PlantoPhaseOut
MercuryTechnology
(ActPlan)
TheActPlan
Background
§ InaccordancewithEUregulations,chlorineproductionwithmercury
technologyshallbebannedatDecember11,2017.Fromthatdate,the
existingfacilitiesshouldhavechangedtomembranetechnologyor,ifnot,
shouldstopitsoperations.
§ Thistechnologicalchangemeansasignificantrestructuringinthe
compositionofchlorineSpanishmarket.Ingeneral,itisnotforeseeable
thattheproductioncapacitythatcurrentlyusesmercurytechnologyis
convertedentirelytomembranetechnology.
§ ThemainchlorinecustomerofErcroshasannouncedtheclosure,by2018,
oftheplantthatconsumesthisproduct.
§ Aspreviouslyannounced,thisclosureandthetechnologicalchangewill
bringasaresulttoErcros,alsoin2018,theneedtoclosethechlorineplants
inFlixandVila-secaIstilloperatingwithmercurytechnology.
§ ItistheaimofErcrostokeeprunningthemercuryelectrolysisinVila-secaI
andFlixuntilthedaythebanonusingthistechnologycomesintoforce.
3
CurrentChlorineProductionCapacity
t/year
Mercury
technology
Membrane
technology
Total
Vila-secaI 135,000 55,000 190,000
Flix 78,000 - 78,000
Sabiñánigo - 30,000 30,000
Ercros
213,000
(71%)
85,000
(29%)
298,000
(100%)
Spain
1
575,950
(81%)
131,000
(19%)
706,950
(100%)
1
IncludedErcros.
4
ErcrosOptions
§ Option1:Converttomembranetechnologytheentirechlorineproduction
capacitythatcurrentlyusesmercury.Thisconversionwouldrequirean
estimatedinvestmentclosetoEUR180million,aclearlyexcessiveamount
relativetotheattainableyieldandtothenewchlorinedemandafterthe
closureoftheaforementionedplantconsumingthisinput.
§ Option2:Closethemercuryproductioncapacitywithouttakinganyfurther
measure.Thisoptionwouldobviouslybedetrimentaltothecompanyand
wouldimplyanEUR22milliondropintheordinaryebitda.
§ Facedwiththeseextremepositions,Ercroshasdecidedtoputinplacean
intermediatesolution(theActPlan)which,throughaseriesofactionsin
allareasofthecompany,:
§ Allowstomaintainthegrossmarginofthecompanywithoutundertaking
theconversionofallofitscurrentcapacitythatcurrentlyusesmercury
technology.
§ Itisadequatetomeettheexpecteddemandin2018.
5
TheActPlan
§ ThePlantoPhaseOutMercuryTechnology(ActPlan)includesapackageof
high-yieldinvestments(withaveragereturnof2years),whichcanbe
implementedmodularandquickly,andwithpracticallynoadditionalfixed
costs.
§ Thus,notonlytheebitdadecreaseinOption2isavoided,butalsoachieves
animprovementofEUR5million,uptoayearlyEUR48millionebitda.
§ ThetotalinvestmentrequiredamountstoEUR53.7million,significantly
lowerthantheinvestmentrequiredbyOption1(converttheentiremercury
productioncapacitytomembranetechnology)thatamountstoEUR180
million.
6
ActPlanEffects
TheActPlanalsogeneratesanumberofhighlypositiveeffectstoErcros,such
as:
§ Amorebalancedportfolioofcustomer-orientedproductsbyreducingthe
excessweightinErcrosofthechlorinerelatedbusinesses(62%ofsalesin
2015)anddecreasedmarketriskinvolvedwithproducingforasmall
numberofcustomers.
§ Lessimpactedbyelectricityexpense:lowerproductionofchlorineandthe
factofworkingexclusivelywithmembranetechnology,whichismore
efficientinelectricityconsumption,anddecreasedregulatoryriskassociated
withthisparticularsupplyandtheannualuncertaintyinvolvedwiththe
interruptibilitycompensation.
§ Greaterstabilityintheebitda,byreducingtheimpactofchangesintheprice
ofelectricityandhavingamorebalancedportfolioofproducts.
§ ThegrantedpresenceofErcrosinallitscurrentmarkets,includingcaustic
soda,asthelowerproductionwillbereplacedpurchasingtheproductfrom
othersuppliers.
7
InvestmentsUnderTheActPlan
TimeFrame2016-2017(I)
AtthefactoryinVila-secaI(ChlorineDerivativesDivision):
§ Actions:
§ 30,000tons/yearcapacityexpansionoftheexistingchlorinemembrane
technology.
§ Expansionoftheproductioncapacityofsodiumhypochloriteand
hydrochloricacid.
§ Newcausticsodaconcentrationunit.
§ Powerreliabilityimprovementoftheplant.
§ Goals:
§ Concentrateinasinglecentertheproductionofsodiumhypochloriteand
hydrochloricacidandchlorine,causticsodaandhydrogen,thussaving
fixedcostsandtransportationofrawmaterialsandfinalproducts.
§ Expandingtheproductioncapacityofchlorinewithmembranetechnology
doesnotexhaustthepossibilityoffurtherfutureexpansions,iftheyare
necessaryformarketreasons.
§ Totalinvestment:EUR20million.
8
AtthefactoryinVila-secaII(ChlorineDerivativesDivision):
§ Action:
§ ReplacingofaPVCreactor.
§ Goal:
§ Completetheprojectofthepolymerizationcapacityconcentrationofthe
companythatwashaltedin2008becauseoftheeconomiccrisisandthe
consequentdropindemand.
§ Totalinvestment:EUR3.8million.
InvestmentsUnderTheActPlan
TimeFrame2016-2017(II)
9
AtthefactoryinSabiñánigo(ChlorineDerivativesDivision):
§ Action:
§ 15,000tons/yearcapacityexpansionoftheexistingchlorinemembrane
technology.
§ Goals:
§ Thisactionwillservehydrochloricacidtothemarketinthenorthof
SpainandwillhelptomeettheneedsofcausticsodaoftheTCCAplant,
whichnowhastobecarriedfromFlix.
§ Withthisoperation,thefactoryinSabiñánigowillsignificantlyimprove
itsself-sufficiencyrateincausticsodaandmoreoverthechlorine
capacitywillbereadytomeettheadditionalneedsgeneratedbythe
increaseofTCCAproductioncapacitydescribedbelow.
§ Totalinvestment:EUR11.8million.
InvestmentsUnderTheActPlan
TimeFrame2016-2017(III)
10
AtthefactoryinAranjuez(PharmaceuticalsDivision):
§ Actions:
§ Expansionoferythromycinsandfusidicacidfermentationcapacity.
§ Expansionoffosfomycinssynthesisandderivativesoferythromycin
capacity.
§ Goal:
§ Theproductioncapacityoftheexistingfacilitiesissaturated,makingit
impossibletomeetthegrowthindemand.
§ Totalinvestment:EUR1.1million.
InvestmentsUnderTheActPlan
TimeFrame2016-2017(&IV)
11
AtthefactoryinSabiñánigo(ChlorineDerivativesDivision):
§ Action:
§ ExpansionofTCCAcapacityby7,000t/year.
§ Goal:
§ Thecurrentproductioncapacityoftheplantisalmostdepletedanditwill
beimpossibletomeettheexpectedfuturegrowingdemand.
§ Thechlorinerequiredasaresultoftheexpansionofthisplantwillcome
fromtheexpansionoftheelectrolysisalreadymentioned.
§ Totalinvestment:EUR14.0million.
InvestmentsUnderTheActPlan
TimeFrame2018-2020(I)
12
AtthefactoriesinTortosaandCerdanyola(IntermediateChemicals
Division)
§ Action:
§ Expansionoftheproductioncapacityatthepentaerythritolplantin
TortosaandmouldingcompoundsinCerdanyola.
§ Goal:
§ Addressingthegrowingdemandoftheproductsalreadymentioneddue
tothesaturationoftheconcernedproductionplants.
§ Totalinvestment:EUR3.0million.
InvestmentsUnderTheActPlan
TimeFrame2018-2020(&II)
13
VariationInTheChlorine
ProductionCapacity
t/year Initialcapacity Finalcapacity
Vila-secaI 190,000 85,000
Flix 78,000 -
Sabiñánigo 30,000 45,000
Ercros 298,000
130,000
(-56%)
Technology
71%mercury
29%membrane
100%membrane
14
SummaryOfActions
Actions
Investment
(M€)
Timeframe2016-2017 36.7
Vila-secaI 20.0
Vila-secaII 3.8
Sabiñánigo 11.8
Aranjuez 1.1
Timeframe2018-2020 17.0
Sabiñánigo 14.0
TortosaandCerdanyola 3.0
TOTAL 53.7
15
ActPlanFunding
§ Currently,Ercroshasahighfinancialcapacitywithitsownresources:
§ Equity:EUR183.8million.
§ Netfinancialdebt(NFD):EUR86.1million.
§ Ebitda(E)ofthelast12month:EUR43.3million.
§ NFD/E:2times.
§ Totalinvestmentrequired:EUR53.7million.
§ Recoveryrate:2years.
§ Financingoftheplan:
§ Actionsofthetimeframe2016-2017:EUR36.7million.
§ EUR25millionfromownresources.
§ EUR12millionfromexternalfunding.
§ Actionsofthetimeframe2018-2020:EUR17million.
§ Fromownresources.
16
ErcrosGrowthPotential
Internalgrowthpotentialareas:

§ Itisexpectedasignificantincreaseinsalesofsteriledrugs,whichwilloccur
oncethenewplant(currentlyinthecommissioningphase)becomesfully
operational.
§ Chlorinetabletsforswimmingpools:increaseddemandinTCCAwillbemet
withtheexpansionofthecapacityoftheplantin2020andsupplemented
withhighervalueaddedproducts(boricacidfreetabletsandmicro-
encapsulatedtablets).
§ Plastic:therecoveryinthePVCproductiontopre-crisislevelswillrespond
totheincreaseddemandassociatedwitheconomicrecoveryandwillbe
complementedwithnewproductsunderdevelopment(ErcrosFlex
®
and
ErcrosBio
®
).
§ Formaldehydederivatives:eliminatingcriticalbottlenecksperfectlyidentified
willallowtomaintainthehighprofitabilityandgrowthpotentialofthese
products.
§ Enhancingtheactivityofmarketingthird-partyproducts,inordertomeet
customersdemands.
17
TheNewErcros
§ Lowerchlorineproductioncapacity(56%less),butallofitusingmembrane
technology.
§ Lowercostandconsumptionofelectricity,thankstothereductionof
chlorineproductioncapacityandtheincreasedenergyefficiencyof
membranetechnology.
§ Ercroswillcontinueoperatingandevenincreaseitspresenceinmarket
segmentswhereiscurrentlyinvolved.
§ Thecustomerbasewillbemorebalancedanddiversified,anditsportfolio
willputthefocusonhighvalueaddedproducts.
§ Ercroswillbelesscyclical,reducingitsdependenceonelectricityand
chlorine-relatedproducts.
§ Ercroswillbealowindebtedcompany,withrenewed,efficientand
competitiveplants.
ThenewErcroswillbesomewhatsmaller,
butmoreprofitableandsolvent.
18
AdditionalDocuments
KeyNotes
1
Average2015.
2
Year2015.
Registeredname Ercros,S.A.
CIF A-08000630
Headquarters Avda.Diagonal,595-595,08014Barcelona(Spain).
Incorporation 1989mergerbetweenERTandCROS
Sharecapital EUR34.2million(94%free float).
Socialstructure
Stockcompany.SharesquotedontheSpanishstock
exchange
Divisions
ChlorineDerivativesDivision,IntermediateChemicals
DivisionandPharmaceuticalsDivision
Workforce
1
1,369workers/11factories.
Sales
2
EUR618.3million
Exports
2
49%ofsales
20
StatementOfProfitOrLoss
EURmillion Year2015 1T2016 LTM
1
Revenue
627.21 154.92 631.78
Saleofgoods
618.27 154.06 619.92
Otheroperatingincome
6.37 1.02 5.65
Changeininventory
2.57 -0.16 6.21
Expenses
-594.59 -138.97 -588.47
Procurements
-279.41 -70.23 -281.90
Supplies
-124.22 -22.74 -116.54
Employeeexpenses
-79.86 -20.80 -80.50
Otheroperatingexpenses
-111.10 -25.20 -109.53
Ebitda
32.62 15.95 43.31
Amortization
-19.87 -4.72 -19.61
Ebit
12.75 11.23 23.70
Financeexpenses
-7.65 -1.51 -7.25
Exchangeratevariations
1.65 -0.21 -0.58
ErningBeforesTaxes
6.75 9.51 15.87
IncomeTaxes
0.49 -1.54 -1.06
Profitfortheperiod
7.24 7.97 14.81
21
1
Calculationofthelast12months(fromApril1,2015toMarch31,2016).
FinancialAndStockMarketInformation
31-12-2015 31-03-2016
Financialindicators
Equity(EURmillion) 175.88 183.80
Netfinancialdebt(EURmillion) 91.23 86.14
Indebtedness(NFD/E) 0.52 0.47
Debtcoverage(NFD/E) 2.80 1.99
1
Stockmarketindicators
Marketcapitalization(EURmillion) 70.28 68.00
Shareprice(EUR) 0.62 0.60
Sharesonthemarket(million) 114.08 114.08
Earningpershare(EUR) 0.06 0.13
2
PVC(marketcapitalization/E) 0.40 0.37
PER(marketcapitalization/benefits) 9.71 4.59
2
1
Calculatedfromtheebitdaofthelast12months,whichwasEUR43.31million.
2
Calculatedfromtheresultofthelast12months,whichwasEUR14.81million.
22
IndustrialStructure
Division FacilitiesProducts Applications
Chlorine
Derivatives
Cardona,Flix,
Tarragona,
Sabiñánigo,Vila-
SecaI,Monzón
andVila-SecaII
Causticpotash
Causticsoda
Chlorine
Chloroisocyanurates
Hydrochloricacid
Sodiumchlorate
Sodiumchloride
Sodiumchlorite
Sodiumhypochlorite
EDC
PVC
VCM
Chemicalindustry
Generalindustry
Derivativesmanufacturing
Swimmingpools
Generalindustry
Paperpulpbleaching
Chemicalindustry
Watertreatment
Watertreatment
VCMmanufacturing
Construction
PVCmanufacturing
Intermediate
Chemicals
Almussafes,
Cerdanyola
andTortosa
Formaldehyde
Gluesandresins
Mouldingcompounds
Paraformaldehyde
Pentaerythritol
Sodiumformate
Derivativesmanufacturing
Woodindustry
Electrotechnics
Resins
Paints
Tanningindustry
Pharmaceuticals
Aranjuez Erythromycin
Fusidicacid
Phosfomycin
Antibiotics
Skininfections
Antibiotics
23
BusinessParticipationinSales
1
ChlorineDerivatives
62%
Pharmacy(APIs)
8%
Intermediate
Chemicals
30%
1
Year2015.
24
ProductionFacilities
25
CompetitivePosition
Spain Europe World
Position Share Position Share Position Share
BasicChemicals
Causticsoda 24% 2% - -
Causticpotash
75% 7% - -
Sodiumhypochlorite
43% 11ª 12% - -
Sodiumchlorate
51% 6% - -
Cloroisocyanurates
40% 27% - -
PVC 33% 4% - -
IntermediateChemicals
Formaldehyde 80% - - - -
Paraformaldehyde
90% 35% 18%
Pentaerythritol
35% 25% 6%
Gluesandresins 50% 8% - -
Mouldingcompounds 80% 30% 8%
Pharmaceuticals
Fusidicacid - - 20% 45%
Phosfomycins 40% 40% 20%
26
Forfurtherinformation
Ercros
Avda.Diagonal,593-595
08014Barcelona
SPAIN
Tel.:+34934393009
+34609880630
Fax:+34934308073
E-mail:ercros@ercros.es
www.ercros.es
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