Imerys in Asia

Imerys in Asia-Pacific
Paris, November 28, 2007
1
d Overview of Imerys in Asia-Pacific
d Focus on 3 of our businesses
•
Pigments for Paper
•
Monolithic Refractories
•
Minerals for Filtration
2
-IOverview of Imerys
in Asia-Pacific
3
Imerys in Asia-Pacific
d
3,500(1) employees in 12 countries
d
A decentralized organization by business with 3 regional
support hubs
d
50 active mines (including open cast and underground mines)
in 7 countries
d
46(1) industrial plants for 9 activities – each Business Group
represented
4
(1) Including Astron operations in China
Steady development since 1999
$M
700
(1) :
600
CA
/2007
8
9
9
GR 1
14%
+ 30%
500
10%
10%
9%
400
9%
8%
8%
415
272
200
100
478
309
6%
3%
670
376
7%
300
10%
181
167
214
207
pr 20
o 07
f
(1 orm
)
a
20
06
20
05
% of total Group's
sales (by destination)
es 20
tim 07
at
ed
Total Group's sales in
Asia-Pacific(1) (by destination)
20
04
20
03
20
02
20
01
20
00
19
98
19
99
62
0
5
(1)
As if all 2007 acquisition were done on January 07, 1st
A profitable growth
d
Current Operating margin: ≈ 12%(1)
d
Capital employed : 6% of Group’s capital employed as of Dec 06
d
ROCE(2) of Asian assets > Group’s ROCE
(1)
Forecast 2007 including COI realized on products
imported into Asia
Return On Capital Employed
(2)
6
A step by step development accelerating
in 2007
d
External growth: approximately €360M since 1999
• Honaïk Malaysia & Thailand
• Dalian Jinsheng JV – China
• New Zealand China Clay
(NZCC)
d
• Yen Bai Banpu – Vietnam
• World Minerals – China
• Imerys Ceramics Jiangmen – China
• MRD / MRD ECC – Thailand
• Siam Refractories – Thailand
• Australian Vermiculite
ECC Plc
(6 operations
in Asia)
1999
• Qingyang CY –
China
2000
2001
2002
2003
Internal growth / CAPEX
above €70M since 1999
• Saraburi plant extension – Thailand
2004
• Jumbo Mining ; ACE – India
• Baotou; ZAF; Yilong & Xinlong;
Astron – China
2005
2006
• Nanling plant
extension
& Changshu new
plant – China
• Kerinci PCC
plant – Indonesia
2007
• Zhanjiagang monolithic
plant – China
• Niigata plant – Japan
• Ipoh plant extension – Malaysia
• Bhigwan – India
7
A sizable part of Imerys headcount
d
Breakdown by Asian country(1)
New Zealand 1%
Japan 2%
Australia 2%
Indonesia 1%
Vietnam 2%
Singapore 1%
Taiwan 2%
Malaysia 4%
South Korea 0,3%
Thailand 5%
India 18%
d
d
China 62%
3,500(1) employees in 12 countries (20% of Imerys headcount)
Of which management: 22%
8
(1) 2007 pro forma estimates including Astron
All Imerys’ Business Groups active
in Asia-Pacific
Pigments for Paper
Performance Minerals
Monolithic Refractories
Kiln Furniture
Minerals for Ceramics
Minerals for Refractories
Minerals for Abrasives
Minerals for Filtration
Graphite
Astron
d
46(1) industrial sites
in 10 countries
9
(1) 2007 pro forma including Astron
Asia-Pacific: a comprehensive range
of minerals
d
Complementary portfolio of minerals to support growth and ensure
Imerys multi-mineral approach
market
Paper
Paint
Plastic
Filtration
Refractories
Ceramics
mineral
D
Andalusite
D
Ball Clays
D
Bentonite
D
D
Diatomite
D
D
Feldspar
D
D
Calcium Carbonate
D
D
D
D
D
Halloysite
Kaolin
D
D
Vermiculite
d
d
d
d
D
D
D
D
More than 50(1) million tons of minerals resources and 10(1) million tons
of mineral reserves, covering short and average terms production
Ongoing geological prospecting and sampling work to improve
resources and reserves for the long term
Significant mining assets acquired in 2007
Mining plans being developed, according to Imerys
safety, sustainable and economic criteria
(1) As on Dec 2006 as reported in 2006 annual report
10
Asia-Pacific is a huge opportunity for Imerys
d
The region is the fastest growing region
for our businesses
d
Asia-Pacific markets already represent a large share
of worldwide markets
11
Asia-Pacific is the fastest growing region
for most of our businesses
Worldwide
CAGR
2006/2012(2)
Asia-Pacific
CAGR
2006/2012(2)
Paper (P&W production)
+ 2.1%
+ 4%
Monolithic Refractories(1)
+ 3.8%
+ 11%
Ceramics
+ 2.5%
+ 6%
Pigments for Paints & Plastics
+ 2.9%
+ 6.8%
(1)
(2)
CAGR 2005/2010
Imerys estimates
12
Asia-Pacific is often the largest region
in market size
d
36%(1) of global printing & writing paper market
d
60%(2) of global market for refractories
d
31%(2) of global market in Paints & Coatings
d
Approximately 50%(2) of global floor tiles market
volumes
(1)
Source: RISI
(2)
Source: Imerys estimates
13
Imerys’ strategy in Asia-Pacific
d
d
d
Objective is:
z
Capture market growth as fast as possible
z
Establish leadership to make of Imerys the Asian industrial minerals leader
How to do it ?
z
Acquisitions and/or greenfield projects
z
Identify strategic reserves to better serve the market
z
Leverage on our position with our main worldwide customers for greenfield CAPEX
(e.g. paper, batteries)
Constraints:
z
Some markets are still fragmented and commoditized
i.e. not easily accessible
14
How to find a way forward?
d
d
Quality requirements
Specifications
ÆCan we engineer an Imerys solution for the local demand?
d
Availability of reserves
d
Fragmented customers' base and/or fragmented
competition:
Æ Can we get a profitable access to the market?
15
Degree of fragmentation
Low
Way forward in Asia-Pacific
Business model
potentially viable
Refractory
No accessible
business today
Sanitaryware
Paper
Abrasives
Filtration
Paint
Hi
gh
Tableware
Floor Tiles
Degree of commoditisation of the market
Low
16
Way forward in Asia-Pacific: business
guidelines
d
Assessment of business risks
d
Operate in Asia with our Imerys standards: Environment,
Health & Safety and Human Resources, whilst maintaining
a competitive cost position
d
Immediately after acquisition, tackle rapidly identified risks
areas without compromising with our business rules and Codes
of Conduct
d
Cautious technology and Industrial Property transfers
d
Be local everywhere: working with Asian managers,
engineers, and staff in all functions Æ permanent
challenge for Imerys' HR functions
17
HR challenges in Asia-Pacific
d
Large number of operations – 56 plants and offices in 12 countries
– most of them are in remote areas, with many different languages
and cultures
d
Vast area inside the India/New Zealand/Korea triangle
d
Huge competitive fight for talents in a booming territory where
cultural differences are very important
Critical HR challenge
z
Feed our growth with the needed skills and talents in order to cope
with our external & internal growth pace
z
Ensure that Imerys keep growing as a Group: culture, values
z
Ensure that our Asian businesses comply
with our business and ethical standards
18
Ongoing initiatives all over Asia-Pacific
d
Recruitment in all key function: Sales, Marketing, Operations,
Finance, HR, EHS, Audit …
d
Welcome Session, presenting the Group, its value, culture, business
opportunities everywhere in the region, by groups of 50/60 attendees
each time (one in China in November 07)
d
Behave competitively in terms of Compensation & Benefits
at all levels
z
Understanding the local markets (benchmarks, surveys),
z
Bonus practices,
z
Benefits,
… to ensure increase of loyalty at all levels and mobility in the Group
19
Be leaders in EHS and SD in the region
d
EHS professionals appointed in all sites and countries,
with detailed action plans to measure/improve/foster Safety &
Environment procedures and audits
z
2 full-time career EHS professionals in China reporting directly to EHS
Vice President in Paris headquarters
d
Constant training
z March 2006 – Imerys Safety University in Kuala Lumpur
z September 2006 – Behavior-Based Safety Seminar in Bangkok
z September 2007 – Imerys Safety University in Shanghai
z November 2007 – China Compliance Seminar in Shanghai
z 13 on-site safety training events throughout Asia in 2007
d
2008 action plan
z Imerys Safety Universities in India and China
z Regional environmental training event in China
z Training of regional safety support team
to conduct 10 on-site events
20
Ensure compliance and control
all over the region
d
Financial, Legal, EH&S, Geology experts have been appointed
and are based in our local headquarters in Singapore, Shanghai
and Beijing
d
An audit team of specialists part of our Corporate Audit Department
are located in Shanghai, working permanently on audit missions
in the region
21
An exciting challenge
d
Asia-Pacific is a huge growth opportunity for Imerys
d
Divisions are responsible and empowered to make it happen and
corporate ensures strategic push, coordination, consistency,
financing and allocation of resources
d
Let's focus together on three examples
z Pigments for Paper
z Monolithic Refractories
z Minerals for Filtration
22
- II Pigments for Paper
in Asia Pacific
23
d Paper Market
d Pigments for Paper Market
d Critical success factors
d Position in Asia and way forward
24
Paper market Asia
d
Asia is the largest paper consuming and producing region
d
Asia is the fastest growing region
d
Printing & Writing (P&W) production should grow on average
+ 4%(1) in the region
d
73%(1) of global growth over the next 5 years will be in Asia
d
50%(1) of global growth over the next 5 years will be in China
25
(1) Source: RISI
Asia share of global P&W paper demand
2006 - 2012
d
Asia represents 36% of the global P&W paper market
d
More than 73% of the global growth over 5 years is in Asia
Global
123.2
CAGR: + 2%
109.0
49.8
+ 4.0% (Asia)
39.4
Asia
6.4
5.5
30.5
30.5
4.7
6.0
28.9
30.4
2006
2012
W. Europe
E. Europe
+ 3.2% (L. Am)
49.8
+/- 0% (N. Am)
39.4
12.0
+ 5.3% (E. Eur)
9.6
11.8
2.8
15.2
+ 1.1% (W. Eur)
N. America
Asia
China
+ 1.5% (R. of Asia)
+ 0.6% (Japan)
+ 3.8% (India)
+ 6.4% (China)
22.1
2006
.
L. America
12.2
3.5
CAGR: + 4%
2012
India
Japan
R of Asia
unit: million tons of paper
26
Source: RISI
Drivers for paper growth
d
d
Fast GDP growth led by China
Rapid increase in per capita usage in both P&W and B&P
z
Increased paper usage in offices, advertising and publications
z
Increased world share in manufactured consumer goods drive packaging
% CAGR for P&W paper per capita consumption
7
6
5
4
3
China
Rest
of
Asia
2006-2012
E. Europe
Asia (total)
2
1
W. Europe
Japan
L. America
0
-1
20
40
60
80
100
N. America
-2
kg/capita P&W paper consumption 2006
27
Source: RISI
Asian capacity vs. utilisation
d
Asia has become the largest region for P&W paper production with
40 Mt produced in 2006
Asia has 37% of the global P&W paper capacity
100%
incremental capacity increase (000's tones)
60 000
98%
50 000
96%
94%
40 000
92%
90%
30 000
88%
20 000
86%
average % utilisation rate
d
84%
10 000
82%
80%
0
1994 1995
1996 1997
1998
1999 2000
P&W Paper capacity
2001 2002 2003
2004 2005
2006 2007
2008
average % utilization rate
28
Source: RISI
d Paper Market
d Pigments for Paper Market
d Critical success factors
d Position in Asia and way forward
29
Position in Asia
d
d
d
20% of PMP revenue more than 25% of EBIT is derived in Asia
d
d
d
Reserve position second to none
d
Need to further develop competence and sales force for Plastics
and Paint segments
The market leader in Pigments for Paper
Positioned to capture the growth in Asia with the leading
customers
Strong local technical & marketing competence
Untapped potential in performance minerals through strong
backbone in mining, processing and logistics created through
the Pigments for Paper platform.
30
Geographic distribution of the pigments for paper
market in Asia 2006-2012
d
d
China and India are the fastest growing market in Asia
Japan remains an important market especially for kaolin
10.6
7.4
2.0
CAGR: + 6.1%
2.6
+ 4.7% (R. of Asia)
2.9
+ 2.1% (Japan)
0.3
+ 7.0% (India)
4.7
+ 10.1% (China)
2.6
0.2
2.6
2006
million ton
China
India
Japan
2012
Rest of Asia
31
Source: RISI and Imerys data
Size and growth of regional pigments for
paper market
Growth is in Asia
Growth rate CAGR 5 years %
d
10
9
8
7
6
5
4
3
2
1
0
-1
China
Rest
of
Asia
L.
Am.
Japan
10
Europe
20
30
40
50
North America
60
70
80
90
100
Relative share of global paper pigment market %
32
Source: RISI and Imerys data
Why are pigments growing faster than paper?
d
Coated papers are growing more than uncoated papers driving higher
pigment use per ton
d
The rapidly increasing pulp prices give paper-makers the incentive to
maximise use of pigments to save cost (800 USD for Pulp)
d
In Asia the lack of wood pulp in countries with fast growing paper demand,
such as China, will drive more replacement by pigment
d
New technology and machinery allowing use of more pigments. Rapid
replacement of non sustainable existing capacity (9 Mt of straw-pulp based
old technology with no or limited pigment usage, mainly in UWF)
d
Productivity, Printability and improved Optics
33
Asia P&W paper and pigment growth
d
Growth is driven by woodfree paper (coated and uncoated)
z
CWF is the primary driver for pigment use
z
The key pigment used in CWF is carbonates (GCC)
Uncoated woodfree
Uncoated mechanical
Coated woodfree
Coated mechanical
Total Printing & Writing
Paper Mt
23.1
1.6
12.6
39.9
CAGR%
3.2%
4.9%
6.3%
6.7%
4.5%
Pigment Mt
1.6
4.2
0.5
6.3
CAGR%
6.0%
n.s.
6.4%
n.s.
6.3%
Note: The numbers refer to P&W paper production and pigment use in P&W papers only.
34
Source: RISI and Imerys data
Coated Woodfree is a high end grade
Relative
Price
€/m2
Special
Special
Grade substitution
between MWC/CWF
Reels
Grade substitution
between SC/MFC and
LWC
BB&&PP
CWF
CWF
UCWF
UCWF
MWC
MWC
Woodfree
LWC
LWC
MFC
MFC
SC
SC
MFS
MFS
Mechanical
News
News
Product Class
35
Pigments loading in Asia is due to grow
d
d
Pigment usage is higher in CWF with the highest growth
Asia is still significantly below Europe in pigment usage and new Asian
machines have higher loading than the European average
40
35
% used in paper
30
25
20
Eur
Asia
15
10
5
Eur
Asia
0
UWF
UM
CWF
Kaolin
CM
Avg. P&W
Carbonate
36
Source: Imerys data
d Paper Market
d Pigments for Paper Market
d Critical success factors
d Position in Asia and way forward
37
Kaolin to paper is a global market
d
Imerys has the best assets and logistics to address it in Asia
Demand:
2.9 Mt
Supply:
3.9 Mt
Supply:
2.5 Mt
Demand:
0.2 Mt
d
d
d
Demand:
3.6 Mt
Supply:
1.7 Mt
Demand:
1.8 Mt
Supply:
0.2 Mt
Imports to Asia is 1.6 Mt
Kaolin is sourced globally for Asia, ~90% is imported
Critical success factors are logistics and application competence and
customer relationships
Imerys is well positioned as a leading supplier
Source: Imerys data
38
Carbonates markets are local
8.6 Mt
3.6 Mt
+ 250 kt/year
+ 100 kt/year
5.7 Mt
+ 500 kt/year
0.8 Mt
+ 50 kt/year
d
d
d
Carbonates are sourced locally within Asia
Critical success factors are marble reserves, logistics, local processing
and application competence and customer relationships
Imerys is uniquely positioned as the leading carbonate supplier
Source: Imerys data - 2006 use and average growth
per year over next 10 years
39
P&W paper production in Asia is
dominated by local players
d
Total market 40 Mt
d
d
d
APP
NPI
Oji
Daio
Shandong
Hokuetsu
d
Mitsubishi
UPM
d
Hansol
April
0
million ton
5
Top-3 are 30% of the market
Top-10 are 44% of the market
These companies will be the long
term winners as they grow
organically to capture demand
growth and partially replace old
obsolete paper capacity
Long term customer relationships
are critical. Need to play with the
top 10 to win
The majority of our business
is with these companies
10
15
20
40
Source: RISI
d Paper Market
d Pigments for Paper Market
d Critical success factors
d Position in Asia and way forward
41
Imerys is uniquely positioned to be successful
in Asia
d
d
d
d
Presence in all the key growth areas
Specific local knowledge and operating expertise is critical in each
country
z
Managers in key growth areas are local talent. Technical and mining
expertise brought in to “jump start” skills
z
Imerys is developing local managerial talent to sustain growth
z
Direct sales presence in 13 countries, 9 Imerys own, 4 country distributors
in Asia
Rapid acquisition of local and regional high quality marble sources
Geographic expansion into high growth markets of India, China,
Vietnam
42
Marble mining
43
GCC plant in China
44
Logistics
45
Logistics
46
Asian industrial and sales footprint
d
20 sites and 560 employees
(2007)
Sales office
.
.
.
Japan
China
Taiwan
Malaysia
Thailand
Indonesia
Singapore
India
Australia
Vietnam
.
.
Total
1
1
1
1
1
Mining Carbonates
2
1
Kaolin plant
3
3
1
1
2
1
1
1
1
9
1
1
5
2
1
1
14
1
1
..
47
Marble success factors
d
Marble is the cornerstone for capturing the GCC growth
d
High brightness, high purity marble is scarce and in demand
z
d
Marble travels regionally to markets
z
d
Imerys owns or has access to over 90 Mt ton of high quality marble
Imerys has developed logistics expertise to move marble regionally and locally
especially in China
Sound EH&S practices are critical
z
Environmentally sound, safe and sustainable mining practices secures long term
supply and right to operate
z
It will be increasingly difficult for opportunistic small players to survive,
as authorities and customers no longer accept mining accidents
and questionable labor and environmental practices
48
BILT, India-Using Carbonates to build a brand
d
India’s largest papermaker, 50% market share of CWF paper and 30%
market share of high-end UWF paper segment. They have 5 sites in India
and one in Sabah (Malaysia)
d
d
Their strategy is product leadership, branded products and differentiation
Recognized as the leader in innovative products
z
Both B2B sales and consumer paper sales
z BILT has a unique branding strategy
d
Imerys majority JV with BILT in 2004: Imerys design, built and operate
a 60 kt/y GCC plant on-site in Bhigwan to meet 100% of BILT needs
d
Critical success factors:
z
Assistance and expertise on using GCC for maximum benefit
z High quality marble and proven logistics chain from Malaysia
z Technical assistance with their product development
z Pigment flexibility GCC usage allows them to differentiate their products
to consumers and B2B
d
BILT is growing:
2008: CWF capacity +190 kt, 2009: UWF capacity +160 kt.
We can grow with them
49
UPM Kymmene/Stora Enso-China: Working with Global
Customers in a Global way
d
Stora and UPM first to China since 10 years and lead the way with high
quality formulations. Their strategy has been to build a base in China
to grow with domestic market and regional exports
d
UPM Kymmene 2 machines for UFW & CWF in Changshu has a combined
capacity of 800 kt/y
z
d
Stora Enso operates a 155 kt/y HQ CWF paper machine in Suzhou
z
d
Imerys is the sole supplier to the 100% GCC coating formulation
Critical Success factors:
z
z
z
z
z
d
Imerys supplies custom filler GCC to the newest machine which is the fastest
uncoated wood-free paper machine in the world.
Global relationship and top quality pigments
Local sources of high brightness marble
Logistics using slurry barges and powder transport
Ability to work technically
Supply of filler to the fastest paper machine in the world
Current project by Stora to expand in Southern China and UPM
growth in Changsu are both opportunities for Imerys China
50
April, Indonesia: Value through multi-pigments and
integrated supply chain
d
APRIL operates one of the largest pulp and paper mills in Kerinci, Sumatra,
Indonesia. April are cost leaders with advantages in pulp production and
forestry. The are value priced paper sellers and leaders in Sustainable
Development (WWF partnership)
z
z
d
d
d
1998, JV Imerys 49/51 APRIL 80 kt/y GCC on-site
2006, 120 kt PCC plant and Imerys acquires majority share
Critical Success Factors:
z
z
z
z
z
d
2 million expansion to 4.5 million TPA in 2008
2 paper machines – PM1, April 1998, UWF (400 kt/y) – PM2, October 2006 UWF
(415 kt/y)
Multi-pigment competence: both machines use proprietary GCC:PCC blends
for optimum performance
Imerys raw material availability with unique fit to take marble and lime by barge from
Malaysia
Applications technology and on-site pigment customization
April wants to work with partner who uses sustainable mining practices
Imerys position in Asia to support April´s geographic expansion
April will continue to expand paper capacity in Kerinci
on the back of its massive pulp investment
51
The way forward – Pigments for Paper
d
d
Leverage Multi-pigment competence in Asia
Focus investments on GCC - there is 400 kt growth p.a.
z
d
Own the marble - world class reserves and mining
–
More than 80 years of reserves safeguards our growth
–
Security of supply and sustainability of reserves are key
z
Logistics is a core competence - continue develop scale and skills
z
Partner with the customer for “on-site” customization
We already have significant local competence in Asia
z
No help needed from Europe in implementing a turn-key plant project
z
We are further developing our local P/L leaders to deliver profitable growth
z
Improving local technical application competence across region
d
Continue geographic expansion in fast growing areas India,
China and Vietnam
d
Build on Japan
52
Asia Paints and Plastics pigment market
Kaolin and carbonate use, million ton
d
d
d
2.4 Mt growth 2006 to 2012
The key mineral is carbonate
Plastics is the most promising segment
z Greatest volume and growth
z Highest quality demands
7.4 Mt
Rest of Asia; 1.3
5.0 Mt
Japan; 1.0
India; 0.7
Rest of Asia; 1.0
CAGR 6.8%
+4.7%
+1.4%
+9.6%
Japan; 1.0
India; 0.4
China; 4.4
+8.6%
China; 2.7
2006
d
million ton
2012
Build the business to Paints & Plastics on the backbone of
Pigments for Paper assets and scale (mine, logistics, processing)
We have reached a scale where this is possible
53
Source: Imerys
- III Monolithic Refractories
in Asia Pacific
54
d Introduction to refractory products & markets
d Refractories in Asia Pacific
z Refractory market
z High temperature industry markets
d Calderys
d Conclusions
55
What are refractories?
d
Refractories are used in high temperature industries to protect
equipment against heat and are therefore consumed where
the production process requires high temperature up to 1700°C
in steel making
d
Refractories vary according to several criteria
z
Form: shaped and unshaped
– Criteria of choice : form of the furnace to line, installation tradition, cost of labour, performance
z
Chemical type: acid and basic
– Criteria : chemical nature of the fluid in contact, tradition, operating temperature, resistance to some chemical
attacks (e.g. iron oxide)
z
Main refractory mineral: alumina-silicates, magnesia, dolomite, graphite, silicon carbide
z
Degree of refractoriness: depending among others on the purity of the main aggregate
and the performance of the “matrix” (binder, filler, additives)
56
Typology of refractory products
68% of
world
market in
volume
Bricks
Acid
Basic
Alumina - silicate
Magnesia based
Special (Sp, SiC,...)
Dolomite based
Insulating
Alumina-silicate
32% of
world
market in
volume
Monolithics
Special (Sp, SiC,…)
Insulating
Basic
10%
22%
Ready shape
57
Source : Calderys estimates
Refractory demand in volume
d
Demand(1) by geography
Others
4%
Europe + ex
USSR
CIS
23%
d
Demand(1) by industry
Power &
Incineration
4%
Others
17%
Cement
5%
China
43%
Americas
13%
India
5%
Asia
12%
(1) Refractory demand = 28 Mt worldwide in 2006
Source : Calderys estimates
Foundry
5%
Steel
59%
Iron
10%
58
Market description: Iron
d
Coke oven
d
Blast furnaces
d
Tap holes
d
Casthouse floor
d
Torpedo ladles
59
Market description: steel
d
Converters
d
Electric Arc Furnace
d
Ladles
d
Lances
d
Porous Plug
d
Tundish
d
Reheat furnace
60
Market description: foundry & aluminium
d
Cupolas
d
Coreless Induction Furnace
d
Channel Furnace
d
Ladles
d
Holding furnace
61
Market description: cement & petrochem
d
Exchanger
d
Calciner
d
Rotary furnace
d
Cracking unit
d
Carbon black reactor
62
Market description: Incineration & Power
d
Waste incinerator
d
Circulating fluid bed boiler
d
Bio mass incinerator
d
Plasma Torch
63
What is a monolithic refractory ?
d
Unshaped product (vs bricks)
d
Components (4 to 20 by formula): aggregates + binder + additives
z
Refractory mineral: tabular alumina, corundum, bauxite, chamotte, magnesia…
z
Binders
– Chemical : resins, phosphate, boric acid…
– Hydraulic : aluminous cement
z
d
Additives: deflocculates, accelerators, carbon carriers,…
Main installation methods:
z
Casting
z
Gunning
z
Ramming
64
Monolithics vs. bricks
Advantages
d
d
Jointless lining (less weak points)
Speed of installation
z
d
d
d
Operations can be restarted sooner
Requires less labor to install
Necessary for complicate furnace
shapes or special items (tap-hole)
Flexible use
z
Different installations methods to adjust
to site conditions
z
Can be casted in a ready-shape for
accessories or big pieces
Limits
d
Cannot be used at some places
where
z
shell deformation occurs (rotary kilns)
z
linings requires high mechanical
strength (anode baking furnace)
65
d Introduction to refractory products & markets
d Refractories in Asia Pacific
z
Refractory market
z
High temperature industry markets
d Calderys
d Conclusions
66
Share of monolithics is still low in
developing Asia
50%
40%
World
average
32%
30%
20%
10%
0%
Europe
+ ex-CIS
Americas
Rest
of Asia
India
China
Others
67
Source : Calderys estimates
Growth in monolithic demand
will be predominantly in Asia
d
d
Monolithic Demand(1)
(volume)
Others
Others
3%
3%
Europe
+ ex
Europe
USSR
+ ex-CIS
25%
25%
China
China
35%
35%
Change in Monolithic
Demand 2010 vs. 2006
kt
CAGR 06-10
1400
+ 10.5%
1200
12%
+ 8%
10%
1000
8%
800
6%
600
400
Americas
Americas
15%
15%
IndiaIndia
4% 4%
+ 2%
(1) Monolithic demand = 9 Mt worldwide in 2006
Source : Calderys estimates
+ 2.5%
4%
200
2%
0
0%
Europe
Rest
of Asia
Asia
18%
18%
+ 2.3%
Rest of
Asia
India
China
RoW
68
Factors behind monolithic growth
d
d
End-market growth (next section)
Investment in modern equipments that are lined with monolithics
z
d
Substitution of bricks by monolithics
z
d
Pre-heater for cement plant (“dry process”), RH/DH vacuum degasser in steel plant
(“Secondary metallurgy”), etc......
Blast Furnace stack, Cement plant, Steel ladles, ...
In addition, there is a trend for increased usage of high
refractoriness monolithics vs. more simple products due to:
z
the modernization/size of new equipments
z
the need to manufacture high quality products not “polluted” by low quality refractories
(steel industry – flat vs. long)
z
the increased awareness of “cost of ownership” (how better refractories contribute
to lower operating cost or increased yield)
69
Calderys: the leader in monolithic
refractories
Asia
stronghold
Cho-
100
80
360
Siam
Refra
ctor
Qing
hua
560
Sun
AGC
Ce
rami
cs
Kros
ak
380
i
Shin
agaw
a
Ther
mal C
er.
Fose
co
ies
St G
obain
)
Cald
erys
Mine
ra
Allied
Resc
o
Minte
ch
Vesu
vius
RHI
ls
Global
Europe
stronghold
SEP
R(
US
stronghold
Brick basic
Brick acid
Brick insulating
Brick specialities
Monolithic acid
Monolithic insulating
Monolithic specialities
=> Tap-hole clay
Monolithic basic
Ready shape
Strong
World sales in m € 2006
1330
1058 241
Medium
100
<100
370
Low
234
125
115
< 100
70
d Introduction to refractory products & markets
d Refractories in Asia Pacific
z
Refractory market
z
High temperature industry markets
d Calderys
d Conclusions
71
3 Groups of countries with different
economic profiles
d
Mature Asia (Japan, South Korea, Taiwan)
d
ASEAN 4 “Tigers” (Thailand, Malaysia, Indonesia, and the Philippines)
d
Booming, Developing Asia (China, India)
GDP Growth (%)
Total World
Developing Asia
ASEAN 4
China
India
Japan
South Korea
Taiwan, China
2006
(Actual)
5.4%
9.8%
5.4%
10.7%
9.4%
2.2%
5.0%
4.7%
2007
(Forecasted)
5.2%
9.8%
5.6%
11.5%
8.9%
2.0%
4.6%
4.0%
2008
(Forecasted)
4.8%
8.8%
5.6%
10.0%
8.4%
1.7%
5.8%
4.8%
Source: IMF, October 2007
72
Position of Asia with respect
to the rest of the world
Volume of production
Steel
Ranking
(2006)
Foundry
Ranking
(2005)
Cement
Ranking
(2006)
China
1
1
1
Japan
2
4
4
India
5
5
2
Korea
6
10
6
Taiwan
12
12
n.a.
Thailand
31
21
9
73
Recent surge in steel production driven by
China and other developing Asian countries
74
Size of the steel market in Asia – Consumption
Share of Asian Countries vs. Total World Steel Output 2002, 2005,
2010 (forecasted)
2002 (Actual)
20%
3%
57%
12%
2005 (Actual)
% China
% India
% Japan
% Korea
% Taiwan
% Oceania
% RoW
31%
48%
4%
5%
2%
1%
10%
1%
4%
2%
2010 (Forecasted)
% China
% India
% Japan
% Korea
% Taiwan
% Oceania
% RoW
37%
42%
% China
% India
% Japan
% Korea
% Taiwan
% Oceania
% RoW
1%
2%
10%
4%
4%
Source: IISI
75
Steel growth forecasted to continue at a frenzy
pace in China & India
d
China: in 2002-2006 capacity increased by an average of 63 Mt
per year (the average size of Russia's annual steel production
during the period)
z
d
Steelmaking capacity is forecasted to rise to above 650 Mt by 2010(1)
vs. 500 Mt in 2007
India: steel capacities to increase to 65 Mt by 2009 to meet
demand for steel from a growing industrial sector and
infrastructure spending
z
Major investments in new plants made by international players not yet
present in India : Arcelor-Mittal (24 Mt) and Posco (12 Mt)
76
(1) Credit Suisse
Steel in China is mainly used for domestic needs
and not driven by export-oriented customers
Chinese demand by end user markets
(2006 total apparent steel consumption is 375 Mt)
Other
25%
Construction
50%
Ship building
2%
Home
appliances
2%
Automotive
5%
Machinery
16%
Source: Ansteel
77
Evolution of the steel product mix in China :
need for better refractories
d
d
d
80
The current steel product mix in China is 60% long/40% flat(1)
The adoption of new technologies, the modernization of the production
infrastructure, and the closure of obsolete production capacities will continue
to lead to the production of higher quality steel
This higher quality steel – which is to reach the 60/40 Western ratios in 2010
(Calderys estimate) – will drive the need for better refractories
76
in % of Finished
70
65
61
60
60
66
63
60
59
Flats
50
40
40
39
40
Longs
41
37
35
34
30
Sources:
CISA, SBB, IISI
24
20
10
0
China
(1) CISA, 2007
Russia
India
EU 25
S. Korea
Brazil
Japan
USA
78
70% of the foundry market is in Asia
and still growing
Share of Asian Countries vs. Total World Castings 2002, 2005
2002 (actual)
23%
36%
17%
2%
5%
8%
2005 (actual)
% China
% Japan
% India
% Korea
% Taiwan
% Thailand
% RoW
9%
29%
30%
2%
7%
15%
8%
% China
% Japan
% India
% Korea
% Taiwan
% Thailand
% RoW
9%
Source: 40th edition of Census of world casting production
79
60% of the cement market is in Asia
Share of Asian Countries vs. Total World Production 2002, 2005
2002 (actual)
42%
42%
1%
2%
2005 (actual)
% China
% India
% Japan
% Korea
% Thailand
% Vietnam
% RoW
41%
6%
3%
4%
45%
% China
% India
% Japan
% Korea
% Taiwan
%Thailand
% RoW
1%
6%
2%
2%
3%
Source: US Geological Survey, Mineral Commodity Summary, January 2007
80
Evolution of the cement production system
in China
d
Modernization, closure of obsolete capacities
d
Dry route (pre-heated tower requesting monolithic refractories
lining) is replacing wet route as it is more energy efficient; it only
accounted for 17% of the total cement production in China in 2005
(185Mt vs. 1,050Mt)
d
Due to the high infrastructure and construction needs, additional
capacities will continue to be built in the coming years
81
Forecast for main end markets in Asia
Focus on "Booming" Asia
d Steel:
d
d
z
+ 8% growth in global steel output expected for year 2007, with same level of growth
forecasted for next year, and a double digit growth forecasted in Asia
z
The worldwide increase in apparent steel use is largely concentrated in the BRIC
countries (+ 11.1% in 2008/07 vs. + 12.8% in 2007/06)
Foundry:
z
Automobile market potential is huge (China, India = world’s top 1 & 2 customer markets
with 2007 GDP growth of + 11.5% and + 8.9% respectively)
z
From 2005 to 2015, China will represent over 50% of world’s growth in the automobile
industry
z
World automobile production 2006/05: China + 28.8%, vs. Korea + 5.5%, Japan + 4%,
EU(15) - 1%
Cement:
z
China’s construction boom: by 2015, the World Bank predicts half of the world’s new
building construction will take place in China
z
Major infrastructure and construction requirements in China
and India lead to growth rate in cement production
around 10% p.a.
82
Market conclusion
d
Asia is already accounting for a large part of total world production
for high temperature industries
d
The growth in Asia is currently not done at the expense of the
mature industrialized countries which on the contrary benefit from
the current investment spend by supplying equipments and
machines to the zone
d
Most of the additional capacities will be built in the zone:
perspectives are favorable
d
New capacities are of international standard and will require
high-end monolithic refractories
83
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
84
Calderys milestones
From a small and unprofitable European player to a Worldwide # 1
in Monolithics
d
2002 - Restructuring Plibrico: profitability and trust recovery
d
2005 - Lafarge Refractories (LR) acquisition: large perimeter
extension worldwide, capitalizing important synergies
d
2007 - ACE acquisition: major step in India, a key developing
country
85
Plibrico restructuring and LR acquisition
Plibrico
d
d
2002: restructuring of production and sales followed by substantial
profitability recovery and refocusing of its activity
Nor sales neither activity in Asia due to historical market (and
brand) limitation:
z
North America: Schaefer family
z
Asia: mainly Asahi Glass
z
Europe/South Africa/South America: Imerys
Lafarge Refractories
d
d
Biggest European Monolithics player with operations in Asia
(plant in Taiwan and sales offices in Japan, China, South Korea)
Great synergies potential with Plibrico, but slightly different
culture
86
Lafarge Refractories Acquisition - Actions
d
d
New global organization (Feb. ’05)
d
d
d
d
d
d
d
New company name (Jun. ’05)
Set and integrate the sales organization country by country
(May ’05)
Country administrations in common location (until end ’05)
New controlling standards (end ’05)
Raw materials savings (end ’05)
BU France social plan (until mid ’06)
Common standard offer and technical references (mid ’06)
Closure of Scheuerfeld – 3rd German plant (Sep. ’06)
Savings achieved: €5 million on yearly base,
with sales volumes
far above the expectations
87
Calderys business model
d
Management teams (Steering, Executive and Operational
Committees)
d
d
d
d
Decentralisation (Exe. Com. represents 8 different locations)
d
d
d
Solutions (package deals) to create long-term customer links
Internationality (Exe. Com. 9 citizenships)
BU managers fully responsible for business decisions
Expertise and innovation ensured by best practise exchange
between BUs as well as technical and R&D units
Controlling and benchmarking
Customer and management international events
88
Calderys is more diversified than
the market
d
d
Sales(1)
by Geography
Africa
9%
Sales(1)
by Industry
Distributors
22%
RoW
3%
Iron & Steel
39%
Asia
19%
West Europe
50%
Thermal
13%
Petrochem
3%
East Europe + CIS
19%
Cement
7%
Foundries
16%
89
(1) 2007 proforma (Calderys + acquisitions)
Calderys worldwide
d
d
d
Proforma turnover: €477 million
Production: 600,000 t/y in 18 plants
Employees: ~ 2,100
Oosterhout
(NL)
Leeds
(UK)
Åmål
(SE)
Höganäs
(SE)
Hangelar
(DE)
Sézanne
(FR)
Gijon
(ES)
Neuwied
(DE)
Fiorano
((IT)
Puerto Ordaz
(VE)
Katni
(IN)
Kao-Shu
(TW)
Nagpur
(IN)
Vereeniging
(SA)
Calderys Plants
Vladimirovka
(UA) Zhangjiagang
(CN)
Györ
(HU)
Unanderra
(AU)
90
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
91
Asian business development
2002
2005
2008
Turnover (€ millions)
<3
25
100
Employees
2
80
> 700
Manufacturing
units
0
1
4
d
Major strategic steps:
z
2005: LRM acquisition
z
Set "Solutions & Engineering": team focused on new business approach on the Asian
market
z
2006: launch of the Chinese plant
z
2007: set the new BU Asia with Headquarter in Shanghai.
z
2007: ACE acquisition
92
Monolithics target markets
Monolithic
Market size 2006
k tons € millions
CAGR
2007-2012
China
3100
1,250
+ 10%
India
350
140
+ 11%
Japan
920
640
+ 2%
Korea
410
280
+ 2%
South East Asia
(incl.Taiwan)
320
160
+ 5%
High
Attractiveness
Calderys
Presence
Low
93
Phased entry strategy
d
Calderys entry into new Asian markets is based on a phased approach
encompassing four key steps
Set up a
sales office
Expand out
of foundry
Establish
plant
Grow by
acquisition
?
China
India
Japan
Korea
?
Taiwan /SEA
Export of silica
mixes (Sweden)
used in foundries;
“unique” product
Local team build
market knowledge
and enter I&S and
Thermal
A plant is built to better
serve customer (reactivity,
flexibility) and lower cost
(local raw materials)
Reach market
leadership if
internal growth
insufficient
94
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
95
Taiwan & South East Asia
d
d
d
d
1992: start up
Employees: 62 in 2007
Turnover: €12 million
Main business:
z
principally Iron & Steel (China Steel)
z Cement and Foundry in SEA
d
Number 1 on domestic market in monolithics
z
9% total Taiwanese share
Ping Tung Hsien
Plant & Office
Production facilities
d Alumina line: capacity 30 kt/y
d Basic line: capacity 25 kt/y
d New Pre-cast shop (2006): capacity 6 kt/y
Competitors:
d Local (SunWoorld, YohHe…), Siam Ref., RHI,
Vesuvius, Allied…
96
Development and opportunities
Sales in mTWD
Petro-
550
Chem
Others
Thermal
500
450
Foundry
Iron & Steel
400
2005
d
2006
2007
Opportunities:
z
z
z
z
z
New investment in Steel in Taiwan (Dragon Steel and Formosa Steel)
South East Asia Cement
Synergies with ACE
Petrochem market not yet attached
Vietnam: opening of new office in 2008
97
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
98
Japan & South Korea
d
d
d
d
d
d
d
Established in: 1995
Sales offices: 4
Employees: 17
Turnover: €12 million
Main business: Foundry (Calderys absolute
leader)
Competitors: Choson Refractory, Shinagawa,
Asahi…
Opportunities:
Seoul
Office
Extend the Japanese and Korean business out of Foundry
Acquisitions
Promising export activity started in Thailand
z
z
z
Tokyo
Kobe
Office
Office
Sales in constant mEUR
Thermal
12
Others
Nagoya
11
Office
10
9
8
2005
2006
2007
Foundry
99
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
100
Calderys China
d
d
1st “Wholly Owned Foreign
Enterprise (WOFE)” established
in Jan ’02 in Shanghai to enter
the Foundry segment
Xuangang
Jiugang
Baogang
Shougang
Tiangang
Taigang
Changgang
Penetration in Iron & Steel
is taking place
Bengang
Angang
Chengang
Hangang
Shougang
Tangang
Qiangang
Jigang
Laigang
Anyang
Meigang
Zhangjiagang
Plant Nangang
Shagang
Yonggang
Maagang
Baogang
Shangang
Wugang
d
Employees: 45 in 2007
Pangang
Liangang
Xianggang
Shuigang
Kungang
d
Turnover: €5 million
Liugang
Xinyu
Shanghai
OfficeDragon Steel
China Steel C
101
China plant
d
Milestones:
z
Start-up building: May 2006
z First commercial sales: April 2007
d
Data:
z
Plant area: 20,000m² of which 8,500m² are covered
z 2 lines:
– Alumina capacity: 30 kt/year
– Silica capacity: 7.5 kt/year
102
China development and next steps
Sales in mCNY
Thermal
60
Others
40
20
Foundry
Iron &
0
2005
2006
2007
Steel
d
Extend the present sales network with regional sales offices
d
Tight up with local potential partners (JV‘s on specific region or market
sectors)
d
Explore opportunity of JV with steel industry owned or controlled
refractory player
103
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
z
Calderys Overview
z
Calderys Strategy in Asia
z
Taiwan & South East Asia
z
Japan & South Korea
z
China
z
India
d Conclusions
104
India
Calderys India
d Established in: 2002
d Employees: 8 (560 with ACE)
Delhi
Office (ACE)
d Turnover: €5 million (€60 million with ACE)
Ahmedabad
d Main business: Iron & Steel, Foundry
Office (ACE)
Katni
Plant (ACE)
Colcotta
Office (ACE)
d Competitors: Vesuvius India, RHI
Pune
Nagpur
Plant & Office (ACE)
Office
Chennai
Office (ACE)
105
ACE - India the fastest growing refractories
market behind China
Economic Indicators
2005
2010
CAGR
7.1%
GDP growth rate
2005
2010
CAGR
Steel (million ton)
38
70
13%
Cement (million ton)
142
218
9%
Foundry (million ton of castings)
6.1
9.9
10%
2005
2010
CAGR
320
530
11%
Production of main refractory users
segments
Refractory Market
Volume Monolithics (‘000 ton)
Sources: IISI; Associated Chambers of Commerce and Industry of India – 2005; 40th Census of World Metal
Casting Production – 2005; Tata Steel – 2006; Refractories Applications & News – Sep/Oct 2006; Indian
Refractory Makers Association (IRMA); Midrex, Calderys estimate.
106
ACE: a leading position in India
d
ACE is the largest Indian
monolithic refractories
manufacturer:
d
ACE domestic sales
by segment in FY 06/07(F)
z
17% share of the Indian refractories
market
z 35% share of the Indian monolithic
refractories market
d
Other
26%
Iron & Steel
20%
Sponge Iron
9%
2006/07F key figures:
z
Sales: €55 million
z EBITDA: €10 million
Cement
13%
Stockist
32%
107
2007: ACE operations
d Katni plant
z
z
Historical site (started in 1951)
Capacity: ~ 130 kt
d Nagpur plant
z
Katni
SAIL
AM Jharkhand
Essar
Tata
SAIL
SAIL
AM Orissa
Posco
z
Started in 1995, specialized
in high grade monolithics
Capacity: ~ 45 kt
d Corporate & Sales
z
Nagpur HQ and 5 sales offices
Ispat
d Outsourcing
z
JSW
7 suppliers produce 60 kt
of bricks and monolithics
ACE plants
Main steel plants
Steel plant projects
108
2007: ACE strategic rationales
d
ACE monolithic focus and market leader
d
Complementary assets and product ranges with Calderys
d
Large “package” sales capability: possible exports to Middle-East
and Asia
d
Successful growth in emerging market: ACE will strengthen Imerys
with management pool having strong track record
d
Goal: build a €100 million business in a few years
109
ACE: Post acquisition actions
d
Creation of the new BU India
d
Integration within Calderys
d
Creation of an international engineering team, based in Nagpur
d
Upgrade the existing production lines
d
Organize technology transfer: precast , tap-hole clay...
d
HR potential: great pool of skilled, flexible, English speaking
resources available for further development within Calderys
110
d Introduction to refractory products & markets
d Refractories in Asia Pacific
d Calderys
d Conclusions
111
Calderys is poised for growth in Asia
d
Large presence in Asia with 4 plants in strategic locations
d
Best technical skills and solutions due to the extended Calderys
network (the largest worldwide)
d
Local country managers to ensure customers relationship
and reactivity on customers demands
d
Imerys large platform is providing local benchmark and support
(legal, HR, raw materials purchasing, network...)
112
- IV Ceramics, Refractories,
Abrasives & Filtration
in Asia Pacific
113
d Presence and strategy
d China: focus by market
A
z
Ceramics
z
Filtration
z
Recent developments: Astron China
Conclusions
114
Asia Pacific territory
d
CRAF in Asia Pacific
(proforma incl. Astron)(1):
z
2007 Sales: € 258 million
(18% of total CRAF)
z
22 industrial sites
z
2,000 employees
d
Strong focus on China
d Decentralized
organization
115
(1) By destination
CRAF industrial presence in Asia Pacific
d
A step-by-step acquisition strategy
CRAF Site
Province / Country
Minerals
Jiangmen
Guangzhou
Kerikeri
Ranong
Lampang
Jumbo
Guiyang
Zhanjiang
Korla
Korla
Alice Springs
Guiyang
Kaili
Zhengzhou
Changbai
Linjiang
Changzhou
Baotou
Bayuquan (3 plants)
Zibo
Guangdong, China
Guangdong, China
New Zealand
Thailand
Thailand
Hyderabad, India
Guizhou, China
Guangdong, China
Xinjiang, China
Xinjiang, China
Australia
Guizhou, China
Guizhou, China
Henan, China
Jilin, China
Jilin, China
Jiangsu, China
Inner Mongolia, China
Liaoning, China
Shangdong, China
Clays / Ceramic bodies
2006
Ceramic bodies
2006
Ceramic bodies
2000
Ceramic bodies
2001
Ceramic bodies
2001
Ceramic bodies
2007
Processing of various
late 1990s
Minerals for Refractories
late 1990s
Andalusite
2007
Vermiculite
2007
Vermiculite
2003
Brown Fused Alumina
late 1990s
Bauxite
2006
Brown Fused Alumina
2007
Diatomite
2005 (with World Minerals)
Diatomite
2005 (with World Minerals)
Graphite
late 1990s
Graphite
2007
Various zirconia processed products
late 2007
Zircon grinding facility
late 2007
d
The vast majority of CRAF activity in Asia-Pacific(1)
is concentrated in China Æ 54% of sales;
88% of employees and 17 plants out of 22
(1) Post Astron China
Established / Acquired
116
CRAF strategy in China
d
d
Establish a local presence either:
z
to serve non-commoditised products to Chinese
customers, when they are ready to pay a price premium
for these (generally, this is the case for Western customers
established in China, so, doing so, we also accompany
these large Western customers in their Chinese
expansion); or
z
to acquire quality, rare, mineral deposits that can be used
not only as a business platform in China, but also to export
in the region or world-wide, based on a good
quality/production cost combination; or
z
to secure, as much as possible, supply of some strategic
raw materials needed by the Group worldwide
Filtration
Refractory (Andalusite)
Ceramics
Graphite
Abrasives
Vermiculite
Refractory (Andalusite)
Filtration
Bauxite (refractory
and abrasives)
Graphite
Favour acquisitions vs. greenfield projects and 100%-owned
companies vs. majority-owned joint-ventures
Unless the joint venture partner brings a clear advantage, for example on mining
rights, or for management transition reasons
d
Identify strategic local mining deposits
117
CRAF presence in China
d
All of CRAF’s five Divisions have built a significant industrial
and commercial presence in China. Each has its own, independent,
management structure locally, with country coordination taking place
in the critical areas (Human Resources, EH&S, …) and staffing at
business group level for M&A/Development
d
This has been built over the years, small acquisition by small
acquisition
d
When completed, the Astron acquisition will provide a large
(Rmb 1,250 million total revenues), established, sales and distribution
platform into many markets (ceramics, refractories, investment
casting, …) in China
d
Our commercial networks in China not only sell local products, they
also sell strategic minerals imported from other Imerys' assets
118
CRAF presence in China
Low
d
Degree of fragmentation
d
Clear move in this direction due to:
z expansion by Western customers demanding
higher quality products
z look for more costs reduction, even by Chinese
customers (refractory)
z in certain sectors, drive by Chinese government to
close small production capacities
Question is at which pace?
Business model is potentially
viable
Refractory
Abrasives
No accessible
business today
Filtration
Sanitaryware
Hi
gh
Tableware
Floor Tiles
Degree of commoditisation of the market
Low
119
CRAF in Asia outside China
d
Strong commercial and distribution infrastructure in Japan
for all of the Business Group’s Divisions
d
Commercial platforms also in all South-East Asian Countries
and South Korea
d
Production base in Ceramics:
z
New Zealand: kaolin Æ Asia
z
Thailand: kaolin / ball clays Æ Thailand primarily
z
India: feldspar Æ Asia / Middle East / Europe
d
Vermiculite in Australia
d
Constant review of growth opportunities primarily in India
and certain South-East Asian countries
120
Ceramics
A small platform today
d Out of the CRAF’s five Divisions, Ceramics is the one with the
smallest, least successful presence in China, despite the huge size
of the Chinese ceramics industry
d
d
The difficulty to develop a business model stems for the fact that:
z
except in Sanitaryware, producers in all other ceramics segments are almost all
Chinese
z
they use specific formulations based on low-quality, commoditised, materials,
which are widely-available locally
z
for some of them (ball clays), mining is not lawfully permitted and deposits are very
small in size
So far, the business model has been therefore to develop small
business platforms to blend local minerals with, possibly, imported
ones, and help customers to move up-market. This is a slow
process; acquisitions of local deposits are continuously
being reviewed
121
Refractories
Two production units with a different strategic logic
d
d
Our presence in andalusite is recent (February 2007). The deposit
is of high-quality, relatively unique in China and dedicated:
z
first to serve the growing demand in China for high-quality refractories and, hence,
refractory minerals (driven by the modernization of the local steel industry) and,
z
progressively, to be an alternative to our South African production base, in particular
to address the Asian market
z
A project is ongoing to expand production capacity and improve the operations
The presence of C-E Minerals for a long time is almost all dedicated
to the export market:
z
Production unit for high-quality bauxite for refractories. While there was, until recently,
a large availability of comparable bauxites for exports, US customers have been
clearly valuing to have an established US player like C-E Minerals active in this
business (quality, consistency, reliability, technical service, …)
122
Fused Minerals
An important part of the bauxite sourcing equation
d
Treibacher Schleifmittel is the world leader in Fused Aluminium Oxydes, half
of which (brown fused alumina) being done out of calcined bauxite as the raw
material
d
For Treibacher Schleifmittel, China is, first and foremost, an important part
of its supply equation, since it serves a portion of its abrasive-grade bauxite
requirements. Therefore, the presence in China was at the beginning (first
two plants) dedicated to secure sourcing of calcined bauxite for European
plants and of semi-finished crude products for US plants (calcined bauxite
fused in an electrical arc furnace)
z
Treibacher Schleifmittel does not control bauxite mines in China, since these are primarily
used for alumina production, so its industrial operations are buying and processing bauxite
d
Both bauxite and semi-finished crude BFA exports are now more difficult,
due to lower availability (shut-down of small polluting operations), political
willingness to stop such exports (tax) and freight difficulties
d
In addition, Treibacher Schleifmittel purchased in June 2007,
in a significant move, a final products (brown fused alumina grains)
producer to serve its abrasives customers in China and Asia
123
Filtration
d
d
A strong, established, business platform for the local minerals for
filtration market
z
The Chinese diatomite operations of World Minerals have been brought
since its acquisition to a reasonable level of profits, despite a quite competitive local
environment
z
For a large part of the business, they manage to sell and price value-added diatomite
filtration products to Western/local customers ready to value them and also to take
into consideration our better operating standards. A part of the market remains
commodity, though
The number 2 global player in Vermiculite exporting almost
all its production
124
Graphite
A developing presence in a critical part of the world graphite
industry
d
China is by far the largest natural graphite producer in the world
d
Being in China allows Timcal:
z
to serve locally Western batteries (Duracell) and lubricant customers
z
to secure its supply of graphite salts to its North American operations
125
d Presence and strategy
d China: focus by market
A
z
Ceramics
z
Filtration
z
Recent developments: Astron China
Conclusion
126
Sanitaryware market in China
d
Production of sanitaryware in China increased from 18.9M (1991) to 98M pieces in 2006
(36% of world production) :
z
z
Growth in the 1990s was led by quantity at the expense of quality
Growth in the 2000s is driven by significant larger exports and higher quality standards
The 30 leading producers account for over 50%, and the 5 largest account for nearly 20% of total
Chinese capacity
d
Most of the world’s largest sanitaryware manufacturers have invested in China (TOTO, American
Standard, Roca, Duravit, Kohler…); foreign producers account for 22% of Chinese capacity in 2006
d
Projected production of 130M pieces in 2010, driven by real estate, housing, and major events
(2008 Beijing Olympics and 2010 World Exposition in Shanghai)
120
60
100
50
80
40
Production
60
30
40
20
20
10
0
0
%
Million pieces
d
Exports
Exports as % of output
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
127
Tableware market in China
d
25
70
60
20
50
15
Output
40
%
d
Over the past decade, production of tableware in China increased from
11B to 19B pieces in 2006 (60% of world production) ; similar to sanitaryware,
growth has been led by exports
The porcelain industry is fragmented, with the 30 leading producers together
accounting for just 14% of Chinese capacity, and fewer international producers
having invested directly in China
Domestic demand for porcelain is projected to rise from 6.8B pieces in 2005
to 8.2B pieces by 2010, with a still strong level of exports
Billion pieces
d
30
10
Exports
Exports as % of output
20
5
10
0
0
1960 1970 1980 1990 1996 2000 2001 2002 2003 2004 2005 2006
128
Floor Tiles market in China
d
d
d
China is the leading producer of tiles worldwide with an output of 2,500 Mm2
in 2005 (36% of the world total), corresponding to a 8% growth per year since
1999
The 30 leading tile producers in China accounted for 38% of national production
in 2005. In contrast to sanitaryware and tableware markets, exports accounted
for only 15% of output
Domestic demand for tiles is forecast to continue to increase, and exports
are expected to gain a larger market share
2005 Tiles production worldwide
Chinese Tiles production
3 000
2 500
2 500
2 200
Million sq.m
2 000
1 807
1 810
1 868
China
36%
Others
39%
2 000
1 600
1 500
Brazil
8%
1 000
Italy
8%
Spain
9%
500
0
1999
2000
2001
2002
2003
2004
2005
129
Ceramics production zones in China
Major ceramics
production
zones in China
130
d Presence and strategy
d China: focus by market
A
z
Ceramics
z
Filtration
z
Recent developments: Astron China
Conclusions
131
Strategy of filtration division in Asia-Pacific
d
World Minerals, part of Imerys’ Filtration Division, is present in China for:
z
The quality of its diatomite deposits
z Taking a growing share in a sustained booming economy
z Increasing deliveries to Asia-Pacific
d
Current sales are targeted to:
z
Subsidiaries of international groups which accept to pay higher-than-local-habits
prices as they want an excellent quality and service
z Volume sales for lower quality products
z For the time being, Filtration focused mainly on filtration applications; opportunities to
develop sales in other segments
d
As the need for quality is dramatically increasing, WM has started to
clearly position itself as the best-in-class, benefiting from global expertise
z
This added-value (quality, service, legal, …) is the main justification
to a higher price (+30/50%, with ~20% increase since acquisition)
which allowed return to profit
132
WM Chinese and Korean sites overview
d World Minerals Asia-Pacific,
is present in the area through:
z
two production sites (one
fully owned, one JV),
z
two imports / exports offices
in Beijing and in Seoul
z
several resale offices in
China
Celite Changbai
Celite Linjiang
Beijing Office
Sales Offices
Celite Korea
d Sales: US$21.5 million(1)
z
2 plants
z
500 employees
133
(1) Sales from Chinese and Korean entities
WM China Sales by Market
Chemicals-Organic
2%
Medicine-PharmaDrugs
2%
Food Prep-Restaurant
2%
Lube Oil Add.
1%
Food-Edible Oil
1%
Others
4%
M&M-Metals
2%
Chemicals-Enzymes
5%
Beer
50%
Food-Sweeteners-Corn
6%
Beverages-Soft Drink
8%
Filtration-Distributors
17%
134
Beer production is growing rapidly in China
d
d
Out of a total WM China sales of 27,000 tonnes of diatomite in the domestic
market, Beer segment is by far the most significant market and represents 50%
of sales in volume
Beer production in China was multiplied by 4 between 1992 and 2007, to reach
400 million hectoliters this year (440 million projected for 2008), representing
a500€ 8 billion market
450
Beer Output (m.hl.)
400
350
300
250
200
150
100
50
0
1992
d
d
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
However, alcohol content also dropped from 4.4% to 3% in the same period,
due to consumers preference of light beer, so part of the increase is diluted
by water
Still low standards for consumption per capita and average
selling price, confirm a high growth potential
for the future
135
Chinese beer production dominated by large brewers
d
d
Consolidation in beer industry reduced the number of brewers from 800 in 1992
to around 90 in 2007
The 7 leading brewing groups contribute 55% of total beer output in China,
through nearly 200 plants
Main brewers - Market shares (%)
17,5%
SAB Miller Huarun
Tsingtao
44,7%
10,0%
Yanjing
Inbev
Chongqing-Newcastle
7,0%
AB Harbin
Heineken
6,5%
4,0%
d
d
4,5%
Others
5,8%
Diatomite consumption for those 7 main brewers represent 20.5 kt
in 2007 (76% of total Chinese domestic needs)
WM sales to those customers amount to 11.1 kt, which means
a 54% market share, and 79% of the global WM Asia sales in 2007
136
Filtration in China and Korea
d
The Chinese market for diatomite and perlite (for Filtration) are estimated
at 76kt and 18kt respectively (vs. total world markets of 0.9 Mt and 1.6 Mt)
z
z
d
The Korean market for diatomite and perlite (for filtration) is estimated
at 13kt and 9kt respectively
z
d
World Minerals holds a 82% share of the diatomite market (11kt). Perlite market is essentially
served by four local producers (importers & expanders)
In 2007, World Minerals sales in Asia Pacific amounted to US$38 million
of which
z
z
d
The diatomite market is very competitive
World Minerals holds a 36% share of the Chinese diatomite market (~ 27kt) but is not today
a significant player on the perlite market which is served by a number of local producers.
US$ 22 m from local assets
US$ 16 m from US assets
WM Asia Pacific has currently 500 employees in the area, approximately
90% of them working in the mining and production operations (underground
mining with reduced mechanical assistance)
137
World Minerals in China (WM China & FTC)
Background
d
WM is present in China through six legal entities:
z
z
z
d
Two diatomite production companies located in Jilin province:
Celite Linjiang (fully owned) and Celite Changbai (owned at
72% by WM), plus LinLin JV.
One company in charge of the imports into China of the WM’s
Group products: Shanghai Trading Co (FTC)
Two BJ office companies
d
z
z
Securing major diatomite deposits
Tapping into the growing Chinese filtration market
Exporting to the whole Asian market
Celite Pacific and Celite Korea are displayed next slide
Celite Linjiang operations:
z
z
z
d
z
z
d
z
Imports to Asia
Pacific
30 373
40%
Imports to China
1 247
2%
d
Chinese Domestic
Sales
27 000
36%
Plant capacity of 21kt - operating at 80% of capacity
193 employees
Owns mining rights (2007-2017) on underground mineral
deposit with reserves of 5 years + exploration rights
Support functions are mainly carried out of the Beijing
office:
z
WM AP 2007F Sales Volumes Breakdown
Plant capacity of 40kt - operating at 60% of capacity
266 employees
Owns mining rights (2006-2016) on underground mineral
deposit with reserves of 5 years + exploration rights
Celite Changbai operations:
z
Those entities were set up in 1994-1995 with the aim of:
z
d
Operations
34 employees in Beijing, incl. sales people located
throughout China and one engineer in Linjiang
5 employees in Seoul (Celite Korea Limited)
Summary Financials
d
d
2007F Sales Volume: 44.6kt
2007F Sales: US$ 23m (including local production
and imported products)
Chinese Exports to
Asia Pacific
16 371
22%
95% of the diatomite sold is used as a filter aid
138
World Minerals in China and Korea
Overview - Celite Pacific
d
Legal entity created in 1994 to handle the Chinese
production JVs exports
z
z
Managed out of the Beijing office
Also employs some WM AP Managers serving certain Asian
market and based in Beijing
Overview - Celite Korea
d
Sales office located in Seoul
z
z
d
d
d
Summary Financials - Celite Pacific
Imports diatomite from China (now up to 71% of the imports in
volume) and the US (29% in volume)
Act as an agent for direct sales from other WM subsidiaries
into Korea
Headcount of 5 employees
2 salesmen
3 employees covering general administration
Summary Financials - Celite Korea
d
2007F Sales Volume: 11.1kt
d
2007F Sales Volume: 10kt
d
2007F Sales: US$ 8m
d
2007F Sales: US$ 6m
d
Celite Pacific acts as the sole exporter for WM’s Chinese production
facilities, while Celite Korea is WM’s Korean resale office
139
WM China : key production figures
Plants
Linjiang
Product
Natural, Calcination,
Flux Calcination
Natural & Flux
Calcination
Changbai
Mines
Ore
Capacity
(metric
tons/month)
Headcounts
Ownership
3,500
133
100%
2,100
121
71.8%
Capacity
Headcounts
Ownership
Liudaogou
Semi White / Grey
3,200
133
100%
Maanshan
Grey
1,500
72
71.8%
Xidapo(1)
White
1,500
18
71.8%
(1) Under development
140
Chinese DE market overview
Total ~ 76 kt/a
Old Changbai
5%
Lvjiang
5%
Dahua
5%
Others
5%
WM; 27kt; 36%
Hengtai
5%
Jiang Yuan
5%
Xin Hua
6%
Hua Tong
8%
Xin Hui
20%
141
(1) Asia except China
Asian(1) DE market overview
Total ~ 115 kt/a
Chuo Silika; 13kt ;
11%
Zem lite
3%
Grefco
4%
Other Chinese
1%
WM; 44.6kt; 39%
EP; 16kt ; 14%
Show a; 32kt ; 28%
142
d Presence and strategy
d China: focus by market
A
z
Ceramics
z
Filtration
z
Recent developments: Astron China
Conclusions
143
Astron China
d
Imerys has announced in August the signature of an agreement(*) for
the acquisition of Astron China, a large producer of zircon-related
products
d
Astron China Sales represent € 110 million in 2007(**)Æ + 20% vs 2006
2007 Sales by geographical zone
Asia
3%
Others
1%
North America
11%
Europe
13%
China
72%
(*) Closing is expected to take place around year-end
(**) Financial year ending June 2007
144
Astron China
d
Astron has a strong growth track record and represents
an excellent fit with Imerys existing products portfolio
z
fused zirconia will add to UCM’s recently acquired capacities, and is a good
complement to Imerys’ existing refractories, abrasives and ceramics product range
z
milled zirconia could be sold as part of our ceramic products range into frits and
glazes (together with kaolin, ball clays and feldspar)
z
zirconium chemicals have a wide customer base, including Paper and Performance
Minerals
2007 Sales by product
Others
2%
Zircon Flour
12%
Mineral Sands
24%
Zirconium
Chemicals
19%
Fused Zirconia
21%
Titanium Products
22%
145
Astron China overview
d
Astron imports zircon sand in China, distributes part of it, processes the rest with
different levels of added value, into zirconium products through its Chinese
factories network and distributes those products into the Chinese (72% of sales
in 2007) and export markets
PRODUCT LINE
Mineral Sands
07 SALES
07 CONTRIBUTION
f € 51m
f 46% of total Sales
CAPACITY
END USES
f Import of feedstock for titanium
dioxide and of unprocessed zircon
sand
f Ceramic pigment
f Refractory for the steel and glass
industry (Stabilised Fused Zirconia)
SALES GEOGRAPHIC
BREAKDOWN (%)
f China: 100%
Fused Zirconia
f € 23m
f 21% of total Sales
f 12,000 tpa
f 8,000 tpa additional
capacity to come on
line in 2008
f China: 52%
f Europe: 28%
f North America: 12%
f Ex-China Asia: 8%
Zirconium Chemicals
f € 20m
f 19% of total Sales
f 22,000 tpa
f Catalysts, deodorants
f Paper, paints
f Advanced ceramics, electronics
f North America : 49%
f Europe: 38%
f Ex-China Asia: 9%
f China and RoW: 4%
Zircon Flour
f € 14m
f 12% of total Sales
f 18,000 tpa
f Ceramic opacifier in frits or glazes
f TV glass
f China: 99%
f RoW: 1%
Others (High Purity
Zirconium and Fused
Silica)
f € 2m
f 2% of total Sales
f High purity zirconium: lasers and
vacuum coatings
f Fused silica: High-end refractories
f China: 65%
f Europe: 32%
fRoW: 3%
Total Astron
f € 110m
f China: 72%
f Europe: 13%
f North America: 11%
f Ex-China Asia: 4%
Source: Astron annual report
146
Astron China operations
d
Astron processing facilities are all located in China :
z
Zircon flour grinding facilities in Zibo (Shangdong) and Bayuquan (Liaoning), close
to the centres of Chinese ceramic industry
z
Zirconium chemical and fused zirconia plants in Bayuquan
d
Astron’s Chinese sales network consists of 8 regional sales offices
and 17 warehouses
d
Headquarters in Shenyang, 1,000 km north of Beijing
d
580 employees in China
147
Astron China operations (Cont’d)
SHENYANG
BAYUQUAN
ZIBO
ZHENGZHOU
YIXING
SHANGHAI
QUANZHOU
Regional sales offices
CHAOZHOU
FOSHAN
Production sites
Headquarters
148
Astron China
d
d
The acquisition of Astron provides Imerys with:
z
A strong sales, operations, logistics and distribution platform in China,
into several key markets such as ceramics, refractories and investment
casting
z
It also brings an experienced, strong, Chinese management team
z
Further investment and development opportunities around Astron
in China are under review
Through its preferred relationship with the seller,
Astron Ltd, Imerys also gets access to a deep worldwide
zircon sand sourcing knowledge
149
d Presence and strategy
d China: focus by market
A
z
Ceramics
z
Filtration
z
Recent developments: Astron China
Conclusions
150
Conclusions
d
We will continue to capitalize in most of our markets in Asia on
the strong underlying growth
z
dynamic internal demand
z
drive towards higher quality products (Filtration, Refractories,…)
z
move from Western customers (even, possibly, in Tableware now)
d
We will focus most of our developments on high-quality,
controllable, mining deposits
d
In China, we will leverage on our future Astron China platform. In
general, we expect a lot in 2008 from our 2007 acquisitions
(Yilong, Xinlong, ZAF, Jumbo, …)
d
Beyond China, a lot of attention will be given in 2008 to:
z
Vietnam: growing economy, rich mineral resources, good logistics into
China
z
India: better internal logistics, more moves from Western
customers, use Jumbo as beach head into Ceramics
151
Imerys in Asia-Pacific
Paris, November 28, 2007
152