Specialist
Former SVP at Klöckner Pentaplast GmbH
Agenda
- Substrate mix update, including PET build-outs and outlook for PVC reductions
- Pricing outlook by product category, and cost pass-through dynamics
- Impact of expandable polystyrene (EPS) food tray ban on Klöckner
- Working capital dynamics
- PET and recyclable PET (RPET) raw material cost outlook
Questions
1.
What are your expectations for Klöckner's delayed Q4 results, given the current market conditions?
2.
What did you see for Q2, Q3, Q4 2018 in the RPET and PVC parts of the market and what might be the impact on Q1 and Q2 2019 results?
3.
How does the feedthrough mechanics typically work for the flake resin feedthrough price? Is there a lag from the flake and then to the resin?
4.
What are your expectations for Klöckner’s Q4 results given the pricing outlooks for RPET, PET and PVC?
5.
What are your thoughts on the previous Klöckner CEO vs the new, and what do you think is likely to change as a result of the new appointment?
6.
Do you think Klöckner has the free cash to invest in a larger sales team and potentially increase the shift over to faster rates?
7.
Klöckner has a pretty attractive position, to be able to invest more in sales and potentially increase the shift over to PET. Where would you look at either cutting costs or freeing up cash to fund those investments?
8.
Why do you think Klöckner’s Q4 results might have been delayed? I think FY18 results were released on 29 January but Q4 has not yet been reported.
9.
You’ve previously spoken (see Third Bridge Forum Interview transcript: Klöckner Pentaplast - FCP Performance Outlook – 3 December 2018) about the 20% shift to PET and the rate at which it was occurring. How much do you think has changed in the last three months?
10.
Looking at the demand side, with tenders coming up that are all PET-based, what’s the typical length of a product cycle, and is there going to be a core part of the product base that will always remain in PVC? Would you expect them all to come up for redesign at some point in the next couple of years?
11.
Is it the largest customers shifting over to PET or is the shift occurring across all customer sizes?
12.
How quickly do you think Klöckner Pentaplast is achieving the PET shift compared to competitors, with particular focus on the last three months?
13.
If we look at the increase in supply vs the shift in demand, how underinvested do you think Klöckner Pentaplast is in that shift? How does the 20% shift over to PET and the 10% shift from Klöckner Pentaplast match up?
14.
What sort of capital allocation issues do you foresee as a result of the Linpac acquisition? Might too much CAPEX go into maintaining the thermoforming business and not enough be spent on the shift to PET?
15.
Bearing in mind a potential ban of EPS food trays, what proportion of Klöckner’s future packaging business is made of EPS food trays?
16.
Do you think pricing will purely be driven by the previous four-months cost for PET or are there any other impacts you’re expecting on PET pricing over the coming quarters?
17.
If you were to give an outlook for PET pricing over the next couple of quarters, what other factors would you bear in mind?
18.
You previously mentioned industry averages for the cost passthrough at 80% and 3-6 months (see Third Bridge Forum Interview transcript: Klöckner Pentaplast - FCP Performance Outlook – 3 December 2018). What are your thoughts on KP’s ability to pass through both the percentage and the lag, given the current position of the market and KP’s border sales structure?
19.
Do you think it will be easier to pass through costs on the PET side, than it would be in any other conditions, given the tightness in the PET market with the shift from PVC being so highly demanded from the end consumers?
20.
What would you expect the difference in passthrough to be on the PET vs the PVC side?
21.
If we look at the payment terms to get an understanding of what KP’s working cap changes might be like for this quarter, have you seen much change in the market in either receivables or payable days that might impact Klöckner?
22.
Looking at structural differences in cost passthrough for different players, how do you think Klöckner’s sales team structure compares to some key competitors?
23.
In your last Forum Interview, I think you mentioned Klöckner Pentaplast's speciality business being about 60% labels and cards (see Third Bridge Forum Interview transcript: Klöckner Pentaplast - FCP Performance Outlook – 3 December 2018). What are your broad indications of what’s happening in the market right now for the speciality part of the business and how might the delayed Q4 results potentially play out for that segment?
24.
When we spoke last week about the pharma business, you mentioned multiples around 14 times, making comparison to blood bags. To what extent do you think that comparison and that multiple is reasonable, and what would be your thoughts on more comparable businesses?
25.
Do you have any closing remarks or thoughts on what people should be looking out for in Klöckner's Q4 results? Or even potential signals as to what might happen in the early parts of next year?
