Supplies
North
America
52%
All charts sales breakdown. ‘Future CSM’ unaudited
§  CSM’s portfolio has been streamlined and refocused over last 8
years
Rationale for strategic transformation
§  New reality in bakery supplies makes further consolidation likely
§  Bio-based ingredients high-growth opportunities require significant
investments
§  CSM does not have sufficient financial resources for both in longer
term
§  Decisive choice made to focus future CSM on Purac and Caravan
§  CSM Bakery Supplies more valuable to others who can participate in
consolidation
Future CSM
Revenues
EBITDA
EBITA
407
72
46
Purac
Future
CSM
Revenues
EBITDA
EBITA
297
52
47
Revenues
EBITDA
EBITA
704
124
93
Caravan
Ingredients
All in €m, pro forma 2011, unaudited
§  Future CSM: comprise of Purac and Caravan
Caravan Ingredients: Product portfolio
Functional
Blends
Emulsifiers
Fortification
Bakery
Ingredients
Bakery
Conditioners
Processing
Agents
Flour
enrichment
Fillings, icings,
glazes
Enzymes, mold
inhibitors
Food
Emulsifiers
Food &
Beverage
Flatbread,
Pizza, Tortilla,
Pita
Flour
conditioners
Non-Food
Emulsifiers
Replacers/
reducers
Bakery Flavors
& Colors
Revenue distribution
Bakery
ingredients,
33%
Emulsifiers,
33%
Sweet Goods
Bagel, English
muffin, Pretzel
Fortification,
7%
Functional
blends, 27%
Unaudited, 2011
Caravan Ingredients: Market positions
Industry
Properties
Caravan position (US)
Competition
Emulsifiers
§ 
§ 
$650m market size
3.5% growth p.a.
#2
Danisco, Cargill,
ADM, Kerry
Functional Blends
§ 
§ 
$400m market size
3% growth p.a.
#1
Puratos, Danisco, AB
Mauri
Fortification
§ 
§ 
$2bn market size
4% growth p.a.
N.A.
Fortitech, Watson
Bakery Mixes
§ 
§ 
$1.6bn market size
-3% growth p.a.
Top 5
General Mills,
Guenther, Dawn
§  Leading market positions in most of Caravan Ingredients activities
Caravan Ingredients: 5-yr Financials
420 70 400 60 50 380 40 360 30 340 20 320 300 10 2007 2008 2009 2010 2011 Sales ($m; LHS) 347 401 397 396 413 EBITA ($m; RHS) 40.2 41.7 53.7 64.2 65.2 Sales ($m; LHS) EBITA ($m; RHS) §  Revenues resilient to economic downturn, EBITA increased
continuously
0 Purac: Product portfolio
§  World market leader in fermentation based lactic acid (derivatives)
§  Purac has grown organically by 8% CAGR in 2000-2011 period
Food market:
§  Natural preservation solutions
§  Taste & Nutrition solutions
Chemical & Pharma markets:
•  Pharma, Animal Health, HPC, Chemical
• 
Leader in biobased building blocks (lactides, biobased chemical
components)
Purac: Market positions
500 290-­‐450 29 CAGR 8%
400 3,000
CAGR 8-12%
CAGR 41%
2,500
300 20 12 2,000
1,500
200 10 1,000
2020 2008 2020 2008 0 500
0
550
100
2010
100 5 0 3,500
3,000
25 15 Est. market potential PLA in kT
2020
35 30 Bio-based chemicals market size
€ bln
2015
Fermentation food ingredients
market size in € bln
Source: McKinsey
§  #1 market share in Lactic acid & derivatives
§  Lactic acid base business expected to grow by 8-10% in coming years
§  Bio-based chemicals beyond lactic acid offer great opportunity
§  Huge market potential for bioplastics/PLA
Purac: 5-yr Financials
450 60 400 50 350 300 40 250 30 200 150 20 100 10 50 0 2007 2008 2009 2010 2011 Sales (€m; LHS) 310.1 325.6 355.3 400.4 407.2 EBITA (€m; RHS) 22.3 22.8 37.9 56.6 46.1 Sales (€m; LHS) 0 EBITA (€m; RHS) §  Strong track-record of top-line growth, strong margin recovery since
2005. Recent results impacted by investments in new technologies
Future CSM: the combined portfolio
Fortification
Meat preservation
Chemicals & Pharma
Margin
Fortification
Bioplastics
Bakery mixes
Functional blends
Emulsifiers
Current portfolio overlap
Growth
3% Purac §  Current overlap of combined portfolio
3% Caravan Manufacturing footprint
Opportunities to expand Caravan Ingredient’s footprint
Future growth opportunities
• Extended shelf life & Food
safety
• Health, both human & animal
• Green Chemicals
• Cross-channel opportunities
• Key account management
• Emerging markets
opportunities
Applications
Geography
Customers
Products
• Other organic acids
• Lactides/bioplastics
• New lactic acid derivatives
• Lactylates
§  Growth segments for combination of Purac and Caravan Ingredients
Future CSM: Pro forma financials 2011
2009
2010
2011
Purac
Sales
EBITDA
EBITA
355.3
59.2
37.9
400.4
81.0
56.6
407.2
71.6
46.1
Caravan Ingredients ($m)
Sales
EBITDA
EBITA
397.0
60.7
53.7
396.0
71.2
64.2
413.0
72.2
65.2
Caravan Ingredients (€m)
Sales
EBITDA
EBITA
284.7
43.5
38.5
298.7
53.7
48.4
296.9
51.9
46.9
Total before central costs (€m)
Sales
EBITDA
EBITA
640.0
102.7
76.4
699.1
134.7
105.0
704.1
123.5
93.0
Central costs (€m)
EBITDA
EBITA
(26.6)
(26.6)
(26.6)
(26.6)
(28.4)
(28.6)
All reporting lines before one-­‐off costs, unaudited
§  Central costs will be right-sized to fit scale of future CSM
Divestments Bakery Supplies
§  Bakery Supplies Europe and North America (excluding Caravan)
likely to be of greater value to another owner
§  Superior market positions, but…
§  Economic turmoil impacting results constraining growth investments
§  Required stable cash flows impacted by high raw material volatility
§  Significant investments required in consolidating industry
§  Businesses to be divested: € 2,409 million and EBITDA of € 128
million
§  Divestment will be a carefully managed process, taking into account;
price, speed, impact on employees etc.
§  Cost savings program Relevance will continue as planned
Divestments & proceeds
§  Proceeds will be balanced between
§  Deleverage CSM (net debt € 616 million at year-end 2011)
§  Resolve pension liabilities related to divested business
§  Invest for organic growth
§  Fund bolt-on acquisitions
§  Distribute funds to shareholders
§  Disposal costs include
§  M&A/legal
§  Financial reorganization
§  Severance plans
Timetable
§  Investor visits
§  9 May: UK
§  10 May: NL
§  EGM will take place at 3 July 2012
§  We expect to have made significant progress in the divestment
program by early 2013
Key take aways
§  Transformation is next major step in CSM strategic evolution
§  We can’t support growth strategies for both activities longer term
§  Recognizes the new reality in Bakery Supplies
§  Decisive choice to redeploy capital into higher growth activities
§  Strong market positions for Purac and Caravan Ingredients
§  Structural growth in natural, renewable bio-based ingredients
§  Financial structure of future CSM will reflect growth opportunities
§  Expect to have made significant progress by early 2013
Appendix: To be divested (financials)
2011
BSEU (€m)
Sales
EBITDA
EBITA
1,078
60.8
38.4
BSNA (excl. Caravan I ngredients) (€m)
Sales
EBITDA
EBITA
1,331
66.8
48.0
Total (€m)
Sales
2,409
EBITDA
127.5
EBITA
86.3
All reporting lines before central costs, one-­‐off costs, unaudited