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21 de Mayo 2011

CEO 360 Degree Presentation On the North American Chemicals & Materials Industry. Presented to. 21 de Mayo 2011. Agenda. Chemicals & Materials Industry Story Till Date and Recent Updates. A 2020 VISION OF THE GLOBAL AND NORTH AMERICAN CHEMICALS & MATERIALS INDUSTRY.

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21 de Mayo 2011

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  1. CEO 360 Degree Presentation On the North American Chemicals & Materials Industry Presented to 21 de Mayo 2011

  2. Agenda Chemicals & Materials Industry Story Till Date and Recent Updates A 2020 VISION OF THE GLOBAL AND NORTH AMERICAN CHEMICALS & MATERIALS INDUSTRY Global Mega Trends and the Chemicals & Materials Industry Analysis of Growth Opportunities

  3. Chemicals & Materials Industry Story Till Date Early 20th Century Early 21st Century Emergence of the Pharmaceutical Industry Separation of the Pharma / Biopharma / Biotech Industries Benefits from Pure Science and Fundamental Scientific Breakthroughs Plastics and Polymers boom Developments in process technology and engineering Focus on Application Development Emergence of sustainability and responsible care Global Presence Focus on price competitiveness, economies of scale and operational excellence R&D and Access to Raw Material critical for the nascent industry Success factors depends on region and portfolio Process Engineering Application Development The chemicals industry is one of the pillars of the global economy Global economic growth not dependent on Chemicals Key value driver: Growth of the industry is high compared to global GDP growth High localised industry Consolidated western hemisphere. Opportunities exist in Asia Onset of Globalization and Consolidation High degree of fragmentation Source: McKinsey, Frost & Sullivan

  4. GLOBAL CHEMICALS SALES, 2009 Story Till Date: Current Market Scenario Global Chemicals Sales: 2009-2020 • European chemicals sales are expected to grow at a CAGR of less than 2% per annum to 2020 • Germany is the leading chemicals producer in Europe and is expected to maintain its position to 2020 • Europe will lead the global chemicals industry in terms of regulatory compliance, sustainability and innovation. • Chemical companies may also look to JVs / strategic alliances in other regions (such as the Middle East) to secure feedstock • Asia is the fastest growing region in the world with chemicals sales expected to grow at a CAGR of approximately 4-5% from 2009-2020 • The Asian chemicals market is mainly driven by China which is soon expected to surpass the US as the largest chemicals producer worldwide • Japan is the second largest market in Asia driven predominantly by specialties. India is also a key constituent in the Asian pie due to its promising long term potential Global chemical sales are expected to grow at 2.5-3% during 2009-2020. In this period, China will overtake the United States as the largest chemicals producing nation $ Billion Source: Frost & Sullivan

  5. Story Till Date: Recession Update Chemicals Industry Outlook After Recession Chemicals Shipments: Historical and Forecast– US, EU, China and India Index 2000=100 • China’s spectacular growth in chemicals sales almost stagnated during 2008-2009, but is expected to continue a strong growth to 2015 • US chemical sales is expected to rebound faster and may reach 2008 levels in 2010-11. However, EU chemical sales may take till 2013 to reach pre-recession levels Index 2000=100 Source: Data on historical chemicals shipments from ACC, Frost & Sullivan analysis

  6. Market Metrics Total US Chemical Industry Revenues, Industry Revenues Per Category, 2010 - 2015, $US Billions • In 2010, revenues in the US Chemical Industry reached $694 billion. Revenues in the US market are likely to grow at a CAGR of 2.7 percent from 2010 to 2015, reaching $793 billion by 2015. • The Basic Chemical category consisted of the largest share of the US market with a 34.1 percent share. Consumer Chemicals held the smallest share of the market by category with 8.1 percent share. Revenues, $US Billion US Chemical Industry: Industry Revenues Per Category, 2010, % Note: All figures are rounded; the base year is 2010.

  7. Market Metrics Basic Chemicals, Industry Revenues Per Subcategory, 2010 - 2015, $US Billions • In 2010, revenues in the US Basic Chemical Industry was $237 billion. Revenues in the US basic chemical market is likely to grow at a CAGR of 2.3 percent from 2010 to 2015, reaching $265 billion by 2015. Polymers are the largest sub-segment within the Basic Chemical category representing 33.3 percent of the market. • Bulk petrochemicals and intermediates make up almost half of the market, the majority of which is consumed directly within the chemical industry for further processing • Fertilizers is a suffering segment of the market due to depressed demand. Revenues, $US Billion Basic Chemical: Revenues Per Category, 2010, % Note: All figures are rounded; the base year is 2010.

  8. Chemicals Industry: Story Till Date The Chemicals Industry Has a Constant Challenge to Maintain and Grow Margins Long Investment Cycles Price Pressure from Customers Raw Material Price Fluctuations Chemicals & Materials Changing Competitive Landscape Increasing Regulatory Requirements

  9. Agenda Chemicals & Materials Industry Story Till Date and Recent Updates A 2020 VISION OF THE GLOBAL AND NORTH AMERICAN CHEMICALS & MATERIALS INDUSTRY Global Mega Trends and the Chemicals & Materials Industry Analysis of Growth Opportunities

  10. Global Megatrends and their Implications Mega Trends Allow Companies to Determine Opportunities and Threats A Mega Trend is a long term global transformation process Mega Trends arise at the interplay between changes that are happening to us as individuals, changes happening to the world at large and our changing requirements and needs FUNCTIONALITY & PERFORMANCE HEALTH & WELLNESS FROST & SULLIVAN’s CHEMICALS AND MATERIALS PRACTICE IDENTIFIES FOUR MEGA TRENDS LOW CARBON ECONOMY GLOBALISATION What is happening to us? (Demographic Trends) MEGA TRENDS What is happening to the world around us? What are our changing needs? Good companies understand what their customers want; great companies understand why. These organizations are better prepared to meet and provide what their customers would want next Considering the impact of major megatrends allows businesses to determine and respond to opportunities and threats Why look at Mega Trends?

  11. Globalization Demand Growth for Chemicals is Linked to End User Industry Growth World Automotive Market: Light Vehicle Sales Global Automotive Refinish Coatings 86 Million Vehicles 16% China 66.8 Million Vehicles 20.6% India 23.0% 6.2% CAGR (2008-2015) 3.9% 8% 6.3% 6.0% Growth in automotive sales has an impact on demand for products such as: Eastern Europe 23.3% 23.8% Western Europe Japan North America 8.3% 0% Million Units 8.5% 0 200 400 Current Market Volume (Million lbs) 34.4% 29.6% By 2015, global automotive light vehicle sales is expected to grow to 86 million vehicles per annum. Asia is the fastest growing market and is expected to account for over a third of all light vehicles sales. This will also impact the growth in demand for chemicals and materials used in transportation such as automotive refinish coatings 0.8% 0.9% Source: Frost & Sullivan Source: Frost & Sullivan

  12. While the global chemicals industry is expected to grow at a CAGR of approximately 2-3% in the long term, demand from the Asia Pacific region is expected to grow faster than other regions at 4-5% We also note that additional capacities and increasing capital investment in the Asia Pacific / Latin American region has resulted in a steep growth in production of chemicals in these regions Globalization Global Shift in Production & Demand Chemicals Demand Growth Forecast: 2009-2020 Chemicals Industry Production Growth Index 1997=100 $ Bn CAGR: 4-5% Source: Cefic data Source: Frost & Sullivan

  13. Globalization: Competitive Perspective Upcoming Capacities in ME and APAC Threaten Supply-Demand Balance Middle East Ethylene Capacity, 2007-2013 • The Middle East has significant feedstock advantages • Chemicals production in the region has focused on petrochemicals and this trend is expected to continue • Saudi Arabia leads in terms of new capacities. The UAE and Abu Dhabi also aims to increase their presence in petrochemicals significantly over the next decade • Over 80% of the new projects are olefins and aromatics • APAC on the other hand, benefits from low cost production and high growth of local demand Million Tonnes Percentage (%) Source: Frost & Sullivan

  14. THE CHEMICALS & MATERIALS INDUSTRY MAKES THESE POSSIBLE Health and Wellness Drives Products and Concepts Such As: Beauty Products Fashion Aesthetic Design Healthcare Personal Care Functional Foods Fitness Personal Protection

  15. Towards Better Health and Disease Prevention Growing Demand for Functional Foods, Beverages and Ingredients US Heart Health Ingredients Market Australian Functional Foods Market The need for prevention and better general health has driven the demand for functional F&B products and consequently the market for specific functional ingredients • Includes: • Energy Drinks • Sports Drinks • Functional Waters • Fruit & Vegetable Drinks • Soy Milk • Includes: • Phytosterols • Omega-3 PUFA • Beta-glucan • Soy Ingredients • Others Revenues in $ Mn Revenues in $ Mn CAGR 2006-2013: 8.6% CAGR 2008-2015: 21.3% Global Weight Management Ingredients, 2008-2015 Focus on the prevalence and rise of obesity amongst the global populace has given rise to opportunities for weight management ingredients CAGR 2008-2015: 9.2% • Includes: • Satiety Ingredients / Appetite Suppressants • Fat Burners • Others: Carbohydrate blockers, Fat blockers, Metabolism regulators, Mood regulators Revenues in $ Mn Obesity: Percentage of population older than 15 with a BMI greater than 30

  16. The increasing focus on personal care not only drives the market for active and inactive ingredients in personal care products but also the market for nutricosmetics Health and Wellness Feel Good Factor: Going Beyond General Health The global personal care market in 2009 was estimated to be around $328 Billion and expected to grow at a CAGR of approximately 5-6% to 2015 US and NA Nutricosmetic Ingredients Market INCREASING FOCUS ON PERSONAL CARE Revenues in $ Mn CAGR 2008-2015: ~15% US and NA Nutricosmetic Ingredients Market, 2008 Indian Personal Care Inactive Ingredients Market Chinese Personal Care Active Ingredients Market Personal care nutricosmetics are products when ingested have an effect (preventive or reactive) on skin, nails and hair. The ingestion of nutricosmetics is mainly through food fortification / supplements Revenues in $ Mn CAGR 2008-2015: 18.5% CAGR 2008-2014: 7.2%

  17. Functionality & Performance Providing Greater Functionality & Performance is Necessary to Survive It is imperative to constantly raise the bar for functionality and performance of products and services to maintain competitiveness in a rapidly evolving marketplace Rapidly Evolving Functionality in Automobiles 5th gen Corolla: 1983 1st gen Corolla: 1966 10thgen Corolla: 2006 Evolution of Portable Media Devices Sony Discman Multifunctional Devices Sony Walkman: 1979 iPods: Nano, Shuffle

  18. Functionality & Performance Chemicals and Materials Enable Improved Functionality and Performance Microwaveable products and non stick cookware make cooking faster and easier A commonly used non stick coating is PTFE – polytetra fluoroethylene Advances in packaging materials enable superior convenience and greater shelf life Anti-reflective coating Alternative Building Materials for Unique Structures In sports, chemicals and materials enable superior performance Enhancing Functionality and Performance of Paints & Coatings Modern tennis raquets are made of materials such as carbon and graphite Anti-graffiti Anti-climb Fluorescent Paint Heat resistant

  19. Key Drivers for Participating in the Low Carbon Economy Consumer Demand Legislation Shareholder Value Profits The Chemicals Business Low Carbon Economy Key Drivers for the Low Carbon Economy Increase in brand value and profits results in greater shareholder value In 2008, a survey by TNS indicated that 45% of British and 53% of American respondents would pay more for eco friendly products Reduced raw material costs (through efficiency, recycling, waste management) This figure is much higher for Brazil (83%) and Thailand (94%) Internal Context External Context Widespread consumer preferences and pressures drive legislation for nations and businesses to reduce emissions Lower operational costs (by optimizing consumption of energy and resources) Since 1990, DuPont has saved more than $ 3 Billion through energy efficiency programs. 3M has saved $ 82 Million between 2001 and 2005 and reaped another $ 10 million in 2006 alone A host of local environmental legislations also apply. Companies may also benefit from the sale of carbon credits Source: Frost & Sullivan

  20. Alternative Fuel Vehicles / Fuel Options Electric Vehicles – Huge Materials Opportunity EU Biofuels Supply-Demand (2009-2020) Chemicals and Materials Drive Low Carbon Trends in the Automotive Industry Case study: Options to Decrease Dependence on Fossil Fuels by Plastics in Passenger Vehicles, Global Battery Materials Laminates, Electrodes Electrolytes, Casing Interior Insulation Increasing Fuel Economy Transmission Cooling fluids, Gear oils, Clutch fluids Glazing Panoramic roof, Side windows, Polycarbonates, Acoustic laminates Rolling resistance Tyre additives Source: Frost & Sullivan Electronics/wiring High tension cables, Charging ports, Cable sheaths 6% PA Automotive Light Weighting Trend Thermosets PP Others Drives opportunities for plastics in passenger vehicles PU 3% CAGR (2008-2015) Miles per gallon ABS 0% 0% 25% 50% Percentage of Total Market Volumes, 2008 Source: Association of International Automobile Manufacturers

  21. Glocalization is the process by which global businesses are getting closer to their customers across regions and applications. Think Global, Act Local! Outlook ‘Glocalization’: Could be the Emerging Mega Trend for the Next Decade = GLOBALIZATION + LOCALIZATION Irrespective of business model or area of focus, companies will increasingly attempt to get closer to their customers. This could mean: • Physical proximity • Consumer focus: Chemical companies are not just looking at their customer, but at their customers’ customers. The current focus on megatrends is just the beginning • Delve downstream: Going further down the value chain • Customized solutions: Increasing consolidation in the end user industries could result in tremendous bargaining power and customized products / services • Product portfolio differentiation: Global companies will increasingly look towards opportunities in product development / application development that are specific to a particular region / geography Glocalization is the emerging trend to watch out for

  22. Agenda Chemicals & Materials Industry Story Till Date and Recent Updates A 2020 VISION OF THE GLOBAL AND NORTH AMERICAN CHEMICALS & MATERIALS INDUSTRY Global Mega Trends and the Chemicals & Materials Industry Analysis of Growth Opportunities

  23. Analysis of Growth Opportunities Introduction Frost & Sullivan’s analysis of key growth opportunities globally (by region, sub sector, and application) Specialty chemicals present growth opportunities in most parts of the world Broad Frost & Sullivan’s analysis of selected attractive segments in key regions (Europe, US, China and India) Market Opportunities Sub-sector focus for growth opportunities: Construction and Utilities Case Study: Market Opportunities in Battery Materials Specific Frost & Sullivan supports chemical companies by identifying company specific growth opportunities through a ‘Growth Innovation Funnel’

  24. Analysis of Growth Opportunities Specialty Chemicals to Witness Faster Growth in Most Regions Growth of Commodity Vs. Specialty Segments, By Region (% of Total Sales): 2009 - 2020 CAGR: 3-4% CAGR: 5-6% CAGR: 9-10% CAGR: 4-5% CAGR: 4% % of Total Sales Commodity Chemicals Specialty Chemicals Commodity Chemicals Specialty Chemicals Commodity Chemicals Commodity Chemicals Specialty Chemicals Specialty Chemicals Commodity Chemicals Specialty Chemicals Europe North America APAC Latin America MEAF • As is evident from the graph above, the next decade could be the decade of specialty chemicals. The % of specialty chemicals as part of the overall chemicals sales will increase in all regions to 2020 • Across the world, sales of specialty chemicals could grow twice as fast as the market. Similar to the overall chemicals sales, growth of specialty chemicals is highest is the Asia Pacific region at 9-10% (CAGR 2009-2020) • Globally, specialty chemicals is expected to grow at a CAGR of 5-6% to 2020

  25. Analysis of Growth Opportunities Opportunity Analysis: Attractive Segments by Key Regions EUROPE INDIA Structural Adhesives High Textile Chemicals Leather Chemicals Biopesticides Admixtures Paints & Coatings Paints & Coatings Med Surfactants Catalysts Low Growth Rate CAGR 2009-2020 Attractive Segments in the Chemicals Industry UNITED STATES CHINA High Water Treatment Chemicals Structural Adhesives Construction Chemicals Biolubricants Nutraceutical Ingredients Paints and Coatings Home and Fabric Care Ingredients Med Polymers Plastic Additives Plastic Additives Surfactants Pulp & Paper Chemicals Low Med Med Low High Low High Market Size Source: Frost & Sullivan

  26. Key Market Opportunities to 2020 Growth Opportunities in Construction and Utilities WATER TREATMENT The scarcity of water and with large geographic areas facing drought and desertification challenges, this is a critical area for investment Significant opportunities in Israel, Singapore, Japan, Australia and Middle East in sectors such as water separation technology, chemicals and desalination COMPOSITE MATERIALS Low cost carbon and glass fiber for building and industrial applications including construction panels in building and power infrastructure have high growth potential Increasingly, non corrosive composite materials are being used in metal and wood replacement GREEN MATERIALS The demand for bio based adhesives and green coatings (low or no VOC) are expanding globally. Technologies emerging in the green building industry in North America, Europe and Southeast Asia include smart windows, vacuum windows and door panes, PV materials, LED lighting and recycled materials WIND POWER The Chinese wind power sector is witnessing rapid growth. In 2008 the installed capacity was 12,210MW in China, a y-o-y growth of 106.7%. This presents significant opportunities for structural adhesives and composite materials. Other regions that are attractive for wind power are: India and the US GROWTH OPPORTUNITIES: CONSTRUCTION AND UTILITIES INSULATION SYSTEMS Exterior Insulation and Finishing Systems (EIFS) is a type of synthetic wall cladding for exterior walls and provides an insulated finished surface and waterproofing. External wall insulation using this can achieve 30-40% energy savings. EIFS is a key application for dry mix mortars and redispersible powders OTHERS Next generation solar systems, ocean thermal technology, algae cells for electricity generation and tidal and wave energy applications also represent opportunities in the near future. These areas are attractive significant funding from government and private sectors alike

  27. Market Opportunities by Application: Case Study Battery Materials: Nissan could not find a supplier in Europe • ELECTROLYTE • The electrolytes are typically lithium salts such as LiPF6 dissolved in EC, DEC solvents • Players such as Merck exited the market in 1990’s and are now re-entering • US Government grants encouraging others to enter No existing EU producer • ANODE • Copper is used as the current collector • Active materials used includes graphite and LiC6 • SEPARATORS • PP based separators are the most commonly used in rechargeable lithium ion batteries • Multilayered polymer separators are also gaining ground • Newer technologies are emerging such as aramid based separators and PVDF separators which offer high temperature resistance • LAMINATE FILM • The laminate film has similar structure to packaging laminates • However, the presence of corrosive electrolytes is the biggest challenge in its construction • Aluminum laminates with PET coating are most commonly used here • European suppliers of aluminum laminates have struggled to meet the performance requirements of the laminate • CATHODE • These electrodes typically have aluminum as the current collector • Active materials used include LiMn2O4 and LiCoO2 No existing EU producer

  28. G A T E 1 Identifying Company Specific Growth Opportunities Growth Innovation Funnel Broad list of Potential Opportunities G R O W T H W O R K S H O P Growth workshops prioritize output and strategize next steps G R O W T H W O R K S H O P G A T E 2 Gate 3 Business Strategy and Implementation Defined short list of most easy to implement and high ROI opportunities • Create a growth pipeline through macro analysis of specific criteria applied to appropriate target markets - • Prioritize 3-4 opportunities • Conduct deep dive and obtain relevant information • Develop tactical business plan and implementation strategy • Develop a monitoring, evaluation, and optimization strategy

  29. Lorena Isla Research Manager Direct: +52 55 5524 8624 Email : lorena.isla@frost.com Mauricio Soberón Account Executive Direct: +52 55 5524 7080 Email : mauricio.soberon@frost.com THANK YOU www.frost.com

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