WELCOME TO HEXPOL - Finansiell...

ÅMÅL, SWEDEN

May 13, 2014

WELCOME TO HEXPOL CAPITAL MARKET DAY (CMD)

May 13, 2014

- 1 -

Agenda 10:30 – Group strategy and overview (Georg Brunstam, CEO)

Group Financial overview (Karin Gunnarsson, CFO)

11:30 – Lunch

During lunch, presentation of TPE Compounding and ELASTO Sweden AB

(Kjell Fagerström, MD ELASTO Sweden AB, and his team)

12:30 – Plant tour (in groups)

13:30 – Presentation HEXPOL TPE Compounding

(Ralph Wolkener & Carsten Rüter, Presidents HEXPOL Compounding Europe/Asia)

14:00 – Coffee break

14:15 – Presentation HEXPOL Compounding NAFTA (Tracy Garrison, President HEXPOL Compounding NAFTA)

HEXPOL in Oil, Energy & Gas (Steve Chase, Regional Sales director HEXPOL Compounding NAFTA)

15:15 – Closing Remark

May 13, 2014

- 2 -

PURPOSE OF THE CAPITAL MARKET DAY

Update on the operating and financial development, Q1-14 presentation, deeper

presentation of HEXPOL Compounding and especially HEXPOL TPE Compounding

Including plant visit.

May 13, 2014

- 3 -

Introduction & presentation

Regional Sales Director,

HEXPOL Compounding

NAFTA

Georg Brunstam, CEO

Karin Gunnarsson, CFO

May 13, 2014

Group strategy and overview Including Q1-2014 update

May 13, 2014

- 4 -

HEXPOL is a world-leading polymers group with strong global positions in

advanced polymer compounds (Compounding), gaskets for plate heat

exchangers (Gaskets) and wheels made of plastic and rubber materials for

forklift and castor wheel application (Wheels).

May 13, 2014

- 5 -

HEXPOL – Fast growing with strong margins

HEXPOL’s vision is to be market leader,

number one or two, in selected technological

or geographical segments, to generate profit,

growth and shareholder value.

Our vision guides us

May 13, 2014

- 6 -

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

M SEK

Robbins (Nov 2012)

Müller Kunststoffe (Jan 2012)

EXCEL Polymers (Dec 2010)

ELASTO (Apr 2010)

Gold Key (Sep 2007)

Trostel (May 2005)

Thona (May 2004)

GFD (Jul 2002)

HEXPOL

May 13, 2014

- 7 -

HEXPOL – A fast growing Group

Contribution to sales made by acquisitions in the past twelve years (Acquisition month in parenthesis)

- Strong Growth

• Product Development – New segments (for example: Shale gas, Flame retardant)

– New products in existing segments (for example: weight saving)

– Application oriented

• Increased market share

• Acquisitions mainly within Polymer Compounding

– Existing markets

– New markets

– New chemistry

• Capacity investments in China and Mexico

• Capacity investments in TPE Compounding

May 13, 2014

- 8 -


- Growth strategy

In emerging markets and in TPE Compounding

May 13, 2014

- 9 -

Investments for growth – added capacity

Additional mixing line,

Rubber compounding

Additional line,

TPE Compounding

New PU line,

Wheels

Additional line,

Rubber

Compounding

New line,

TPE Compounding

Additional

press capacity,

Gaskets

• Greenfield, 2007

• Rubber Compounding

• 101 employees

• Installed a third line

• Acquisition, Excel Polymers 2010


• 113 employees

• Installation of a second line 2014


- Growth in Mexico

May 13, 2014

- 10 -


- Growth in Mexico

May 13, 2014

- 11 -


- Growth in Mexico

May 13, 2014

- 12 -



• 75 employees

• Installed a second line 2013

• Acquisition, Excel Polymers 2010


• 38 employees


• TPE Compounding

• 12 employees


• Gaskets

• 142 employees

• Invested in more press capacity


• Wheels

• 36 employees

• Invested in a new PU-line


- Growth in China

Raw material

manufacturers Manufacturer of

polymer compounds

Rubber and plastic

component

manufacturers

OEMs End customers

The market:

• Fragmented market – few global players – many

local players

• Few industrial consolidators

• Few vertically integrated companies

-Rubber -TPE -TP

-Silicone -FKM

- 14 -

May 13, 2014


- HEXPOL Compounding

Business model:

• “Glocal” (local supplies/JIT)

• Application focused (often End user specified)

• Customized made to order

• 95 % outside of Sweden

Value chain:

http://www.dow.com/

Main customer segments:

Strong automotive industry

Growth to automotive industries but today lower share of total Group sales

thanks to strong growth in other segments.

Automotive sales around 33% (2008 60%).

Engineering and general industry

Construction and Infrastructure

Energy, Oil and Gas sector

Strong growth for Shale Gas in the U.S.

Cable and water treatment industries

Consumer industries

Medical equipment industries

Manufacturers of plate heat exchangers

Manufacturers of forklifts and castor wheels

HEXPOL – A well positioned Group

May 13, 2014

- 15 -

• Two business areas

– HEXPOL Compounding

– HEXPOL Engineered Products

• Strong global market positions

– Global number ONE for rubber compounding

– Strong European position in Thermoplastic Elastomer Compounding (TPE)

– Global number ONE in Gaskets for plate heat exchangers (PHEs)

– Global market coverage in Wheels for fork lift trucks and castor wheels

• Global presence with production at 31 units in 9 countries (≈3,400 employees)

• Head office in Malmö, Sweden

• Shares listed on Large Cap segment of the NASDAQ OMX Nordic Exchange

May 13, 2014

- 16 -



• True global footprint – 11 of 31 production units in emerging markets

• Historical strong sales growth and good profitability

• Well invested and strong cash flow

• Long industrial history with highly experienced and dedicated management and board

• Acquisition oriented – two major acquisitions in 2010 and two further major ones in 2012

- Added 15 units with development and production

May 13, 2014

- 17 -

- With a stable organisation

Two business areas

– HEXPOL Compounding (>90 % of sales)

– HEXPOL Engineered Products (<10 % of sales)

May 13, 2014

- 18 -


- A favourable sales distribution

Sales per geographic area Jan - Mar 2014

Europe 33%

NAFTA 61%

Asia 6%


- 19 -

May 13, 2014


- Strong margin development

3 1902 608

3 798

7 1978 007 8 036 8 153

0,0

4,0

8,0

12,0

16,0

20,0

0

2 000

4 000

6 000

8 000

10 000

2008 2009 2010 2011 2012 2013 Apr -13 -Mar -14

Sales OM

M SEK %

- 20 -

May 13, 2014

• Consistently growing demand from the global automotive industry

• Growing demand from the global engineering industry

• Demand for alternative heating from the

energy sector • Outsourcing of non-core compounding

business • Globalization trend (in trade and travel)

continues to increase volume in material handling

• Thermoplastic Elastomers (TPEs) is a strong growth market, especially in medical applications

May 13, 2014

- 21 - - 21 -


- Market driving forces


• Consistently growing demand from global

automotive industry

• Demand for alternative heating from energy sector

• Outsourcing of non-core compounding business

• Globalization trend – in trade and travel –

continues to increase volume in material handling

• Thermoplastic Elastomers (TPEs) is a strong

growth market, especially in medical applications

May 13, 2014

- 22 - - 22 -

- Market driving forces

IHS January 2014 Forecast

2014 2015 2016

- NAFTA +4,0% +2,7% +2,6%

- Europa +1,3% +4,0% +3,7%

- Kina +9,2% +8,6% +7,2%

Light Vehicle Growth

May 13, 2014

- 23 -

M USD

- 23 -

19 19 20 20 21 22 23

15 16 17 17 18 18 18

14 13 13 12 12 12 12

1921 23

2527

2829

1414

15

1618

1919

0

20

40

60

80

100

120

2012 2013 2014 2015 2016 2017 2018

Rest of the World

China

Japan/Korea

North America

Europe

82

99

102

96

92

8784

Source: IHS January 2014

- Shale Gas/Fracking – Growth Opportunity

• Highest rubber consumption application in the Oil & Gas market

(NBR/HNBR)

• Key Customers: Dynadrill, Weatherford, Baker Hughes

• HEXPOL is the leading supplier of high quality Stator

Compounds in North America

Stators (for drilling motors)

Packers (seals for bore holes)

• High growth EPDM/NBR/HNBR application driven by the

booming Shale Gas/Fracking market

• Key Customers: Baker Hughes, Halliburton, Schlumberger,

Weatherford and TAM

• HEXPOL is the leading supplier of high quality Swell Packer

Compounds in North America

- 24 -

May 13, 2014



- Fragmented market in polymer compounding with few global

competitors

Examples of competitors:

• HEXPOL Compounding

– Excel Polymers

– AirBoss, Kraiburg, Dynamix, Preferred Rubber, PTE,

Robbins

– Teknor Apex, Multibase, GLS, SOFTER, Alpha Gary

– Customers own rubber compounding facilities

– Many local national compounders

• HEXPOL Engineered Products

– Räder-Vogel, Wicke, Thombert, TRP

- 25 -

May 13, 2014

- 25 -

• HEXPOL’s heritage dates back to 1895,

when brothers Carl and Wilhelm Gislow

founded Svenska Gummifabriks AB.

• Listing of Hexagon Polymers as HEXPOL

AB on the OMX Nordic Exchange in

Stockholm on 9th of June 2008.

Wilhelm Gislow Carl Gislow

A long industrial heritage in polymers

May 13, 2014

- 26 -

HEXPOL Wheels

HEXPOL Gaskets

From Rubber to Polymer

Compounding

Turning TPE

threat into a

major

Opportunity

HEXPOL

Compounding

Globalize three product areas

May 13, 2014

- 27 -

Acquisitions oriented – Major acquisitions within

HEXPOL Compounding

May 13, 2014

- 28 -

Elasto (April, 2010) – TPE Compounding

Units in UK and Sweden

Excel Polymers (Nov, 2010) – Rubber Compounding

Units in U.S., Mexico, UK and China

Müller Kunststoffe (Jan, 2012) – TPE Compounding

Units in Germany

Robbins (Nov, 2012) – Rubber Compounding

Units in U.S.

Including acquisitions within:

New end user customer segments

New geografical regions

May 13, 2014

- 29 -

Acquisitions oriented – Continued expansion

within HEXPOL Rubber Compounding

- 30 -

Acquisition of Excel Polymers, Nov 2010

May 13, 2014

A leading global supplier of performance elastomer solutions, offering a

comprehensive portfolio of compounded polymer materials, performance additives and

technical know-how, mainly sold to rubber parts manufacturers.

Approx. 800 employees and 377 MUSD in turnover divided on 8 units.

- 30 -

Excel Polymers

2009A End Market Breakdown

HEXPOL Group Automotive

sales moving from around

54% to 33%

- 31 -

May 13, 2014

- 31 -

Acquisition of Excel Polymers

- Complementary End Markets

Key information:

• An estimated annual turnover of approximately 100 MUSD

• Approx. 240 employees

• Three production facilities in the US; Muscle Shoals, AL, Findlay, OH and Tallapoosa, GA.

• Consolidated from December 2012

May 13, 2014

- 32 -

Acquisition of Robbins, Nov 2012

A leading US rubber compounder and a global leader in molded envelopes and curing tubes.

- 33 -

Åmål, Sweden

Lichtenfels, Germany

Middleton, UK

Foshan, China

May 13, 2014

Creating a Global TPE Compounding Business

- 33 -

May 13, 2014

- 34 -

Acquisition of Elasto, Apr 2010

A leading European manufacturer of thermoplastic elastomers (TPE).

Key information:

• An estimated annual turnover of approximately 33 MEUR

• Approx. 85 employees

• Production facilities in Great Britain and Sweden

• Consolidated from April 2010

Key information:

• Annual sales 46 MEUR

• Strong brands

• Strong management, well managed company

• 90 employees

• 40 % of turnover to consumer industry

• 60 % of turnover to engineering industry

- 35 -

Turnover 2008 2009 2010 F2011

MEURO 29,0 29,3 39,4 46,0

Acquisition of , Jan 2012

May 13, 2014

Müller Kunststoffe is a leading Central European developer and manufacturer of

thermoplastic elastomer compounds (TPE Compounding).

- 35 -

"We are a qualified

supplier/development partner of

technological input materials and

components with deep proprietary

technology in materials as well as

process and applications."

HIGH LEVEL OF COMPETENCE

May 13, 2014

- 36 -

• Sustainability is part of our strategic work and is a priority area.

• Group-wide targets for:

- reduced energy consumption,

- reduced emissions of greenhouse gases,

- reduced risks from chemicals,

- introduction of environmental management systems,

- safe working environment.

• Our Sustainability Report 2013 provides detailed information on how

we work and sustainability performance.

SUSTAINABLE DEVELOPMENT - A prerequisite

May 13, 2014

- 37 -

SUSTAINABILITY REPORT

SUSTAINABLE DEVELOPMENT

Available on www.hexpol.com

May 13, 2014

- 38 -

MATERIALIZING OUR VALUES

SUSTAINABLE DEVELOPMENT

May 13, 2014

- 39 -

SUSTAINABILITY WORK GOES FORWARD

May 13, 2014

- 40 -

SUSTAINABILITY EFFORTS - Some examples from the organization

May 13, 2014

- 41 -

PROFESSIONAL DEVELOPMENT

42

- Some examples from the organization

3 1902 608

3 798

7 1978 007 8 036 8 153

0,0

4,0

8,0

12,0

16,0

20,0

0

2 000

4 000

6 000

8 000

10 000

2008 2009 2010 2011 2012 2013 Apr -13 -Mar -14

Sales OM

M SEK %

- 43 -

May 13, 2014

HEXPOL Group yearly summary

MSEK

310 261

460

895

1069

1255 1321

0

250

500

750

1 000

1 250

1 500

2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

* The figures for 2009 and 2010 are reported excluding items affecting comparability

Operating Profit*

May 13, 2014

- 44 -


199

411 462 506

911

1209

1418 1465

0,0

3,0

6,0

9,0

12,0

15,0

0

300

600

900

1 200

1 500

1 800

2007 2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

Op. Cash Flow WC / Sales

MSEK % Operating Cash Flow & WC / Sales

May 13, 2014

- 45 -


2013:

+40%

Share price development

Source: OMX Nordic 2013-01-01 – 2014-05-09

+76%

Since January 2, 2014 HEXPOL's B-shares listed on the NASDAQ OMX Nordic in

segment Stockholm Large Cap after being moved up from the segment Stockholm

Nordic Mid Cap

2014:

+25%

May 13, 2014

- 46 -

MSEK

4572 297

4 076

6 953

11 823

16 591

20 790

02 0004 0006 0008 000

10 00012 00014 00016 00018 00020 00022 000

2008 2009 2010 2011 2012 2013 May -14

*The 2013 Market Capitalization is based on the share price on May 9, 2014

Market Capitalization

May 13, 2014

- 47 -


Q1 2014 – Strong start of the year

- 48 -

May 13, 2014

- 48 -

2014 2013 2013

MSEK Q1 Q1 Q4

Net Sales 2 131 2 014 1 923

Operating Profit, EBIT 364 298 321

Operating Margin, % 17,1 14,8 16,7

Profit after tax 262 216 254

Earnings per share, SEK 7,61 6,28 7,38

Operating cash flow 287 240 398

Equity/assets ratio, %

+ 22%

+ 21%

- Volume increases in all geographical regions and further

improved margins

Q1 2014 – Highlights – Strong start of the year


improved margins

• Sales increased to by 6% to 2,131 MSEK (2,014)

- Effected by lower raw materials prices, which stabilised during the last two quarters

• Operating margin further improved to 17.1% (14.8)

• Sales in NAFTA above last year

- Automotive and energy/oil/gas continued strong

- Mexico also continued strong in all segments

• Improvements in Europe

- Sales and volume above last year

- Improved sales to automotive related customers

• Earnings per share increased by 21% to 7.61 SEK (6.28)

• Strong operating cash flow, 287 MSEK (240)

May 13, 2014

- 49 -

Q1 2014 – Financials – Strong start of the year


improved margins

• Net sales increased to 2,131 MSEK (2,014)

– Increase by 6 percent

• Operating profit amounted to 364 MSEK (298)


– Including an insurance compensation of 6 MSEK for rebuilding the fire damaged production line in HEXPOL Wheels

• Operating margin further improved to 17.1% (14.8)

• Return on capital employed improved to 30,8% (24,5)

May 13, 2014

Net sales & operating margin

MS

EK

*

- 50 -

• Earnings per share amounted to 7.61 SEK (6.28)


• Strong operating cash flow, amounting to 287 MSEK (240)

• Very strong Balance Sheet

– Equity/assets ratio 61.3 % (49.6)

– Net debt further reduced 133 (1,013)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

500

1000

1500

2000

2500

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012 2013 -14

Net sales Operating Margin

* Excluding items affecting comparability

- Effected by lower raw materials prices, which stabilised during the

last two quarters

Q1 2014 – Increased sales

- Volume increased in all geographical regions

May 13, 2014

- 51 -

Quarter 1

MSEK 2014 2013 Growth

Sales 2 131 2 014 6%

Currency -34 -2%

Ex. Currency 2 097 2 014 4%

- Strong balance sheet


May 13, 2014

- 52 -

2014 2013 2013

MSEK Q1 Q1 Q4

Net Sales 2 131 2 014 1 923

Operating Profit, EBIT 364 298 321

Operating Margin, % 17,1 14,8 16,7

Profit after tax 262 216 254

Earnings per share, SEK 7,61 6,28 7,38

Operating cash flow 287 240 398

Net debt 133 1 013 312

Net debt/equity, multiple 0,0 0,3 0,1

Equity/assets ratio, % 61,3 49,6 61,5

+ 22%

+ 21%

May 13, 2014

• Strong volume increase in HEXPOL Compounding

• Continued positive development in Product area HEXPOL TPE Compounding

• Margin improvement in HEXPOL Engineered Products

- 53 -

Q1 2014 – Business areas

2014 2013 2013 2014 2013 2013 2014 2013 2013

MSEK Q1 Q1 Q4 Q1 Q1 Q4 Q1 Q1 Q4

HEXPOL

Compounding1 954 1 831 1 749 337 282 294 17,2 15,4 16,8

HEXPOL Engineered

Products177 183 174 27* 16 27** 15,3 8,7 15,5

Operating Margin, %Operating ProfitNet Sales

* Including an insurance compensation of 6 MSEK for rebuilding the fire damaged production line in HEXPOL Wheels

** Including an insurance compensation of 7 MSEK for rebuilding the fire damaged production line in HEXPOL Wheels

- Positive development

- Another strong quarter with positive volume development

in all geographical regions

Q1 2014 – HEXPOL Compounding

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

500

1000

1500

2000

2500


2010 2011 2012 2013 -14

Net sales Operat ing margin

• Sales 7% above last year: – Volume improvements in all geographical regions

– Effected by lower raw materials prices, which stabilised during the last two quarters

• Operating profit amounted to 337 MSEK (282) – Continued improvement of performance and

efficiency in operations

– Increased volumes

• Improvements in Europe – Sales and volume above last year

– Sales improved to automotive related customers

May 13, 2014

Net sales & operating margin

MS

EK

* Excluding items affecting comparability

*

- 54 -

• NAFTA – sales above last year – Strong volumes

– Automotive and energy/oil/gas continued strong

– Mexico continued strong in all segments

• Asia – significant increase of sales vs. last year

– Strong sales to automotive-related customers in China

• HEXPOL TPE Compounding – continued increased sales and improved operating profit

- Further result improvement

• Net sales amounted to 177 MSEK (183) – Sales for HEXPOL Gaskets improved

– Sales in HEXPOL Wheels was affected by the fire in Laxå, Sweden in April 2013

– Positive development in the US, China and Sri Lanka within HEXPOL Wheels

• Operating profit increased to 27 MSEK (16)

– Including insurance compensation of 6 MSEK for rebuilding the fire damaged production line in HEXPOL Wheels

– Improved vs. last year

• Operating margin 15.3% (8.7)

– Excluding insurance compensation of 6 MSEK, 11.9% (8.7%)

– Improved vs. last year

May 13, 2014

Net sales & operating margin MSEK

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

145150155160165170175180185190195


2010 2011 2012 2013 -14

Net sales Operat ing margin

*

- 55 -

Q1 2014 – HEXPOL Engineered Products


• Sales increased by 6 percent to 2,131 MSEK (2,014) - Volumes increased in all geographical regions vs. last year

- Sales in NAFTA above last year

- Raw materials prices stabilised during the last two quarters

• Improvements in Europe

• Operating profit increased with 22 percent

• Further improved margins, 17.1 % (14.8)

• Return on capital employed improved to 30.8 % (24.5)

• Earnings per share up with 21 percent

• Strong operating cash flow, 287 MSEK (240)

May 13, 2014

- 56 -


improved margins

HEXPOL Group – Depreciation/amortisation & Investments

70

9384 88

150 152 156 153

173

105

2332

103

177

145 144

0

50

100

150

200

2007 2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

Depreciation/amortisation Investments

M SEK

May 13, 2014

- 57 -

Comments:

• Investments in line with depreciations/amortizations

• Mainly capacity investments in Mexico and within TPE Compounding

• Maintenance investments primarily in the U.S.

• Rebuilding of the fire damaged PU-line in HEXPOL Wheels

MSEK

310 261

460

895

1069

1255 1321

0

250

500

750

1 000

1 250

1 500

2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14


Operating Profit*

May 13, 2014

- 58 -


MSEK

258 238

434

872

1047

12361305

0,0

4,0

8,0

12,0

16,0

20,0

0

250

500

750

1 000

1 250

1 500

1 750

2008 2009 2010 2011 2012 2013 Apr-13 -

Mar-14

Profit bef. Tax Margin

Profit before Tax* & Profit Margin*


%

May 13, 2014

- 59 -


183 172

318

619

753

930976

0,0

5,0

10,0

15,0

20,0

25,0

30,0

0

300

600

900

1 200

2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

Net Profit EPS

MSEK SEK Net Profit* & Earnings per Share**


** Historical share metrics have been adjusted after the 2011 rights issue

May 13, 2014

- 60 -


0,0

1,0

2,0

3,0

4,0

5,0

0

500

1 000

1 500

2 000

2 500

2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

Net Debt ND / EBITDA

MSEK Net Debt & Net Debt / EBITDA* ratio


May 13, 2014

- 61 -


0,0

0,5

1,0

1,5

2,0

0

1 000

2 000

3 000

4 000

2008 2009 2010 2011 2012 2013 Apr-13 -

Mar-14

Equity ND / Equity

MSEK Tot. Equity & Net Debt / Equity ratio

May 13, 2014

- 62 -


199

411 462 506

911

1209

1418 1465

0,0

3,0

6,0

9,0

12,0

15,0

0

300

600

900

1 200

1 500

1 800

2007 2008 2009 2010 2011 2012 2013 Apr-13 -Mar-14

Op. Cash Flow WC / Sales

MSEK % Operating Cash Flow & WC / Sales

May 13, 2014

- 63 -


HEXPOL’s financial targets have been revised to the following, measured at

a yearly average over a business cycle:

• Sales growth (adjusted for currency effects) is to exceed 10 per cent.

• The operating margin (adjusted for items affecting comparability) is to exceed 12

per cent.

The previous targets over a business cycle were as follows:

• Organic sales growth will average 7-10 per cent annually.

• Operating margin will average at least 8-10 per cent annually.

May 13, 2014

- 64 -

Updated Financial targets

TARGET FULFILLMENT

We have exceeded our target for the operating margin.

May 13, 2014

- 65 -

DIVIDEND POLICY

HEXPOL's earnings and equity ratio determines the size of the

dividend. HEXPOL's dividend policy is that 25-50 percent of profit

after tax to be used for distribution to HEXPOL's shareholders with

the premise that the Group's financial position is satisfactory.

AGM DECISION 9.00 SEK / share (6.00)

- An increase of 50 percent

May 13, 2014

- 66 -

Continued strong development - our best year so far

MSEK 2013 2012 2013 2012

Net Sales 1 923 1 764 8 036 8 007

Operating Profit, EBIT 321 230 1 255 1 069

Operating Margin, % 16,7 13,0 15,6 13,4

Profit after tax 254 186 930 753

Earnings per share, SEK 7,38 5,41 27,02 21,88

Operating cash flow 398 323 1 418 1 209

Net debt 312 1 215

Equity/assets ratio, % 61,5 49,2

Return on capital employed, % 27,0 24,0

Oct - Dec Jan - Dec

+ 17 %

May 13, 2014

- 67 -

Jan - Dec 2013

+ 24 %

+ 17 %

- Continued strong earnings development, our best year so far

• Sales increased to 8,036 MSEK (8,007)

- Volumes increased vs. last year - Lower raw materials prices but stabilised during fourth quarter

• Operating profit increased with 17 percent to 1,255 MSEK (1,069)

• Further improved margins, 15.6 % (13.4)

• Earnings per share up with 24 percent

• Very strong operating cash flow, 1,418 MSEK (1,209)

• Robbins, a US Rubber Compounder, successfully integrated – further strengthening our position in the US Rubber Compounding market

- Integration faster than plan

- Result ahead of plan

• Very strong balance sheet - Net debt decreased to 312 MSEK (1,215)

- Net debt/equity ratio 0.1 multiple (0.4)

- Equity/assets ratio 61.5 percent (49.2)

• The Board of Directors proposes a dividend of 9.00 SEK (6.00)

May 13, 2014

- 68 -

Full-year 2013

Kjell Fagerström, MD ELASTO Sweden AB,

and his team

Presentation of TPE Compounding

and ELASTO Sweden AB

May 13, 2014

- 69 -

ELASTO Sweden AB

May 13, 2014

- 70 -

ELASTO Sweden AB

• Founded 1976

• Moved to Åmål 1984

• Acquired by Hexpol 2010

• Size of facility: 5 120 m2

• Property size: 11 650 m2

Products

• Dryflex® TPE compounds based on SBS, SEBS & TPO

• Mediprene® TPE compounds for medical applications

Production

• 4 compounding lines with twin screw technology

• Clean compounding

• ISO 9001, ISO 14001, ISO 13485

May 13, 2014

- 71 -

What is TPE?

Polymer Family Tree

Thermoplastics Thermoplastic

Elastomers Elastomers Thermosetting

Resins

PP, PVC, ABS, PA, PE… Styrene Block Copolymers (TPS)

SBS, SEBS

Thermoplastic Polyolefins (TPO)

EPDM/PP, NBR/PP, OBC…

Thermoplastic Vulcanisate (TPV)

Dynamically vulcanised EPDM/PP

Thermoplastic Polyurethanes (TPU)

Polyether & Polyester Urethanes

Copolyesters

Polyether Block Amides

SBR, NBR, EPDM… Epoxy & Polyester Resins

Phenolic & Melamine

Resins

May 13, 2014

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FEEL &

PERFORMANCE

OF RUBBER + PROCESSABILITY

OF PLASTIC = THERMOPLASTIC

ELASTOMER

(TPE)

What is TPE?

May 13, 2014

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What is a TPE Compound?

RUBBER

(SBS / SEBS

/ EPDM)

POLYOLEFIN

(PP,PE…)

ANTI

OXIDANTS OIL FILLER PIGMENTS

ETC

Very complex formulation process

>300 raw materials within the types above

Endless combinations

May 13, 2014

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TPE Compounding

Rubber+Oil

(premix)

PP

Compounding extruder

(Heat and shear forces) Dehydration TPE

Filler

(if relevant)

Additives

Advanced compounding process

Wide variety of machine settings to achieve the right compound properties

o Temperature profile, torque, screw speed, output…

May 13, 2014

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TPE Processing Benefits

TPE FABRICATION

TPE SHAPING FINAL

PRODUCT

+ Light weight

+ Recyclable

+ Low cycletime

May 13, 2014

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UV & Weather

Resistance

Flexible Transparent

Grades

Soft Touch Scratch

Resistance RoHS Compliant

Non-slip Low

Temperature

Flexibility

Low Fogging Lightweight Medical

Grades

High Heat

Resistance

Food Contact Easy

Processing

0 Shore A to 65

Shore D

Conductive

Grades

Compression

Set

Easy to Colour

Abrasion

Resistance

Adhesion to… Antimicrobial

Grades

Chemical / Fluid

Resistance

Recyclable Flame Retardant

Grades

ELASTO Sweden

Quality brands

May 13, 2014

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Long and extensive experience

1976

38 years of experience

2014

Has developed

over 3,000 TPE formulations

Of which actively

using 400-500 today

Established excellent reputation for know-how and high quality

High profile among customers, suppliers and competitors

Modern laboratory

May 13, 2014

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Key attractions of ELASTO Sweden

• Focus on value added technical grade TPE (TPE-S)

• Operate in high growth segments, notably Medical

• Leading market position in TPE-S in the Nordic countries

• Growth in targeted exports markets, mainly Europe

• Track record of growth

• Strong cost control, whilst still investing in people

• Customers require specified high quality TPE-S solutions

• Customers are reluctant to switch between suppliers

Attractive TPE

segment

Strong market

position

Healthy growth

Excellent

customer relations

May 13, 2014

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State of the art production

• Modern production facilities

• Purpose-built for efficient and flexible

production

– New ‘clean’ line 2006

• Extensive formulation knowledge

and process know how

Success factors

• Our team − Dedicated and motivated

− Qualified chemists, polymer scientists and medical specialists

− Multi-product specialists

− Shared knowledge

− Very productive (about 500 projects p.a.)

• Mobile team − Sales-Tech teams with customer responsibility

− Frequent customer visits. Work with customer from idea to production

− Customer training and presentations

• Quality − High hit rate

− Delivery accuracy (99%)

− Customer satisfaction

May 13, 2014

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Ralph Wolkener & Carsten Rüter

Presidents HEXPOL Compounding Europe/Asia

Presentation of

HEXPOL TPE Compounding

May 13, 2014

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Capital Markets Day 2014

Agenda:

1. Organization/facilities

2. Target markets

3. Commercial organisation

4. Highlights 2013/2014

5. Technical organisation

6. Product developments

May 13, 2014

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Organisation/facilities

Organizational Chart

Hexpol AB

Hexpol TPE

Elasto Sweden Elasto UK Müller Germany Elasto China

Sales R&D Purchasing Quality Engineering Production Finance

May 13, 2014

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Lichtenfels, Germany (2 plants)

7 twin screw lines, PVC comp.

35kt capacity TPE, 6kt soft PVC

Nbr.of employees: 108

Manchester, UK

2 twin screw, 2 banbury

13kt capacity


Åmål, Sweden

4 Twin Screw lines

20 kt capacity


EU Total Capacity

~70,000 Tonnes p.a.

(Within Top 3 Producer in EU)

Foshan, China

1 twin screw line (greenfield)

Capacity: 5.000t/a

Nbr.of Employees: 12

May 13, 2014

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Target Markets

General Market

Established Market Segments

Automotive Toys, Sports & Leisure Household & Appliances Industrial & Construction

Special Market Segments

Shoes Caps & Closures Medical Film & Sheet

Complimentary Compounds…

May 13, 2014

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HEXPOL TPE

Sales by Market Segment

2013

May 13, 2014

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Commercial Organisation

Multi-channel structure

• Geographical responsibilities for ‘core’ TPE compounds

• Product specialities – Sweden = Medical

– UK = Waterswell, TPV

– Germany = Flame Retardant, PVC, Masterbatch, Cork Compounds, ‘out-the-box thinking’

• Key Account Management

• Market Segment Teams – Medical

– Caps & Closures

– Automotive Mats

• Distributors

May 13, 2014

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Highlights 2013/2014

Highlights 2013 / 2014

Expansion at Müller Kunststoffe

-Line 6 in operation since beginning 2013 and running already at full capacity since May/June

-Line 7 in operation since Q2 2014

-Expansion of offices (technical lab + customer service)

Development of new TPV range in UK

-First TPV orders after 2 year intensive development on most complex TPE family in UK

May 13, 2014

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Highlights 2013 / 2014 Grow sales in specialties

- Medical German market penetration

Investment in a new line for medical production with upgraded capacity and capability in Åmål, Sweden

- EPSeal Applications: • Aluminium closures

• Crown corks

• Plastic closures

• Tailored solutions for range of beverages including carbonated soft drinks, beer, fruit juice, cold, hotfill or pasteurisation processes

Foshan production Line - First line in place since beginning 2013

- Target markets: toys, consumers and general industries and develop from there

- Establish local Chinese supplies via EU/Nafta contacts to HQ´s

May 13, 2014

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Technical Organisation

A C

T L

O C

A L

T H I N K G L O B A L

• Local R&D (TS&D)

• direct contact for customer sites

• Customer Projects from A – Z

(Customer demands incl. process, material &

process development, on site service, TS after

implementation, complaint handling, etc.)

• Competence Centers

ALL ABOUT COMMUNICATION

• Market Trends and Innovation (Raw Materials, Formulations, Applications, Processes, etc.)

• Coordination of site activities

• Knowledge sharing between sites

• Standardization

Follow the market trends

• Automotive interior parts made of TPE (mats, buttons, etc.)

• Move from PVC to TPE in medical and toy applications (new materials and new process, also on customer site)

• 3D Printing for private usage and industrial prototyping

• Continues focus on legislation changes (Food applications)

• Raw material projects (new polymers, GTL oils, etc.) in close collaboration with suppliers

• Higher temperature resistance materials

• Flame retardant formulations

May 13, 2014

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Development Team

• 10% of all Hexpol TPE Group work in R&D (TS&D)

• AMA 9, LIF 6, MAN 5, China 2

• Different Centre of Expertise

Medical – Amal

Soft PVC, Cork, special TPE – Lichtenfels

TPV, Waterswell – Manchester

• R&D Coordination in place and lead by Klas

Dannas

May 13, 2014

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Development process

• Customer contact

− New idea, problem, challenge

− Define needs & product spec.

• Supply samples of relevant grades

• Customer evaluation and feedback

• Formulation adjustments…

• Tests and approvals (e.g. food, medical,

automotive etc.)

• Full scale production

• Final approval

• Fast response and sample turnaround

• Continuous documentation in CRM

• Follow up

May 13, 2014

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Recent Product Developments

Recent Developments - Automotive Mats

• Customer: German

• Project: Automotive Mats for various OEM’s

May 13, 2014

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• Customer: German

• Project: Cleanroom Antistatic Shoe

• Challenge: Sole and clog, antistatic, recyclable, sterilization 134C,

colourable – the soles are colour coded for different areas to

to avoid cross contamination, low abrasion

Recent Developments – Antistatic Shoes

May 13, 2014

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• Customer: China

• Project: Toy dinosaur

• Challenge: Printable TPE

Recent Developments – Dinosaur China

May 13, 2014

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Medical

• Customer: French

• Project: Radial Compression Device

- TPE wrist strap and compression pad

• Challenge: Biocompatible, Non-sensitizating

Transparency/Elasticity

May 13, 2014

- 113 -

Thank you!

Tracy Garrison, President HEXPOL Compounding NAFTA

Steve Chase, Regional Sales Director HEXPOL

Compounding NAFTA

Presentation of

HEXPOL Compounding NAFTA

May 13, 2014

- 115 -

Agenda

• Business Introduction

• Operation & Organization

• Sales & Marketing

• Keys for the Business

May 13, 2014

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NAFTA Compounding

HPC Jonesborough, TN

Burton Rubber

Processing

50.000 tpa, 2 mixing lines

HPC Statesville, NC

20.000 tpa, 2 mixing

lines

Gold Key Processing

Middlefield, OH


HPC Burton, OH

Burton Rubber

Processing


HPC Dyersburg, TN

Colonial Rubber Works


lines

HPC Querétaro, MX

20.000 tpa, 1 mixing line

Adding a new line during

2014

Chase Elastomer

Kennedale, TX

18.000 tpa, 1ml + 6 mills

HPC California

Santa Fe Springs, CA


HPC Aguascalientes,

MX


lines

Robbins LLC

Muscle Shoals, AL

12.000 tpa, 1 mixing line

Resale Additives

3rds to 3rds

• 10 Sites, 2 Countries

• 1,283 Employees • 3 Product Areas

- HEXPOL Compounding - Curing tubes and envelopes - Performance Additives

• Global Reach

Americas, Europe, Asia, Mid East & Africa

• Strong Market Brands

HEXPOL NAFTA

President & CEO

T. Garrison

COO

Compounding

R. Simpson

Regional Sales

Director

S. Chase

CFO

E. Ulmer

BUR, OH

J. Gorrell

VP, Purchasing

L. Johnston

Org Development

R. Simpson

VP, Sales

Marketing

D. Picard

MID, OH

J. Saxion

JON, TN

L. Lowe

DYR, TN

S. Smith STA, NC

M. George

M. SHOALS, AL

C. Poirier

Regional Sales

Director

B. Wynd

Regional Sales

Director

A. Claytor

Eng. Mgr.

J. Carroll

KEN, TX

J. Young

HEXPOL Compounding NAFTA Organization

QRO, MX

F. Viliesid

AGS, MX

S. Reyes SFS. CA

A. Wallace May 13, 2014

- 118 -

Organizational Development “Growing our organization by growing our people!”

Intentional daily effort for Leadership Development • International and Domestic training (via group projects, group study, book study,

video and audio resources)

• Current active participants: 55% of employees engaged (~700 employees) at

some level

Active University Co-operative program at every site • Includes disciplines of Chemical/Mechanical/Electrical/Computer Engineering,

Marketing, other…

Upward Mobility/Promotions within HEXPOL

May 13, 2014

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Focused development capabilities

Strong in-house development

organization

5 % of staff in compound

development

Central compound and

developement coordination

On-line database with HEXPOL

solutions

May 13, 2014

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Products

extrusion and molding compounds

dense and sponge

black and color compounds

continuous strips, slabs or granules

strained and non-strained compounds

flame-retardant and specialty compounds

Our experience is spread over a large number of polymer

types such as EPDM, SBR, NBR, HNBR, ACM, FKM,

AEM, IIR, CR, CSM, CM, VMQ, ECO and NR/IR.

May 13, 2014

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Our market segments

Automotive

Bldg. & Construct.

Industrial

Other

Oil & Gas

Tire Toll

Belting

Envelopes

Transportation

Rolls

OTR

Appliance

Tire

Medical

Floor Mats

Agriculture

Automotive Building & Construction

Industrial Oil & Gas

May 13, 2014

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Automotive Segmentation (Americas) Belting

3% Hose

11%

NVH

14%

Seal4%

Weather

Strip65%

Wiper3%

Diverse and well positioned

May 13, 2014

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We have an international and balanced

customer base

USA 34%

European 25%

Japanese 29%

Korean 12%

• Saargummi

• Magna

• Kinugawa

• Hwaseung Auto

• Cooper Standard

Automotive

• Henniges Automotive

• Contitech

• Hutchinson Group

• Caterpillar

• 3M Company

May 13, 2014

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Diverse and well positioned

MEXICO AUTOMOTIVE SECTOR

• Nissan – $2B in Aguascalientes

• Ford – $1.3B in Hermosillo Sonora (North

MX)

• Honda – $800M in Celaya Guanajuato

• Mazda – $500M in Salamanca Guanajuato

• Audi – $2B in Puebla

• GM – $420M in current plants in Guanajuato

San Luis Potosi

• Daimler Trucks – Potentially investing

$300M in a new plant to manufacture heavy

Truck transmissions

• BMW – Planning $2B investment to produce

the 3 Series

Current Distribution of Light

Vehicle Assembly Plants Extensive new Investments

May 13, 2014

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Priorities

• Core business growth:

– Auto, Energy, Construction, Industrial

• Balance Capacity & Leverage Assets

• Strategic Expansion of Mexico

• Effective Cost & Price Management

• Human Capital – Organizational Development

May 13, 2014

- 126 -

SECTOR UPDATE

A SPOTLIGHT ON ENERGY & GROWTH

Intentionality In Everything we Do

May 13, 2014

- 127 -

Specialized Product Expansion

Chase Elastomer Business Kennedale, TX

• Predominately Roller Market

• Family business est. 1983

• Acquired in Excel Polymers Acquisition

• In 2009 enjoyed ~65% of N American

Share—85% of business book was roll

compounds

• Share gain was limited heavily to outsource

programs.

• Began looking at complimentary Markets

Hexpol Geographic Expansion

• Evolve business book beyond roll

compounds to Oil & Gas

• Leveraged proximity to Houston

Business Performance (3 Year):

• Grew overall site sales by 65%

• Grew overall EBIT for site X4

Share Gain Across the Board:

• Grew roll compounds by ~9%

• O&G represents 35% in Texas in ‘13

• Establishing Kennedale as Technical hub

near the oilfield demand.

May 13, 2014

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Who buys rubber for Oil & Gas? Oilfield Service Companies

Top 10 Oilfield Service Co.

1.Schlumberger

2.NOV (National Oilwell)

3.Halliburton

4.Saipem

5.Transocean

6.Baker Hughes

7.Fluor

8.Weatherford

9.BJ Services

10.Petrofac

May 13, 2014

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Why Oil & Gas? # of Producing Wells

May 13, 2014

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NAFTA O&G Market - Rig Count

• 6-7 Wells for every rig.

• 2008--46%-Horizontal

• Today--78%-

Horizontal

May 13, 2014

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Why Oil & Gas?

Stators BOP’s Packers Other

• Long established customer relationships

• Strong brand from Burton-Colonial-Gold Key

• Growth trend due to shale plays

• Strong value capture for profit

• Industry looks for strength / stability

• Geographic Proximity in Texas

Major Pillar for Hexpol Growth strategy!

May 13, 2014

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May 13, 2014

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Ongoing Globalization

May 13, 2014

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Trends for O&G Compounds

• Reliability of supply and Security of Technology

• Expanding geographies

• Operational temperatures elevating

– High Pressures

– Deeper Wells (inland and offshore)

– Demand for heat resistant technology

• Speed to performance

– Sealing or Securing the hole to begin production

May 13, 2014

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Swell Packer

• NBR/HNBR – H2O Swell

• EPDM – Oil Swell

• Mandrel Built /Autoclave Cured

• Calender or Extrusion

• Major Players: Baker, Schlumberger, TAM

Int., Halliburton, Tendeka, Weatherford

• Heavy use of 3rd Party Mfg.

• 2012 Market Development

May 13, 2014

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Pipe Coating for Anti-Corrosion

May 13, 2014

- 137 -

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=FUiCEy6nKLeQSM&tbnid=yiwPAIMLwrmFnM:&ved=0CAUQjRw&url=http://www.unitedpipeline.com/Products.aspx&ei=JTFEU6bsAbHeyQHFmIHgDQ&psig=AFQjCNFvm-ukU9ohuQ1BmLu9YeBxnBDSCw&ust=1397064261966294

Offshore Thermal Pipe Coatings

May 13, 2014

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HEXPOL O&G Growth Strategy

• Economic indicators are strong into 2040

• Major well service companies expanding part production

into 2020 to Asia and Middle East

• HEXPOL operational footprint aligned for growth

May 13, 2014

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Thank you for your attention

May 13, 2014

- 140 -

Georg Brunstam, CEO

Closing Remark

May 13, 2014

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SUMMARY– STRONG MARKET POSITIONS AND

PROFITABLE GROWTH ORIENTED

• We are global with strong market positions – approx. 95 per cent of our sales outside of Sweden.

• We have deep and broad polymer application know-how – ”The vision and the busniess model is

strong”.

• We have a strong company culture.

• We have a transparent history of good growth with good margins and strong operating cash flow.

• We are working with demanding customers in segments with long term growth.

• We are acquisition oriented – with a very strong balance sheet – Robbins successfully integrated

during 2013.

• We are pro-active, transparent and focused in our sustainability work.

• Increasing volumes and stronger volume increases during the second half of 2013.

• Further improved margins during 2013.

• Strong start of 2014 – best quarter ever (so far).

We have a strong platform for the future!

May 13, 2014

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