Aktieselskabet Schouw : 2020 Q2 interim report

INVESTOR PRESENTATION

18 August 2020

Enabling long-term and

responsible transformation

Schouw & Co.

2020 Q2 report

INTRODUCTION

A portfolio of six strong businesses

Quality feed for

fish and shrimps

Revenue

DKK 11.2bn

Employees

~1,250

Fabrics for diapers	Textiles for indus-
and hygiene	trial applications
Revenue	Revenue
DKK 2.2bn	DKK 1.7bn
Employees	Employees
~750	~1,000

Electronic Manu-

facturing Services

Revenue

DKK 2.9bn

Employees

~3,800

Hydraulic compo-

nents & solutions

Revenue

DKK 2.1bn

Employees

~1,200

Remanufactured

automotive parts

Revenue

DKK 0.9bn

Employees

~1,600

Aquaculture feed

~50% of Group EBITDA

Nonwovens

~25% of Group EBITDA

Industrial solutions

~25% of Group EBITDA

2 Note: 2019 full-year figures

FINANCIALS

Very strong Q2 profit and cash flow…

Revenue DKK million

-1%

42 -51

-38

181

-107

4,969
-58
0	4,938

2019 BioMar FPC	FIN GPV HySp Borg Other 2020
Q2	Q2

EBITDA DKK million

+23%
20	-18
	-10	517
22		1
52
31
419

2019 BioMar FPC	FIN GPV HySp Borg Others 2020
Q2	Q2

Cash Flow from Operations DKK million

	+375%
		607
		6
		75
5	15	71
-63
370		607
128
128

2019 BioMar FPC	FIN GPV HySp Borg Other 2020
Q2	Q2

3

FINANCIALS

…resulting in all-time-high H1 figures

Revenue DKK million
		+1%
-11	-57
		-77
425		-130
		-56		9,740
			2
9,645

2019 BioMar FPC	FIN GPV HySp Borg Other 2020
H1	H1

EBITDA DKK million

+16%
20	-21
37	-18	0	951
54
58
821

2019 BioMar FPC	FIN GPV HySp Borg Others 2020
H1	H1

Cash Flow from Operations DKK million

	+246%
	0	789
	94
	71
	5
	93
	-15
312		789
228
228

2019 BioMar FPC	FIN GPV HySp Borg Other 2020
H1	H1

4

PORTFOLIO COMPANIES

BioMar: Strong Q2 but still uncertainty

A global leader in quality feed for aquaculture focusing on responsible use of sustainable raw materials, food safety and traceability in the entire value chain

Q2 revenue DKK billion
	+9.1%
	2.5	2.5	2.7
2.3

Very strong Q2 driven by salmon division

• 9% volume growth, driven by salmon
• LatAm and EMEA affected by corona
• Shrimp prices in Ecuador and salmon prices in Chile challenge customers
• Best ever Q2 EBITDA, good mix
• Smooth "digital" start-up of factories in China and Tasmania
• LOI to start shrimp feed in Vietnam
• Non-consolidatedfarmer Salmones Austral hit by low salmon prices
• NWC increases due to increase in activity and geographic/customer mix
• ROIC ex goodwill of 18.9%

Positive outlook but also uncertainty in 2020

• Effect of new capacity in Denmark, Australia, Chile, Ecuador (pelletised and extruded) and China
• To date, only limited corona impact but restricted feeding or lower fry release can limit growth
• End-userconsumption and HORECA segment important for future growth
• US salmon consumption and China shrimp import need to be retained
• Innovative products/concepts and close collaboration with customers remain important for value-creation

1.9
2016	2017	2018	2019	2020
Q2 EBITDA DKK million
				+11.1%		222
145	156	174	191
2016	2017	2018	2019	2020

5

CAGR

PORTFOLIO COMPANIES

FPC: Very strong demand and outlook

Market leader in spunbond fabrics used in hygiene applications improving everyday health and well-being for millions of people worldwide

Q2 revenue DKK million
	+6.1%
494	486	506	548
433

Very solid Q2, however effect from raw materials and FX

• Q2 volume increase of 21%
• Very strong demand, Asia and Europe
• DKK 32m effect from raw. mat. prices and FX compared to effect in '19Q2
• Positive effects from corona virus with surging demand for PPE products
• FPC do not produce fabrics for masks but industry is running at full speed
• Print activities in US are progressing but still loss-making
• Very solid cash flow from operations and NWC continues to decline
• ROIC ex goodwill improved to 17.1%

Current demand pattern continues throughout 2020

• Strong demand for hygiene products set to continue
• Customers planning longer than usual
• Diaper industry continues move towards specialty products and FPC focus on innovation, niche products and post-treatment applications
• Updated 2020 guidance raised to DKK 390-420m and implies full capacity utilisation rest-of-year
• No effect from raw material prices or FX included in updated guidance

2016	2017	2018	2019	2020
Q2 EBITDA DKK million
			+13.8%		124
74	82	69	72
2016	2017	2018	2019	2020

6

CAGR

PORTFOLIO COMPANIES

FIN: Offsetting auto with health-care

Leading manufacturer of lightweight non-woven fabrics used e.g. to reduce CO2 emissions in cars, in disinfection wipes, to improve infrastructure and in filtration to secure clean air

Q2 revenue DKK million
	+2.0%
	420	443
	392
362	374

Very positive Q2 with strong sales in health-care products

• Q2 volume and revenue decline following corona setback in auto, furniture and other sectors
• Continued strong US performance
• Surging sales of wipes and speciality products, e.g. for face masks
• Best ever Q2 EBITDA performance
• Global reach with spunlace capacity in France, Turkey, Brazil and US
• NWC continues to decline
• ROIC increasing, but still at unsatisfactory 5.6%

Positive 2020 outlook with good industry fundamentals

• Balanced product portfolio and two main production technologies
• Continued move towards value-added speciality products
• Strong operational efficiency and ongoing adjustment of capacity
• Nanoproducts continue to develop with very promising potential
• Demand for disinfection wipes, face mask fabrics and advanced filtration solution to continue beyond 2020

2016	2017	2018	2019	2020
Q2 EBITDA DKK million
			+5.7%		60
			52
48	49
				38
2016	2017	2018	2019	2020

7

CAGR

PORTFOLIO COMPANIES

GPV: Varying demand from global customers

European top 10 EMS company serving global industrial and cleantech customers from Asian factories with significant better-than average health & safety and working conditions

Q2 revenue DKK million
+32.7%	714	676

Q2 affected by corona with soft demand from many customers

• Revenue down with 5%
• Soft demand from large industrial customers across markets
• Effect from temporary close of sites (China and Sri Lanka) and lower activity from lockdowns
• Increase in Q2 EBITDA, partly due to soft comps (PPA and FX in 2019)
• Integration continues smooth, now implementing a Manufacturing Execution System at all sites

2020 profitability uplift despite soft revenue outlook

• Soft demand from several global customers in different segments
• Very interesting potential in MedTech with existing customers
• Continued investment in efficiency and automatization
• Order intake and H2 performance depends on European and North American business activity
• Uncertainty might continue beyond 2020
• Crises tend to increase use for outsourcing

218	286	297
2016	2017	2018	2019	2020
Q2 EBITDA DKK million
						62
				+48.5%
					42
			27	24
13
2016	2017	2018	2019	2020

8

CAGR

PORTFOLIO COMPANIES

HydraSpecma: High activity in wind segment

Leading Nordic hydraulic component and solutions specialist servicing wind turbine and other cleantech customers globally

Q2 revenue DKK million
	-0.5%
	550	565
466	457	458

Lower activity in vehicle segment gives soft Q2 figures

• Q2 revenue declined 19%
• EBITDA declines DKK 18m, however still at 2018Q2 level despite DKK 100m lower sales
• Wind segment continues to be solid
• Large vehicle segment (busses, trucks, off-highway) very soft
• Strong effort on cost cutting and streamlining efficiency
• NWC reduced and strong cash flow from operations of DKK 86m

Recovery expected but corona effects throughout 2020

• Ongoing optimisation of logistics and production network and footprint, new site in Gothenburg following plan
• Good outlook in wind segment and other stationary equipment
• Slow ramp up in vehicle OEM
• Focus on electrical products to complement hydraulic core business
• Significant uncertainty in outlook regarding OEM's 2020 ac

2016	2017	2018	2019	2020
Q2 EBITDA DKK million
			+1.4%
				64
43		48		46
37
2016	2017	2018	2019	2020

9

CAGR

PORTFOLIO COMPANIES

Borg: Soft demand but European strength

European leader in remanufacturing of automotive parts in a business model fundamentally build on circular economy

Q2 revenue DKK million
		-6.3%
	247	268
225		232

Significant effect from

European lockdowns

• All markets have seen very low demand during lockdown periods
• No cars on the road, no cars to repair
• Significant EBITDA declined directly linked to lower volumes
• Factory in UK closed for 2 months
• Polish site on reduced manning and significant distancing measures
• Good relationships to key customers
• Very solid cash flow from operations of DKK 75m following NWC reduction

Recovery to happen but full demand is still distant

• Strong effort on productivity and cost cutting across all functions
• ~200 FTEs fewer than LY
• Demand starting to pick up
• Crises tend to increase mileage and age of car fleet
• Ongoing IAM customer consolidation
• Full market recovery earliest at Q4

						173
2016	2017	2018	2019	2020
Q2	DKK million
				-25.7%
36		41
					21
			13			11
2016	2017	2018	2019	2020

10

CAGR

PORTFOLIO COMPANIES

Conglomerate corona implications

Global demand for PPE products
exploded since corona outbreak
Volume			+21%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2
EBITDA
			+72%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2
11

Decline in sales to new cars offset by
increase in hygiene and health-care products
Volume
			-13%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2
EBITDA
			+58%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2

Significant sales decline due to corona
lockdowns limiting driving activity
Volume
			-24%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2
EBITDA
			-47%
2019	2019	2019	2019	2020	2020
Q1	Q2	Q3	Q4	Q1	Q2

OUTLOOK

Guidance reinstated

	2019	2020 original	2020Q2	Midpoint deviance	Indicated after 2020Q1
	realised	susp. range	range	to org. guidance
BioMar	966	1,000-1,060	940-1,000	-60		Revenue might fall short of guidance, earnings still at
	attractive level, EBITDA range will be challenged, in
						Danish "den oprindelige forventning vil blive udfordret"
FPC	352	280-310	390-420		+110	Unchanged revenue, EBITDA increased guidance to
	DKK 320-360
FIN	141	165-185	205-225		+40	Revenue down DKK ~150m, EBITDA expected
	slightly short of original expectation, in Danish "lidt
						under det forventede interval"
GPV	196	210-240	200-230	-10		Decline in both revenue and EBITDA expected,
	impact depends on corona, in Danish "under det
						forventede interval"
HySp	215	200-220	160-180	-40		Revenue down DKK ~200m and EBITDA somewhat
	below original range, in Danish "noget under det
						forventede interval"
Borg	110	110-120	75-85	-35		Sharp decline in both revenue and EBITDA expected,
	severe setback in Q2, in Danish "væsentlig
						reduktion..."
Other	-29	-30	0		0	No change expected
Total	1,951	1,935-2,105	1,940-2,110		+5	Group financial guidance temporarily suspended

12

OUTLOOK

Status on the priorities for 2020

	▪ Maintain positions and keep volumes
Profit	▪ Streamline costs and margin mgmt.
improvement	▪ Fix underperformers

• Capital allocation to ongoing

transformation

Growth ▪ Invest to secure long-term

investments competitiveness

	▪ Reduce NWC
Capital	▪ Generate cash flow
optimisation	▪ Improve ROIC

	▪ Secure financial and management
Future-	resources
▪ Create value from ESG
proofing

13

Globalise and

✓

Regain volume

✓

Focus and

✓

create platform

in Europe/Asia

capture value

Utilise new

✓

Further

✓

Leverage on

✓

capacity

innovation

investments

Utilise strong	✓	Transform and	!	Regain top line	!
platform		improve Sweden		momentum
Continue long-	!	Optimise	✓	Expand in new	
term growth	footprint	products

THE JOURNEY

SCHOUW & CO. TOWARDS 2030

INTEGRATION ARCHITECT

2030 Next Transformation

SOLUTION PROVIDER

2025 Build Future

COMPONENT SUPPLIER

Responsible growth Sustainable profit Lasting investments Long-term value

Orchestrate and empower Inspire and focus Results are created by people

2020 Go Strong

Enabling long-term and responsible transformation

Aktieselskabet Schouw & Co.

Chr. Filtenborgs Plads 1  8000 Aarhus C  Denmark [phone]

[e-mail]

www.schouw.dk

www.linkedin.com/company/schouw Nasdaq Copenhagen ticker SCHO