PrésentationPowerPoint
2006 Annual Results
22 March 2007
2006 Annual Results - 22 March 20072
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
3 2006 Annual Results - 22 March 2007
2006: A Major Crossroad for Sequana
2006 brought a major change to Sequana, leading to the distribution of over €1,960m to our shareholders
► €350m in the form of cash dividends (ordinary and exceptional)► c. €1,610m through a share buy-back
Every shareholder will thus have received a total of €19.3 per share:
● Exchange offer 57.3% x €28 = €16.0 per share● Dividend paid out in 2006 €3.3 per share
€19.3 per share
4 2006 Annual Results - 22 March 2007
Highlights
2006: A Major Crossroad for Sequana
In 2006, Sequana Capital became a pure paper-sector player with two unlisted, 100%-owned subsidiaries► Arjowiggins, the world leader in creative and technical papers► Antalis, Europe's leading distributor of paper and visual communication products
This new strategic focus took effect on 18 December 2006, when Sequana Capital distributed its €1.6bn stake in SGS to its shareholders► The EGM of 30 October 2006 approved a buy-back of up to 57.6m (54.31%) of the
Company’s shares► As a result:
● 57 521 414 shares were bought back via an exchange for SGS shares● 125 566 shares were bought back for cash for €21 per share
Sequana’s new ownership breakdown is: IFIL (48.88%), AGF (13.66%), and public (37.46%)
5 2006 Annual Results - 22 March 2007
Share Price Performance
Market capitalization as of 21/03/07: €1,145 mShare price as of 21/03/07: €23,31 / share
15
16
17
18
19
20
21
22
23
24
25
26
27
janv-06 févr-06 m ars-06 avr-06 m ai-06 ju in -06 ju il-06 août-06 sept-06 oct-06 nov-06 déc-06 janv-07 févr-07 m ars-070
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
1 100 000
1 200 000
Share Price - € VolumeDividend
Distribution 3,3€ / share
Share buy-back annoucement
Offer ClosingOffer
Opening
6 2006 Annual Results - 22 March 2007
Europe's leading distributor of paper and visual communication productsPresent in 36 countries and providing 22,000 deliveries a day180,000 + customer base 6,000 employees, 73 warehouses
Sequana Today: A Diversified Paper Group
Global leader in creative and technical papersEstablished, prestigious brands: Arches, Conqueror, Maine Gloss, Rives, UtopiaPresent in 82 countries (sales)7,800 employees, 30 facilities
Sales: €2.0bn Sales: €2.3bn
Paper manufacturing Paper merchanting
Net Consolidated Sales: €4.0bn
7 2006 Annual Results - 22 March 2007
2006 Sales Split by Geography2006 Sales Split by Segment
Sequana Today: A Diversified Paper Group
A revenue base well balanced between manufacturing and merchanting activities
Western Europe remains Sequana’s main market
A global player in specialty paper manufacturing and merchanting
European Union69%
RoW16%
US10%
Other European countries
5%
AW - Communication
14%
ANT - Printing35%
ANT - Other7%
AW - Security & Technology
16%
ANT - Office13%
AW - Graphic15%
8 2006 Annual Results - 22 March 2007
Corporate communicationPromotion & advertisingLuxury packagingFine arts paperTechnical thin papers(carbonless, thin opaque)
Manufacturing: Arjowiggins
Communication
“Paper as a business and
communication means”
Graphic
“Paper as a printing and publishing
support”
Woodfree Coated Woodfree Coated with Recycled fibers
Security & Technology
“Technological solutions for
industry”
33% of SalesASP: €700-800/t
32% of SalesASP: €1,200-8,000/t
35% of SalesASP: €1,200-8,000/t
Product Portfolio Key Success Factors
ServiceLocal production (transportation cost / ASP)Pulp / paper integration
Brands and creativity R&D spending Worldwide availability for global customers
Decor papers, backings for abrasivesBanknotes, security documents and RFID, labellingHospital and Medical applications
Understanding of customers’ needsHigh R&D spending requiring leadership positionGlobal footprint
Key Figures (1)
Sequana Today: A Diversified Paper Group
___________________________1. ASP: Average Selling Price.
9 2006 Annual Results - 22 March 2007
Worldwide Presence European Presence
7,800 people employed in 30 facilities and 3 R&D centersMajor European footprintRapid development in Eastern Europe and Asia
Arjowiggins: footprint
Comments
Naples
GelidaAnnonay
Rives/Charavines
Bessé-sur-BrayeLe Bourray
Brno (2006)
Arches
Dettingen
Virginal
ApeldoornDartford Clacton
Chartham
Ivybridge
Stoneywood
Wizernes
Bergerac
Crévecoeur
Neuilly en Thelle
Sequana Today: A Diversified Paper Group
CombinedLocks South Hadley
Charlotte
Salto
Witcel
Shouguang(2006-2007)
QingDaoQuzhou (2007)
Graphic Papers
Communication
Security and Technology
10 2006 Annual Results - 22 March 2007
Print Paper65%
Visual Com.2%
Packaging5%
Office Paper24%
Prom. Products4%
Europe90%
RoW10%
Sequana Today: A Diversified Paper Group
Merchanting: Antalis
2006 Sales Split by End-Markets 2006 Sales Split by Geography
Europe is both Antalis’ first and most competitive market
The development in high growth regions like Latin America and Asia is key to margin expansion
11 2006 Annual Results - 22 March 2007
Antalis: footprint
___________________________1. Number in brackets denotes Antalis’ ranking.
Sequana Today: A Diversified Paper Group
South Africa (#1)
Asia (#1)
Worldwide Presence European Presence (1)
Comments
Turkey (#1)Italy (#3)
Spain (#2)Portugal (#3)
Finland (#3)
Baltic States (#3)
Poland (#1)
Czech Republic (#3)
Romania (#2)
Slovakia (#1)
Austria
Switzerland (#1)
Ireland (#2)
France (#1)
Luxembourg (#1)
Belgium (#1) Netherlands (#5)
UK (#3)
Germany (#5)
6,000 people in 36 countriesBroad European footprint with leading market positionsLeading positions in fast growing countries as well
12 2006 Annual Results - 22 March 2007
Sequana Today: A Diversified Paper Group
Strengths Weaknesses
Leadership positions on high value added, high technology and know-how intensive segmentsPrestigious brandsSuccessful expansion into low cost, high growth areas
Strongly exposed to Western EuropeLack of critical mass in coated woodfree, now a commoditized segment led by integrated players (Sappi, M-Real, UPM)
Opportunities Threats
Sound balance sheet allowing to seize external growth opportunitiesBe an active player in the consolidation of the market to strengthen leadership positions / dispose of activities lacking critical mass
Difficulty to pass through raw materials and other costs increases to customers (CWF)Risk of capacity closures in Western Europe being offset by decreases in exports to US and Asia (overcapacity in Asia)
2006 Annual Results - 22 March 200713
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
14 2006 Annual Results - 22 March 2007
Demand in Sequana’s various market segments and geographies showed contrasted trends:
► Growth in electronic media weighs on paper-related advertising spend (Coated Woodfree; Specialty Papers)
► Improvement in office printers connected to the Internet supports growth in office papers (‘Cut-size’) at the expense of carbonless forms, reports and brochures (Coated Woodfree) and of traditional corporate communication supports (Letterheads)
► Widespread relocation move towards low cost geographies (Eastern Europe, China) also affects the printing and publishing segments (apart from newspapers and periodicals)
Widespread increase in costs (wood, pulp, energy, chemical, transportation) affected all players and was particularly detrimental to those manufacturers purchasing their pulp externally
Market Environment: 2006
15 2006 Annual Results - 22 March 2007
Market Environment: 2006
Prices followed contrasted trends on Sequana’s various segments:► They increased on those segments where demand grew strongly and/or
consolidation is highest (e.g., Cut-size, Specialty Papers)► They decreased on those segments facing the strongest overcapacity and where
exports are prominent and less and less profitable (Coated Woodfree)
Capacity closures announcements have multiplied in Western Europe
► The price increases they should allow by theoretically improving the supply/demand equation will face significant hurdles, in particular in Coated Woodfree● Decrease in export volumes (facing competition from Chinese exporters and
adversely affected by strong Euro)● Manufacturers implementing restructuring plans will find it difficult to raise prices
while keeping their volumes “in-house”● Poor health among Western European printers
16 2006 Annual Results - 22 March 2007
Market Environment: Growth Factors
Setting up dedicated strategies towards emerging countries is essential; all sector players are re-evaluating their production and commercial networks accordingly Sequana’s markets exhibit contrasted levels of inertia (investments; know-how)«Cut-size» growth, boosted by substitution effects, remains in line with GDP growth in Western Europe
Paper Demand vs. GDP in Western Europe Paper Demand Forecasts by Region
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
GDP Paper Demand
___________________________Source: EMGE.
2,3%
7,3%
1,4%1,0%
5,8%
4,1%3,4%
2,8%
0%
2%
4%
6%
8%
Easter
n Euro
pe
ChinaAsia
(Other)
Rest O
f Wor
ldWorld
(avg
.)Weste
rn E
urope
North A
merica
Japan
Paper demand (printing & publishing) CAGR (2005-2010)
17 2006 Annual Results - 22 March 2007
Market Environment: European Coated Woodfree
1,495
6,760
10,030 1,915
1,620
1,460
1,370
975
375240 580
700
1470
50
Deliveries Capacity Sappi M-RealStora EnsoLecta UPM Burgo Arjo-Wiggins
ScheufelenOthers
US Europe Asia
► Unfavorable currency effectthat prevents from exporting to the US
► Asian pressureespecially from Korea which has entered the US market and created overcapacity that would indirectly impact the European market
► Increase in Asian capacity preventing European manufacturers from exporting local overcapacity
Western Europe
Eastern Europe
Exports
Imports 8,980
Overcapacity of around 10%; exports threatened by increased capacity in Asia
___________________________Source: EMGE.
Worldwide coated woodfree capacity (kT)
18 2006 Annual Results - 22 March 2007
Market Environment: Costs
In the meantime, electricity prices increased by 14% in 2006 compared to 2005
Comparison Between Recent Price Increase Announcements and Expectations as of end 2006Uncoated Woodfree Coated Woodfree
YoY growth expected in 2007 5-8% 3-5%
Recent price increase announcements since 2006
2-3% ~0%
___________________________Source: Broker research.
30%
40%
50%
60%
70%
80%
90%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Ratio
Pulp / Coated Woodfree Price Ratio Selling Price Evolution – Distributors
+15%
- 8%
Coated paper, 100 grams A4 copier, C, gsm
04-04 08-04 12-04 04-05 08-05 12-05 04-06 08-06 12-06650
700
750
800
850
900
19 2006 Annual Results - 22 March 2007
2,200
2,300
2,400
2,500
2,600
2003 2004 2005 2006650
750
850
950
2003 2004 2005 2006
Market Environment: Selling Prices
Selling prices – Coated Woodfree vs. Specialty PapersThe average selling price of Coated Woodfree has experienced a strong decline while that of Specialty Papers has increased sharply since 2004
€/t€/t
Coated Woodfree Average Selling Price (Manufacturers) Specialty Papers Average Selling Price
___________________________Source: Arjowiggins
+8,1%-16,5%
20 2006 Annual Results - 22 March 2007
Growth drivers (volume and prices) have evolved negatively since the 2000 peak
Average selling price and volumes – European Paper Merchanting Sector
Market Environment
850
900
950
1,000
1,050
1,100
1,150
1,200
1,250
1999 2000 2001 2002 2003 2004 2005 2006
Price (€/t)
9,400
9,600
9,800
10,000
10,200
10,400
10,600
10,800
11,000
Volume (t m)
1,177€/t10.8 Mt
9.8 Mt
999€/t
(9.3%)
(15.7%)
Average Selling Price Volume (market)___________________________Source: Eugropa
2006 Annual Results - 22 March 200721
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
22 2006 Annual Results - 22 March 2007
Sequana: Consolidated Income Statement (IFRS)
€m, 31 Dec. Year End 2006 2005
Total Net Sales 3,979 3,998Growth in % (0.5%) -Recurring Operating Expenses (3,886) (3,886)Recurring Operating Income 93 112Margin in % 2.3% 2.8%Other Operating Expenses (66) (251)Operating Income 27 (139)Margin in % 0.7% (3.5%)Net Financial income 18 (30)Income Tax (40) (39)Net Result of Consolidated Companies 5 (208)Margin in % 0.1% (5.2%)Income from Associates 1 1Discontinued Operations 952 563Net Income (Total) 958 356Minority Interests 0 (8)
Net Income (Group Share) 958 348
Net Income per Share 9,20 3,29
23 2006 Annual Results - 22 March 2007
Sequana: Consolidated Income Statement
€m, 31 Dec. Year End 2006 2005
3,998-
2195.6%
1122.9%
(30)
(22)
Misc. Recurring Items 5 9
691.7%
(268)Share of Associates 62 58
497(8)
348Net Income 958
Total Net Sales 3,979% Growth (0.5%)
EBITDA 187% Margin 4.7%
EBIT 93% Margin 2.3%
Net Financial Income (20)
Income Tax (9)
Recurring Net Income 69% Margin 1.7%
After Tax non-recurring Result (62)
Discontinued Operations 889Minority Interests 0
Comments
Flat turnover due to difficult paper markets in Western Europe, offset by fast growing emerging markets
Consolidated EBITDA margin at 4.7%
Decrease in non-recurring losses: ► Lower asset impairments► €25m capital gain on Legg
Mason shares sale► -€21m exit tax
Significant capital gain on SGS shares sale and distribution
24 2006 Annual Results - 22 March 2007
Sequana: Consolidated Balance Sheet (IFRS)
€m, 31 Dec. Year End 2006 2005
Goodwill 763 815Equity stakes 3 626Other Fixed Assets 890 1,140
Trade Debtors 953 1 006
Cash & Equivalents 255 496
Other Liabilities 57 71
Total Liabilities 3,706 5,002
Shareholders Equity 1,244 2,193
Other Trading Liabilities 32 0
Inventories 538 550
Other Trading Assets 304 369
Total Assets 3,706 5,002
Provisions 562 592
Financial Debt 687 1,117
Trade Payables 1,124 1,029
Simplified Balance Sheet
25 2006 Annual Results - 22 March 2007
€mn, 31 Dec. Year End 2006 2005
Goodwill 763 815Financial Investments 3 626Other Fixed Assets 990 1,279
Other Trading Assets 146 37
Other Liabilities 32 0
Total Liabilities 3,393 4,313
Equity 1,244 2,193
Net Debt 380 433
Inventories 538 550Trade Receivables 953 1,006
Total Assets 3,393 4,313
Trade Payables 1,124 1,029Other Trading Liabilities 51 66
Provisions 562 592
Sequana: Consolidated Balance Sheet
CommentsSimplified Balance Sheet
Reduction in shareholders equity due to capital reduction following SGS operation
Decrease in other fixed assets essentially related to the sale of Legg Mason shares and the impact of impairments
Reduction in consolidated group net debt reflects strict working capital management and asset base optimization (real estate and Legg Mason shares), despite €350m dividend payout
26 2006 Annual Results - 22 March 2007
Sequana: Consolidated Cash Flow (IFRS)
(1) Of which €184m related to Legg Mason shares disposal.
€m, 31 Dec. Year End 2006
958
+/- Other (216) (386)
(842)
Funds From Operations 116 195
- Net Capital Expenditures (24) (59)
Cash Flow from Investing Activities 207 319
- Dividends Paid (350) (42)
Increase (Decrease) in Cash & Cash Equivalents (193) 128
Opening Cash 400 272
(7)26(3)
132
186(1)
45
40
(526)
(6)
207
+ Change in Working Capital 27
Cash Flow from Operations 209
+/- Net Acquisitions (1)
+ Dividends Received 14
Cash Flow from Financing Activities (414)
+/- FX Impact 14
Closing Cash & Cash Equivalents 400
Net Income 356
+/- Items Not Affecting Cash (161)
+/- Other 379
2005
- Taxes Paid (13)
+/- Other 0
Summary Cash Flow Statement
27 2006 Annual Results - 22 March 2007
Sequana: Debt Variation
€m, 31 Dec. Year End 2006
Opening Net Cash (433)
Taxes paid (11)
Acq and sales of assets – nets 133
Dividends received 63
Dividends paid (350)
Closing Net Cash (380)
EBITDA 187Working Capital Movements 40
Acq. and sales of shares – nets 145
Capex (131)
Financing costs (23)
Summary Cash Flow Statement Comments
Cash Flow from operations was €96m
Exceptional dividend and acquisitions were financed through the sale of Legg Mason shares as well as the disposal of Antalis warehouses and of non-core assets across the group
Despite the exceptional dividend paid, Net Debt was reduced by €53m.
2006 Annual Results - 22 March 200728
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
29 2006 Annual Results - 22 March 2007
Key Segment Reporting
30 2006 Annual Results - 22 March 2007
Arjowiggins: Strategy
Faced with lackluster demand and external costs increases difficult to pass through to customers on several key segments – the Arjowiggins team has devised an enterprise transformation plan based on five strategic priorities:
► Rapid expansion into high potential geographies (Eastern Europe, Asia)
► Research and Development focused on the integration of total solutions supporting our client’s own development
► Consolidation of the commercial organization to benefit from Arjowiggins’ Global Offer (“one face to customer”, key accounts, prescription)
► Implementation of enterprise-wide processes (IT, procurement, “Lean Manufacturing”, Supply Chain, etc.) to significantly improve productivity and extract underlying synergies – targeting €80m of identified savings over 3 years
► Execution of the perimeter changes which will enable Arjowiggins to be leader on all its activities
31 2006 Annual Results - 22 March 2007
Arjowiggins: Key Events
Key new partnerships► Canson-Hamelin
● Sale of Canson’s conversion and B2C activities of (€90m sales, 420 p.)● Long term supply agreement with the Hamelin group● Brand sharing in drawing, tracing and inkjet papers
► Exclusive partnership with Thibierge & Comar (high-quality fine papers)► Increase of direct stake in GEP (84%) (e-passport software, smart labelling, etc.)
New commercial organisation in the Graphic and Communication segments (One face to customers)
Key restructuring measures► Closure of the Nivelles facility► Closure of one machine at the Rives facility► Important rationalizations in Dartford, Bessé and Wizernes
Expansion into Eastern Europe and Asia► Start of the Czech site (Medical & Hospital, Carbonless)► JV-Chenming construction (China, Decor)► HBD majority stake (China, Tracing paper)
32 2006 Annual Results - 22 March 2007
Arjowiggins Competitive Landscape
Graphic
Communication
Medical & Hospital
Security &Technology
M Real Commercial Printing
Stora Enso Fine Paper
UPM Fine Paper
Sappi Fine Paper
Neenah
GlatfelterWausau
Ahlstrom
Munksjö
De La Rue
Fedrigoni(Fabriano)
Industrial Solutions
Security & Labelling
Neenah
Glatfelter
33 2006 Annual Results - 22 March 2007
Arjowiggins: Key P&L Items
€mn, 31 Dec. Year End 2006 2005
Total Sales 1,926 1,935
EBITDA 142 164
Capital Employed 814 872ROCE 7.9% 8.2%
% Margin 7.4% 8.5%
% Growth (0%) -
EBIT 64 71% Margin 3.3% 3.6%
Comments
2005 figures are pro forma the Canson transaction
Flat sales► Positive price and mix: +2.4%► Lower volumes: -2.6%
€22m decrease in EBITDA ► Rise in external costs (+€44m)► Lower fixed costs (-€23m)
ROCE stable at around 8%
34 2006 Annual Results - 22 March 2007
Arjowiggins: 2005-2006 EBITDA Bridge
(44)
23
(27)
142
164
(17)
(1)
0
50
100
150
200
2005 EBITDA Volume & Price Direct Costs Energy Fixed Costs 2006 EBITDA
€m
35 2006 Annual Results - 22 March 2007
Arjowiggins: Key Cash Flow Items
€m, 31 Dec. Year End 2006 2005
Operating Cash Flow 106 165
EBITDA 142 164
Change in working capital 52 64
Capex (88) (63)
Net debt 251 291
Comments
Growth capex in high potential areas and sectors: decor paper mill in China (€30m), conversion unit in the Czech Republic
Sustained cash flow generation thanks to strict working capital management
New significant reduction in net debt
36 2006 Annual Results - 22 March 2007
Papiers Fins Couchés Europe
46%
Papiers Fins Couchés Recyclés
7%
Coated Fine Paper US
45%
Arjowiggins: Graphic Segment
2006 Sales Split by End-Market Comments
► Efficiency: “Couchés Avenir” cost reduction program, €60/t; leverage our local presence through service to fight-off competitors
► Positioning: develop a “green”offering in Europe and the US
► Mid-term: to be the leader-consolidator in recycled paper; evaluate the global partnerships capable of bridging the gap with large integrated players
Segments in which Arjowiggins is the market leader#1
#2 Coated Fine Paper Europe
46%
Coated Fine Paper US 45%
Coated Recycled Fine Paper 7%
37 2006 Annual Results - 22 March 2007
___________________________1. Operating cash flow defined as: Operating Income + Depreciation – Capital Expenditures - Change in Working Capital. Change in working capital amounted to
€25m and €10m in 2005 and 2006, respectively.2. ROCE defined as Operating Income / Capital Employed.3. Including non-recurring gain for €7m.
EBITDA Operating Income(3)Sales
Operating Cash Flow(1) ROCE(2)Capital Employed
667 646
2005 2006
Arjowiggins: Graphic Segment
17
7
2005 2006
52
27
2005 2006
2.4%
5.3%
2005 2006
52
36
2005 2006
300327
2005 2006
€m, except ROCE
38 2006 Annual Results - 22 March 2007
Arjowiggins: Communication Segment
Segments in which Arjowiggins is the market leader
2006 Sales Split by End-Market Comments
► Efficiency: margin expansion through productivity and restructuring efforts
► Renewed and better marketed offering: Thibierge & Comar, new organization, Hamelin
► Mid-term: expansion and partnerships into emerging countries, portfolio decisions if necessary
High cash flow generation and ROCE
Technical Thin Paper41%
Corporate Communication
20%
Luxury Packaging
10%
Fine Arts8%
Promotion & Advertising
21%
#1
#1
#1#1
#1
#1
39 2006 Annual Results - 22 March 2007
657610
2005 2006
Arjowiggins: Communication Segment
20
26
2005 2006
75
57
2005 2006
13.4%
8.4%
2005 2006
49 48
2005 2006
198244
2005 2006
___________________________1. Operating cash flow defined as: Operating Income + Depreciation – Capital Expenditures - Change in Working Capital. Change in working capital amounted to
€47m and €35m in 2005 and 2006, respectively.2. ROCE defined as Operating Income / Capital Employed.
EBITDA Operating IncomeSales
Operating Cash Flow (1) ROCE(2)Capital Employed
€m, except ROCE
40 2006 Annual Results - 22 March 2007
Security44%
Medical - Hospital
16%
Industrial40%
Arjowiggins: Security & Technology Segment
Segments in which Arjowiggins is the market leader
2006 Sales Split by End-Market Comments
► Efficiency: low-cost developments (decor paper in China, Medical-Hospital in Czech Republic)
► Positioning: accelerate development of new technological solutions
► Mid-term: seize the opportunities that would strengthen leadership positions
Limited margin erosion related to non-recurring industrial issues
#1
#1
#1
41 2006 Annual Results - 22 March 2007
612671
2005 2006
Arjowiggins: Security & Technology Segment
3431
2005 2006
38
22
2005 2006
9.6%11.2%
2005 2006
6358
2005 2006
316300
2005 2006___________________________1. Operating cash flow defined as: Operating Income + Depreciation – Capital Expenditures - Change in Working Capital. Change in working capital amounted to
(€9m) and €5m in 2005 and 2006, respectively.2. ROCE defined as Operating Income / Capital Employed.
EBITDA Operating IncomeSales
Operating Cash Flow(1) ROCE(2)Capital Employed
€m, except ROCE
42 2006 Annual Results - 22 March 2007
Arjowiggins: Outlook
H1 2007 results will reflect the continuing, very difficult environment in the Graphic sector, both in Europe and the US. They will most likely be down year-over-year on this segment. They should reflect better performance in the Communication and Safety and Security segments
The January strikes subsequent to the Nivelles site closure announcement as part of the restructuring plan of the “Carbonless” activity will have a negative impact on recurring operating income (approximately €2m)
The group’s ambitious transformation plan is ongoing, with each semester to record further benefits:
► Efficiency: go-to-market model; enterprise-wide processes; restructuring measures
► Positioning: resolution of the size/integration handicap; development of “client-centric” technological solutions
► Mid-term: evolution of the group’s perimeter to be the leader in every segment (several negotiations in progress)
43 2006 Annual Results - 22 March 2007
Key Segment Reporting
44 2006 Annual Results - 22 March 2007
Antalis: Key Events (1/2)
Markets have started to recover with volumes, but only partially in terms of prices
Increasing competition from direct mill sales and office supply dealers put pressure on margins
Loss making UK envelope manufacturing business has been divested
Further acquisitions completed in high growth markets and regions
► Dekker Packaging (packaging)
► Lapiz Lopez (Chili): graphic paper procurement JV
45 2006 Annual Results - 22 March 2007
Antalis: Key Events (2/2)
Agreement reached with PaperlinX to acquire their French activities and sell them our Italian activities
Strengthening of the Customer Relationship Management (CRM) system and increased regions segmentation
Asset optimization: real estate assets transaction
► Operational sale and lease back of 22 warehouses across Europe for €103m
► Objective is to re-invest this sum into trade payables to get increased rebates forcash payments
► The transaction has and will generate improved cash position and operating profit
46 2006 Annual Results - 22 March 2007
Ofiice Supply Dealers
Antalis: Competitive Landscape
Independent merchants
Integrated merchants Manufacturers
PaperlinXIgepaInapa
Map Merchant Group (M-Real)Papyrus (Stora-Enso)Europapier (Mondi)Torras (Lecta)Burgo merchants
Lyreco Office DépôtCorporate ExpressStaples
Stora EnsoBurgoSappiM-RealUPM-KymmeneHolmenLectaArjowiggins
Merchants not related to a manufacturer
Merchants subsidiaries of manufacturing groups
and acting as their primary distribution
channels
Manufacturers increasingly sell “direct” to certain types of traditional merchanting
customers
Distributors of office supplies who
frequently use paper as a loss
leader
47 2006 Annual Results - 22 March 2007
€m, 31 Dec. Year End 2006 2005
Total Sales 2,309 2,344
EBITDA 2,309 2,344
Capital Employed 541 646ROCE 9.8% 8.2%
% Margin 3.0% 3.3%
% Growth (1.5%) -
EBIT 53 53% Margin 2.3% 2.3%
Antalis: Key P&L Items
Comments
Stable turnover► Lower European activity► Focus on margin vs. market
share gains policy► Strong growth in Asia
Decrease in EBITDA due to margin pressure in Western Europe and increasing competition in Eastern Europe
Antalis nevertheless managed to maintain its EBIT vs. 2005 and generated a nearly 1% ROCE in 2006
48 2006 Annual Results - 22 March 2007
Antalis: 2005-2006 EBITDA Bridge
7
4
(13)
77
69(6)
0
10
20
30
40
50
60
70
80
90
2005 EBITDA Volume Gross Margin Direct Costs Fixed Costs 2006 EBITDA
€m
49 2006 Annual Results - 22 March 2007
Antalis: Key Cash Flow Items
€m, 31 Dec. Year End 2006 2005
Operating Cash Flow 25 43
EBITDA 69 77
Change in working capital (12) (12)
Capex (32) (22)
Net debt 255 316
Comments
High Capex due in particular to CRM investments
Strict Working Capital management► €26m reduction in Working
Capital► Offset by €38m effect of early
payments to suppliers (against rebate)
Net Debt reduction thanks to real estate deal (€95m cash-in in 2006)
50 2006 Annual Results - 22 March 2007
Antalis: Europe Segment
Western Europe excl. France
71%
Central and Eastern Europe
9%
France20%
2006 Sales Split by End-Market Comments
Market down 1.1%
Increasing pressure on margins
Good results in Iberia, France and Switzerland, difficult situation in the UK
New CRM investments and logistics optimization
51 2006 Annual Results - 22 March 2007
EBITDA Operating IncomeSales
Operating Cash Flow(1) ROCE(2)Capital Employed
2,136 2,089
2005 2006
Antalis: Europe Segment
6154
2005 2006
38.3 39.2
2005 2006
539
435
2005 2006
3128
2005 2006
7.1%
9.0%
2005 2006
___________________________1. Operating cash flow defined as: Operating Income + Depreciation – Capital Expenditures - Change in Working Capital.2. ROCE defined as Operating Income / Capital Employed.
€m, except ROCE
52 2006 Annual Results - 22 March 2007
Antalis: Rest of World Segment
South Africa50%
Asia20%
South America30%
Sales Split by End-Market Comments
Sustained activity in Asia and good outlook in South Africa
Difficult startup in Brazil
Joint venture set up with Lapiz Lopez in Chile
Significant variations in working capital due to the launch of new activities
53 2006 Annual Results - 22 March 2007
Antalis: Rest of World Segment
208 220
2005 2006
16 15
2005 2006
15 14
2005 2006
106 107
2005 2006
12
(3)
2005 2006
13.7% 12.9%
2005 2006
___________________________1. Operating cash flow defined as: Operating Income + Depreciation – Capital Expenditures - Change in Working Capital.2. ROCE defined as Operating Income / Capital Employed.
€m, except ROCE
EBITDA Operating IncomeSales
Operating Cash Flow(1) ROCE(2)Capital Employed
54 2006 Annual Results - 22 March 2007
Antalis: Outlook
H1 2007 expected to be ahead of previous year thanks to a more favourable price environment in Cut-Size and to the fast growing regions
Real estate divestment program will continue, although to a lesser extent than in 2006, and will generate further operational improvements
External growth strategy based on targeted acquisitions in high-growth / high-margins areas will continue
Antalis is also ready to consider any major acquisition allowing it to consolidate the sector in the context of growing competition
2006 Annual Results - 22 March 200755
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
56 2006 Annual Results - 22 March 2007
€m, 31 Dec. Year End 2006 2005
Financial Assets 177 192
Net Provisions 386 399
DG IV 205 201
Fox River 121 139
Pensions 117 157
Restructuring Provisions 66 15
Other Provisions 54 79
Gross Provisions 563 591
Sequana: Split of Provisions
Comments
DG IV: first outcome of appeal expected late April 2007
Fox River: expenses have been reduced and insurance companies refunded around €30M in 2006
Restructuring provisions mainly relate to the Arjowiggins restructuring program
Other provisions relate to various social and environmental risks
57 2006 Annual Results - 22 March 2007
Sequana: UK Pension Fund
Pensions for our UK subsidiaries are provided through a defined benefit pension scheme
► In 2004, the Pension Fund Trustee unilaterally decided to request a £ 49,5m contribution for the period 2004-2008 which the group agreed to pay
► As of December 2006, £ 19,8m remain to be paid while the fund is now over-funded according to IAS rules
End 2006, the Pension Fund Trustee unilaterally decided to request an additional contribution of £ 105m over 5 years, equivalent to a monthly payment of £ 1,75m beginning in January 2007
► The group has disagreed with this amount, perceived as totally unjustified, and has therefore refused to pay and requested a review by the UK Pension Regulator
► Following negotiations, the group obtained a change to the Funds governance rule and the nomination of two new Trustees alongside the historical Trustee
► This new Board of Trustees, operating under majority rule, is responsible for the general review our UK Pension Fund’s situation
58 2006 Annual Results - 22 March 2007
Permal
We will dispose of the bulk of our remaining stake in Permal in November 2007
We may, at the same date, receive a material earn-out on top of the November 2005 transaction
Overall the two transactions could generate up to $200m of cash
Today, we believe it is reasonably likely – barring any major adverse market event –that we will perceive a very significant portion of this amount
Permal Earn-Out
2006 Annual Results - 22 March 200759
Table of Contents
1. Introduction
2. Market Environment
3. Consolidated Financial Results
4. Key Segment Reporting
5. Other Financial Information
6. Strategy and Outlook
60 2006 Annual Results - 22 March 2007
Dividend Distribution Proposal Dividend Distribution 2004-2007 (1)
Sequana’s Board of Directors will propose to the shareholders Annual General Meeting a dividend for 2006 of €0.60 per Share
It will be paid on May, 15th
Dividends
___________________________(1) Year of payment.(2) 2006: SGS shares distributed to shareholders for c. €1,610m, or c. €16 per share.
Amounts paid
0,6 0,60,4
0,6
2,7
2003 2004 2005 2006
63.0 42.0 1,960 29.5
(1)
2004 2006 (2) 20072005
€m
€ / share
61 2006 Annual Results - 22 March 2007
Key Developments
In 2006, Sequana devised a clear strategy and successfully implemented its transformation into a focused paper group
Key changes have been initiated at both Arjowiggins and Antalis, where the key managers now have stakes in their respective companies’ share capital through demanding yet motivating incentive plans► Both companies’ key managers are now shareholders in their respective companies
In a difficult market environment, the group managed to maintain a sustained cash-flow generation despite disappointing operating results, which is a cornerstone of our strategy and objectives
62 2006 Annual Results - 22 March 2007
Outlook
Sequana is now ready to reach a new milestone in its ambitious development strategy in the paper sector
► Our strong balance sheet and significant cash flow generation allow us to consider external growth operations our two businesses
► In a structurally difficult market environment, our strategy is more than ever to be leaders in everything we do and everywhere we are
The remaining assets and liabilities relating to our former holding status will continue to be actively managed with a view to maximizing cash returns
PrésentationPowerPoint
2006 Annual Results
22 March 2007