Kordsa Investor Presentation Jun, 2020
Disclaimer The information and opinions contained in this The Company does not undertake any obligation, and document have been compiled by KORDSA Teknik disclaims any duty to update or revise any forward Tekstil Anonim Şirketi (the “Company”) from sources looking statements, whether as a result of new believed to be reliable and in good faith, but no information or future events. Neither this document nor representation or warranty, expressed or implied, is the information contained within can construe any made as to their accuracy, completeness or investment advice, invitation or an offer to buy or sell the correctness. No undue reliance may be placed for any Company and/or Its group companies’ shares. The purposes whatsoever on the information contained in Company cannot guarantee that the securities described this presentation or on its completeness, accuracy or in this document constitute a suitable investment for all fairness. This document may contain forward-looking investors and nothing shall be taken as an inducement to statements by using such words as "may", "will", any person to invest in or otherwise deal with any shares "expect", "believe", "plan" and other similar of the Company and its group companies. The terminology that reflect the Company management’s information contained in this document is published for current views, expectations, assumptions and the assistance of recipients, but is not to be relied upon forecasts with respect to certain future events. As the as authoritative or taken in substitution for the exercise actual performance of the companies may be affected of judgment by any recipient. You must not distribute the by risks and uncertainties, all opinions, information information in this document to, or cause it to be used and estimates contained in this document constitute by, any person or entity in a place where its distribution the Company’s current judgment and are subject to or use would be unlawful. Neither the Company, its board change, update, amend, supplement or otherwise of directors, directors, managers, nor any of Its alter without notice. Although it is believed that the employees shall have any liability whatsoever for any information and analysis are correct and expectations direct or consequential loss arising from any use of this reflected in this document are reasonable, they may document or its contents. be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially. External 2
Global Footprint 4 continents ~4,500 2 R&D 807 patent applications 12 facilities employees Centers 194 patents W E R E I N F O R C E L I F E External 3
Global Footprint Regional footprint versus key competitors • #1 NY TCF • #2 NY TCF producer Kordsa • #1 NY TCF producer • The only PET yarn, TCF and producer in the US SEC producer in LATAM market • #2 PET TCF producer • #1 PET TCF producer position Confidential 4
Milestones Second R&D Center Brezilya @Composite Finalized the Start up of Global GPTW Technology Best Merging The acquisition of AS9100 Indonesia Technology 2 years Center of Export R&D Axiom Acqusitions Reinforcer RevD expansion Centre in Izmit in a row Excellence Champion Center Certified 2016 1973 - 2005 2006 2008 2010 2014 2015 2017-2018 2019 Kordsa Growth in Member of the Commercialisation Innovation Sustainability Composite Fortune 100 Fastest- Growth in Launching Asia; Indonesia, TURQUALITY of Kratos Strategy Report Technology Global 100 Growing Composite CoKoon Thailand, China Global Brand Champion received 2 Center of Companies Sector, Programme Gold Awards Excellence in Indonesia Finalized the from LACP in 2016-2017 Acquisition of FDI & TPI & AHT External 5
Strategy House External 6
Kordsa in Brief Tire cord fabrics (“TCF”) Next generation fabrics Composite Construction • • • • Macro and micro fibers for Nylon and polyester based Textile reinforcement Carbon fiber, aramid, concrete reinforcement tire reinforcement fibers materials for green tires hybrid fabrics, and pre- and fabrics for radial and pregs • High performance Description bias tires • Monofilaments Production technologies • Global #1 by revenue/ #2 for composite materials • Green Products with by capacity @ NY66 TCF • Resorcinol Formaldehyde High value added • Global # 2 by revenue / #3 Free Dipping thermoplastic and by capacity @PET TCF thermoset resins • Highly engineered hybrid cords with superior properties End markets Selected end-market participants 7 External
Kordsa Investment Highlights Market leadership based on longstanding strategic partner status with all global tire players 1 2 Global footprint with large presence at growing regions 3 Technology leadership at the cutting edge of reinforcement 4 Growth in composite reinforcement market 5 Growth opportunities from new businesses such as thin film and flexible electronics 6 Strong cash generation and dividend payout Experienced management team with proven track record 7 External 8
Must Win Battles a. Operational Excellence : Safe and reliable operations, 1. competitive cost Business b. Digital Transformation: Data analytics and Artificial Excellence Intelligence, Robotics and Automations, Cybersecurity c. Effective Finance & Risk Management d. Commercial Excellence a. Growth in Tire Industry: Improve approved product base 2. b. Growth in Composite Industry: Realization of growth business plan for composites, increase market Growth penetration speed via acquisitions c. Growth in New Industries: a. Innovation in Material Science 3. b. Innovation in Tire Technology c. Innovation in Composite Technology Innovation d. Effective Innovation Management External 9
Overview of The Tire Cord Fabric Value Chain Raw materials Manufacturing Process Products Kordsa Products NY66 and PET HMLS Polymerisation Spinning Yarns Oil Derivative Twisting Ingredients For NY66 yarns: • Hexamethylenediamine (HMD) • Adipic Acid • NY66 Salt • NY66 Flake • A tire is a highly complex composite with approx. 40 Dipped Greige components working under dynamic conditions Weaving Dipping Fabric Fabric For Polyester HMLS • NY66 typically used in cap plies • PET typically used in radial plies yarns: • Approx 7-10% cost of a tire is Tire Cord Fabric • PET Chip Twisting Kordsa fabrics are developed for specific requirements and are custom made 1 External 0
Market Dynamics - Tire Global Tire Market (Munits) Global Automotive Market (Munits) APAC ex. China China EMEA North Americ ica South America APAC ex. China China EMEA North Americ ica South America Growth ’19 vs ‘20: -20.0% Growth ’19 vs ‘20: -25.1% 89.3 1.699 1.359 61.0 61 1.349 66.9 68.4 3.4 3. 201.0 20 16 16.5 45 45.0 40.0 40 1. 1.9 166.0 16 163.0 16 1.8 1. 41 418.0 11 11.9 11 11.7 23.3 23 330.0 33 323.0 32 18.0 18 17 17.6 52 520.0 24 24.2 45 458.0 446.0 44 20.4 20 19 19.9 499.0 49 21 21.9 39 395.0 387.0 38 15.9 15 16.2 16 2019 2020E 2021E 2019 2020E 2021E Tire Reinforcement Market (PET-ktons) Tire Reinforcement Market (NY6.6-ktons) Growth'19 vs 20 for NY66: -20.0% NY66 (ktons) PET HMLS (ktons) Growth'19 vs 20 for PET: -20.0% 673.0 552.2 538.3 336.3 276.0 269.0 2019E 2020E 2021E Confidential 11
RM Price Drivers - Tire NY Raw Material Trend (Indexed) 320 Benzene Propylene Butadiene Crude Oil 270 Forecast • In the US, from a demand perspective, 220 most of the large consumers have shut 170 down indefinitely owing to Covid-19 related concerns 120 • Although the virus spread has been well 70 under control in mainland China, pressure on other Asian countries is increasing, in 20 Jan-15 Aug-15 Mar-16 Oct-16 May-17 Dec-17 Jul-18 Feb-19 Sep-19 Apr-20 Nov-20 Jun-21 particular in Southeast Asia. PET Raw Material Trend (Indexed) 120 MEG Asia Contract PX Asia Contract PTA Asia Contract Crude Oil Dubai 110 100 Forecast 90 Dollars per ton 80 70 60 50 40 30 20 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20 Source : IHS 12 Confidential
Market Leadership Based on Longstanding Strategic Partner Status with All Global Tire Players Nature of customer relationship as key barrier to entry Leading market shares Length of Typical length of Co-development relationship approval period (a) projects Global Tire Other B Since 1986 ~ 5 years Player 1 %30 %27 NY66 HDI Market Global Tire Share 2019 Since 1995 ~ 5 years E Player 2 %4 D Kordsa %6 C %27 Global Tire Since 1973 ~ 3 years %6 Player 3 Global Tire Since 1985 ~ 2 years Player 4 A Other %29 PET HMLS %35 Global Tire Market Since 1973 ~ 3 years Player 5 Share 2019 Kordsa D %9 Global Tire %6 B C Since 1987 ~ 2 years Player 6 %14 %7 (a) For a new supplier Source: Company Estimate Strong barriers to entry for new comers 13 External
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