Specialist
Former director at DSM Engineering Plastics
Agenda
- Competitive landscape and sensible comparable businesses
- Carve out challenges and reverse synergy risks
- Chemical portfolio analysis – chemistry basis, commodity, specialty and sustainability risks
- Asset review – strategic locations, age and quality
Questions
1.
Could you outline DSM Engineering Materials’ major assets across product IP, plant capacity, feedstock access and distribution and customer relationships?
2.
Where is the major value for DSM? Is it within the product IP, the capacity to build the commodity-based chemicals or the diaminobutane access? Are those the major asset value drivers?
3.
What part of the portfolio would you say polyamide 6 accounts for?
4.
How commoditised is DSM’s product portfolio compared to competitors such as EMS-Chemie?
5.
DSM has a roughly 19% EBITDA margin, while EMS-Chemie has a roughly 30% EBITDA margin. What margins would you expect for DSM Engineering Materials on average relative to the broader DSM group? Would it be closer to EMS-Chemie’s margins?
6.
Are there any meaningful operational differences between EMS-Grivory and DSM’s speciality businesses?
7.
How challenging do you think it would be to carve out DSM Engineering Plastics from the broader DSM group? What sorts of reverse synergies would you expect?
8.
Are there any other reasons why DSM is selling its Engineering Plastics division? Do you think this is a pretty clear strategy, or is there any fear? Is there anything associated with the sustainability pressures on this business unit that could be driving its sale?
9.
How do you expect the level of commoditisation in the product portfolio to change over time? Will the company become more commoditised, or will innovation mean more revenue comes from speciality?
10.
Do you think there is meaningful brand value for DSM across Akulon, Stanyl, ForTii, Arnite and Arnitel?
11.
Do you think DSM can meaningfully differentiate with Akulon on the compounding side? Is it creating better margins or not?
12.
How do you expect the full combined portfolio demand for polyamide 6 to grow YoY on average for the next 3-5 years?
13.
What sort of demand or top-line growth would you expect for DSM Engineering Materials YoY over the next 3-5 years?
14.
Do you think there is any opportunity for DSM to expand into new products, given its existing feedstock structure?
15.
Which players are developing better products and compounding solutions between DSM, EMS and others?
16.
Could you outline the consolidation trends and how they’ve changed the market’s pricing maturity?
17.
You mentioned the market is consolidated and has become more crowded. Is this in terms of capacity build-out, or are the barriers to entry low enough that newer players have been able to enter within that time period?
18.
How low are the barriers to entry? You mentioned you just need speciality knowhow and the ability to deal with the application. Do you expect margins to come under increasing pressure as more players enter the market?
19.
Do you find it concerning that DSM Engineering wants to grow primarily through compounding in many cases, where the barriers to entry are much lower than in the core part of the business?
20.
Have the new market entrants typically entered with a similar type of compounding knowledge to DSM Engineering, or with new products?
21.
How do you expect margins to develop over time?
22.
What are the risks of a competitor developing a similar feedstock to the polyamide 4-6 with the diaminobutane feedstock unique to DSM Engineering Plastics?
23.
How much substitution do you think there can be between polyamide 4-6 and other materials?
24.
Do you think there is a risk from sustainability pressures on DSM, especially its packaging plastics division?
25.
What are your thoughts on the general state of DSM Engineering's asset base?
26.
Do you think there is meaningful opportunity to bolt on additional assets to the engineering plastics division?
27.
Which other businesses do you think DSM could acquire? Would these be small compounding new entrants, or would there also be some larger players?
28.
What are the key risks to DSM and would you be concerned about them?
29.
Is DSM Engineering less exposed to automotive than EMS-Grivory?
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