STYROLUTION GMBH: Annual Financial Report

  STYROLUTION GMBH: Annual Financial Report

UK Regulatory Announcement

FRANKFURT, Germany

                            Styrolution Group GmbH

 Unaudited Presentation of Results of Operations, Financial Position and Cash
            flow – three and twelve months ended 31 December 2012

                          Forward Looking Statements

The following presentation includes “forward-looking statements”, based on our
current expectations and projections about future events, including:

  *the cyclical nature of our businesses and their sensitivity to changes in
    supply and demand;
  *raw material availability and costs, as well as supply arrangements,
    including arrangements with principal feedstock suppliers;
  *the highly competitive nature of our principal industries;
  *current or future environmental requirements, including those related to
    greenhouse gas and other air emissions, and the related costs of
    maintaining compliance and addressing liabilities;
  *currency fluctuations and economic downturns in the countries in which we
    operate;
  *our ability to implement our business and cost reduction strategies;
  *our ability to successfully integrate our businesses and realize
    anticipated synergies and cost savings; and
  *our substantial indebtedness following the consummation of the Joint
    Venture Transaction may affect our ability to service our outstanding
    indebtedness, which would likely impact the way we operate our business.

All statements other than statements of historical facts included in this
presentation, without limitation, statements regarding our future financial
position, risks and uncertainties related to our Company and the notes,
strategy, capital expenditures, projected costs and our plans and objectives
for future operations, may be deemed to be forward-looking statements. These
forward-looking statements are subject to a number of risks and uncertainties.
Words such as “believe,” “expect,” “anticipate”, “may”, “intend”, “will”,
“should”, “estimate” and similar expressions or the negatives of these
expressions are intended to identify forward-looking statements. In addition,
from time to time we or our representatives, acting in respect of information
provided by us, have made or may make forward-looking statements orally or in
writing and these forward-looking statements may be included in but are not
limited to press releases (including on our website), reports to our security
holders and other communications. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to be correct. We undertake no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

                               Reporting entity

Styrolution Group GmbH (‘Group GmbH’ or the ‘Company’) is an intermediate
holding Company which is wholly owned by Styrolution Beteiligungs GmbH, a
wholly owned subsidiary of Styrolution Holding GmbH. Styrolution Holding GmbH
is a joint venture ultimately owned by two shareholders, INEOS Industries
Holdings Ltd., a subsidiary of INEOS AG, and BASF SE (“BASF”). INEOS
Industries Holdings Ltd. (“INEOS”) owns 50% of the shares of Styrolution
Holding GmbH. BASF SE directly owns 15.95% of the shares of Styrolution
Holding GmbH and indirectly through BASF Antwerpen N.V. (a wholly owned
subsidiary) another 34.05%. The Company is domiciled in Germany and has its
registered office at Erlenstrasse 2, 60325 Frankfurt am Main, Germany. The
Company was formed on 19 April 2011.

The Unaudited Presentation of Results of Operations, Financial Position and
Cash flow (“presentation) comprise the Company and its subsidiaries (together
referred to as the ‘Group’ and individually as ‘Group entities’). The Group is
the leading global producer, marketer and merchant seller of styrene monomer
and styrenics polymers.

  Styrolution Group GmbH – Unaudited Presentation of Results of Operations,
                       Financial Position and Cash flow

  Consolidated Statement of Income for the three and twelve months ended 31
                                December 2012

In millions of EUR              1 October – 31         1 January – 31
                                 December 2012           December 2012
Revenue                         1,435.6                 5,989.5
Cost of sales                   (1,302.4)               (5,415.5)
Gross profit                     133.2                   574.0
                                                         
Selling expenses                 (71.1)                  (316.0)
General and administrative       (26.7)                  (86.6)
expenses
Research and development         (1.8)                   (11.3)
expenses
Other operating expenses (net)  (0.8)                   (23.2)
Result from operating            32.8                    136.9
activities
                                                         
Interest income                  0.9                     5.8
Interest expense                 (13.4)                  (53.8)
Other finance gain (loss)        (7.0)                   (6.3)
(net)
Net finance costs                (19.5)                  (54.3)
                                                      
Income (loss) before tax         13.3                    82.6
Income tax benefit (expense)    (4.2)                   (26.8)
Net income (loss)                9.1                     55.8
Attributable to:
                                0.3                     1.0
Non-controlling interests
Owners of the company           8.8                     54.8

                 Consolidated Statement of Financial Position

In millions of EUR                        31 December 2012  31 December 2011
Assets                                   
Property, plant and equipment              799.6              809.4
Intangible assets and goodwill             1,318.2            1,333.2
Deferred tax assets                        35.3               22.8
Other receivables and miscellaneous        25.3               7.1
non-current assets
Non-current assets                        2,178.4            2,172.5
Inventories                                581.4              463.6
Accounts receivable, trade                 682.5              756.3
Other receivables and miscellaneous        129.0              360.3
current assets
Cash and cash equivalents                  190.1              266.0
Assets held for sale                       -                  13.2
Current assets                            1,583.0            1,859.4
Total assets                              3,761.4            4,031.9
                                                           
Equity
Share capital                              10.0               10.0
Contributed Surplus                        1,641.4            1,641.4
Other reserves                             17.3               24.0
Accumulated deficit                        (31.8)             (69.2)
Equity attributable to owners of the      1,636.9            1,606.2
Company
Non-controlling interest                   6.8                8.4
Total equity                              1,643.7            1,614.6
Liabilities
Financial indebtedness                     470.6              468.2
Employee benefits                          60.9               42.8
Deferred tax liabilities                   445.1              462.6
Other liabilities and other long term      60.8               124.4
provisions
Non-current liabilities                   1,037.4            1,098.0
Accounts payable, trade                    531.2              728.0
Financial indebtedness                     359.1              439.6
Current tax liabilities                    26.5               10.4
Other liabilities and short term           163.5              137.6
provisions
Liabilities held for sale                  -                  3.7
Current liabilities                        1,080.3            1,319.3
Total liabilities                         2,117.7            2,417.3
Total equity and liabilities              3,761.4            4,031.9

                     Consolidated Statement of Cash Flow

In millions of EUR                                    1 January – 31 December
                                                       2012
Cash flows from operating activities                 
Income before tax                                      82.6
Adjustment for:
Depreciation and impairment of property, plant and     112.3
equipment
Amortization and impairment of intangible assets       56.3
Change in other receivables                            3.6
Change in pension provisions, other liabilities and    6.7
charges
Net finance cost                                       47.9
Current income tax paid                               (58.4)
Working capital adjustments:
                                                       (123.3)
  *Inventories
                                                       ))
  *Trade receivables                                  75.2
  *Trade payables                                    (72.6)
  *Cash generated from operating activities           130.3
Interest paid                                         (44.9)
Net cash flows from operating activities              85.4
                                                       
Cash flows from investing activities
Investments in property, plant and equipment and       (127.9)
intangible fixed assets
Proceeds from disposal of property, plant and          0.7
equipment and intangible assets
Receipt of other investments                           3.2
Proceeds from sale of disposal group (ELIX)           22.1
Net cash flows used in investing activities           (101.9)
                                                       
Cash flows from financing activities
Share repurchase India                                 (6.6)
                                                       4.9
Receipt of asset securitization, net
                                                       ))
Receipt of receivables from related parties            29.1
Repayment of borrowings from related parties           (106.5)
Receipt of other borrowings                            63.4
Repayment of other borrowings                         (44.2)
Net cash flows used in financing activities           (59.9)
                                                     
Net changes in cash and cash equivalents              (76.4)
                                                       
Cash and cash equivalents at 31 December 2011          266.0
Effect of exchange rate fluctuations on cash held     0.5
Cash and cash equivalents at 31 December 2012         190.1

   Presentation of the Styrolution fourth quarter 2012 business results of
                                  operation

The Company prepared this discussion and analysis of its results of operations
by comparing its unaudited presentation of results of operations, financial
position and cash flow for the three months ended 31 December 2012 to the
unaudited presentation of results of operations, financial position and cash
flow for the three months ended 31 December 2011. Additionally the Company
prepared a discussion and analysis of its results of operations by comparing
its unaudited presentation of results of operations, financial position and
cash flow for the twelve months ended 31 December 2012 to the pro forma
information for the corresponding period. The pro forma information is based
on the combined performance of the businesses that were contributed to the
Company by its shareholders in connection with the completion of the Joint
Venture transaction on 1 October 2011, but do not include the effects of
purchase accounting which affect the actual financial information for 2012.

In millions of EUR                1 October – 31  1 October – 31    %
                                 December 2012    December 2011**
                                                                   
                                
Revenue                           1,435.6          1,362.3            5.4
Cost of sales                    (1,302.4)        (1,294.6)          (0.6)
Gross profit                      133.2            67.7               96.8
                                                                      
Selling expenses                  (71.1)           (73.2)             2.9
General and administrative        (26.7)           (18.5)             (44.3)
expenses
Research and development          (1.8)            (3.0)              40.0
expenses
Other operating income           (0.8)            (15.7)             94.9
(expenses)
Result from operating             32.8             (42.7)             >100.0
activities
                                                                      
Interest income                   0.9              0.7                28.6
Interest expense                  (13.4)           (14.9)             10.1
Other finance gain (loss) (net)   (7.0)            4.0                >(100)
Net finance costs                 (19.5)           (10.2)             (91.2)
                                                                  
Income (loss) before tax          13.3             (52.9)             >100.0
Income tax benefit (expense)     (4.2)            8.4                >(100.0)
Net income (loss)                 9.1              (44.5)             >100.0
Attributable to:
                                 0.3              0.2                50.0
Non-controlling interests
Owners of the company            8.8              (44.7)             >100.0

** In the fourth quarter of 2011, the Company reported external sales for
certain location and time swaps. These swaps are not included as external
sales in the tables above. Management considers this to be a better
presentation of the actual trading and revenue of the Company.

    Presentation of the Styrolution twelve months 2012 business results of
                                  operation

In millions of EUR         1 January – 31  Pro forma 1 January –  Delta in %
                          December 2012    31 December 2011**
                                                                 
                         
Revenue                    5,989.5          6,321.3                 (5.2)
Cost of sales             (5,415.5)        (5,694.4)               4.9
Gross profit               574.0            626.9                   (8.4)
                                                                    
Selling expenses           (316.0)          (321.7)                 1.8
General and                (86.6)           (77.6)                  (11.6)
administrative expenses
Research and development   (11.3)           (11.8)                  4.2
expenses
Other operating income    (23.2)           (29.2)                  20.5
(expenses)
Result from operating      136.9            186.6                   (26.6)
activities
                                                                    
Interest income            5.8              0.7                     >100.0
Interest expense           (53.8)           (49.9)                  (7.8)
Other finance gain         (6.3)            (5.8)                   (8.6)
(loss) (net)
Net finance costs          (54.3)           (55.0)                  1.3
                                                                
Income before tax          82.6             131.6                   (37.2)
Income tax expense        (26.8)           (41.8)                  35.9
Net income                 55.8             89.8                    (37.9)
Attributable to:
                          1.0              0.2                     >100.0
Non-controlling
interests
Owners of the company     54.8             89.6                    (38.8)

** In the 2011 combined financial report, the Company reported external sales
for certain location and time swaps. These swaps are not included as external
sales in the tables above. Management considers this to be a better
presentation of the actual trading and revenue of the Company.

Revenue: Revenue in the fourth quarter of 2012 amounts to EUR 1,435.6 million,
an increase of EUR 73.3 million or 5.4% compared to EUR 1,362.3 million in the
fourth quarter 2011. Revenue increased in all Polymers segments despite lower
sales volumes, mainly because increased feedstock cost was passed on to
customers, particularly for Polystyrene in EMEA and Americas.

Specialties sales slightly increased and generated a higher profit in 2012,
the combined effect of a shift to a higher value product portfolio, better
market conditions in the fourth quarter 2012 and the negative impact of the
force majeure in the fourth quarter 2011.

ABS sales in ASIA and EMEA were reduced by the margin over volume strategy the
Group applies. Trading conditions in both regions were similarly weak in the
fourth quarter 2012 compared to the same quarter in 2011. ABS Americas revenue
increased as a result of more demand from several sectors, mainly automotive.

Styrene Monomer sales increased slightly. This increase is mainly based on
higher feedstock prices passed on to our customers. Benzene, the key raw
material to produce Styrene, increased substantially during 2012 and this has
led to higher sales prices in mainly Americas. EMEA styrene monomer sales
decreased. As a result of the Marl closure the company had less excess styrene
available for external sales.

Revenues by segment:

In millions of EUR  1 October – 31 December  1 October – 31          %
                     2012                      December 2011
EMEA                 605.3                     585.3                    3.4
Americas             532.9                     470.3                    13.3
Asia                 297.4                     306.7                    (3.0)
Revenue              1,435.6                   1,362.3                  5.4

Revenues by product:

In millions of EUR         1 October – 31       1 October – 31       %
                            December 2012         December 2011
                                                                     
Acrylonitrile Butadiene     186.0                 189.2                 (1.7)
Styrene
Polystyrene                 602.9                 526.1                 14.6
Styrene Monomer             375.7                 368.7                 1.9
Specialties                 271.0                 278.3                 (2.6)
Revenue                     1,435.6               1,362.3               5.4

The Company has slightly revised the reporting structure of its portfolio.
While the Company still has the same product groupings: styrene monomer,
polystyrene and ABS, the Company has identified a number of ABS grades which
have joined the copolymers product group and are classified as specialties
with the reporting starting in Q1 2012. The comparative revenues for 2011 have
been adjusted accordingly. Prior to the third quarter of 2012, the Company
reported external sales for certain location and time swaps. These swaps are
not included as external sales in the tables above. Management considers this
to be a more representative presentation of the actual trading and revenue of
the Group and adjusted comparative revenues accordingly.

Cost of Sales: Cost of sales increased by EUR 7.8 million, or (0.6)%, to EUR
(1,302.4) million compared to EUR (1,294.6) million in the previous year. This
increase is due to higher underlying feedstock costs passed on to the
customers.

Gross profit: Gross profit increased by EUR 65.5 million, or 96.8% to EUR
133.2 million compared to EUR 67.7 million in the previous year. The Group was
able to improve its polymer margins in the fourth quarter 2012 in all regions
and all businesses. The Group benefited from better market conditions mainly
in the Americas, synergy advantages (i.e. the closure of the Marl asset), a
margin over volume strategy and the fourth quarter 2011 was impacted by the
Specialties force majeure.

The fourth quarter 2011 was characterized by bottom of cycle conditions. The
Group saw better trading conditions in the fourth quarter 2012, but its
economic outlook remains cautious.

The gross profit of the styrene business increased significantly due to
improved margins mainly in the Americas. The Group benefitted from an improved
supply / demand balance in the market and from increasing benzene prices that
led to positive flowthrough. This was partly offset by the force majeure
effects of the Sarnia plant in the Americas.

Cost of sales include Purchase Price allocation impacts. The cost of sales
impact for the fourth quarter 2012 was EUR 15.7 million compared to EUR 15.6
million in the fourth quarter of 2011. This was mainly higher depreciation and
amortization costs.

Selling expenses: Selling expenses decreased by EUR 2.1 million or 2.9% to EUR
(71.1) million compared to EUR (73.2) million in the previous year. The
decrease mainly reflects lower freight and selling costs. Freight costs are
lower because of lower polymers sales volumes

General and administrative expenses: General and administrative expenses
increased by EUR8.2 million, or 44.3%, to EUR(26.7) million compared to
EUR(18.5) million in the previous year. The increase is caused by several
unusual items incurred in the context of the formation of the Joint Venture,
the termination of certain contracts or the integration of activities.

Research and development expenses: Research and development expenses decreased
by EUR1.2 million, or 40.0%, to EUR(1.8) million compared to EUR(3.0)
million in the previous year.

Other operating expenses: Other operating expenses were EUR (0.8) million, a
decrease of EUR 14.9 million compared to other operating expenses of
EUR(15.7) million in the previous year. The operating expenses of the fourth
quarter 2011 are mostly one-off costs related to the force majeure in the
specialties business.

EBITDA before special items: EBITDA before special items increased by EUR72.9
million, or 662.7%, from EUR 11.0 million to EUR 83.9 million. The fourth
quarter of 2012 was an acceptable volume and margin quarter in an uncertain
economic environment. The increase is mainly due to improved performance of
the polymers business, in all regions and products. Special items were
incurred in the context of the formation of the Joint Venture, the termination
of certain contracts or the integration of activities.

Reconciliation of EBITDA before special items to income (loss) before tax:

In millions of EUR                1 October – 31  1 October – 31  Delta in
                                   December 2012    December 2011    EUR
EBITDA before special items (1)    83.9             11.0             72.9
Special items (restructuring       (9.9)            (9.0)            (0.9)
expenses)
                                   (41.2)           (44.7)           3.5
Depreciation and Amortization
Results from operations            32.8             (42.7)           75.5
Net finance costs                  (19.5)           (10.2)           (9.3)
Income (loss) before tax           13.3             (52.9)           66.2

(1) EBITDA represents income from operations plus depreciation of property,
plant and equipment and amortization of intangible assets. EBITDA before
special items represents EBITDA less special items. Although EBITDA and EBITDA
before special items should not be considered substitute measures for profit
and net cash flow from operating activities, we believe that they provide
useful information regarding our ability to meet future debt service
requirements. EBITDA and EBITDA before special items may not be comparable to
similarly titled measures used by other companies.

                       LIQUIDITY AND CAPITAL RESOURCES

The cash flow statement is prepared in accordance with the indirect method.
Cash and cash equivalents do not include deposits and guarantees that are not
immediately available. These amounts are included in other receivables.

Cash provided by operating activities

Cash provided by operating activities by the Group in the twelve months of
2012, excluding interest payments was EUR 130.3 million. The cash flows
generated by operations were significantly higher than the result from
operations on the income statement due to material depreciation and
amortization amounts included in the result from operations. The Group used
cash to fund its working capital needs. By the end of the fourth quarter of
2012, feedstock prices had increased compared to the beginning of the year,
which tends to have an increasing effect on the cash flow requirements of the
Group. In addition, interest and income taxes paid reduced cash flows from
operations.

Cash used in investing activities

The cash used in investing activities of EUR 105.1 million consists mainly of
two items. The cash used for capital expenditures was EUR 127.9 million.
Capital expenditures relate to regular maintenance and new investments in our
plants, including an extension of the plant in Ulsan, Korea, dedicated to the
production of styrene acrylonitrile copolymers and inaugurated on 19 July
2012. Proceeds from sale of ELIX were EUR 22.1 million.

Cash used in financing activities

The Group used cash flow in financing activities primarily to repay loans from
related parties of a net amount of EUR 77.4 million, offset by net additional
borrowings of EUR 19.2 million. In addition, EUR 6.6 million was paid in
connection with the tender offer in India and EUR 4.9 million net were
received from asset securitization.

Financing of the Group

The financing of the Company is through the issuance of Senior Secured Notes
of EUR480 million, a Trade Receivables Securitization Facility (up to EUR 500
million) and ancillary lines for instruments such as guarantees and letters of
credit.

The financing of the Group and the use of funds at the end of December 2012
was as follows:

In millions of EUR                                                   
                                                                     
Senior secured bond                                                    480.0
Short term borrowings from asset securitizations and other             359.1
borrowings
Total Financing on 31 December 2012                                    839.1
Cash and cash equivalents                                             (190.1)
Net Debt on 31 December 2012                                          649.0

Contact:

STYROLUTION GMBH
 
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