To Sustain Ability in the

Global Lubricants Industry

Apu Gosalia
Head of Global Competitive Intelligence
Chief Sustainability Officer
The 18th ICIS World Base Oils & Lubricants Conference
London, 20th February 2014

Agenda
Macroeconomics & Lubricants, Competitive Landscape, Sustainability

Macroeconomics & Lubricants

Competitive Landscape
Sustainability
Outlook

FUCHS PETROLUB SE

Macroeconomics & Lubricants

Global GDP Growth

Growth Rate (%)

6
5.2

5.1

5.3

5.2

4.7

4.7

3.9

3.8

4
2.8

3.1

3.0

2012

2013

2.7

2.3

2
1
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
-0.4

2010

2011

-1
3

FUCHS PETROLUB SE

Source: IMF

Macroeconomics & Lubricants

GDP vs. Lubricants Demand Growth
Growth Rate (%)

-3

-6

-9

-12

FUCHS PETROLUB SE

GDP

Lube Demand

Macroeconomics & Lubricants

Global Production Growth 2013

Chemical Industry

4.5%

Car Industry

4.0%

Steel Industry

3.5%

Engineering

1.0%

Lubricants

0.9%

0%

FUCHS PETROLUB SE

1%

2%

3%

4%

5%

Sources: VCI, PWC, World Steel, VDMA

Macroeconomics & Lubricants

Development Global Demand*

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
36.4

35.6

35.7

35.4

36.1

36.5

36.9

37.1

36.0

32.2

34.5

35.1

35.0

35.3

Variance (%)

-0.2

-2.2

0.5

-0.8

1.9

1.0

1.2

0.5

-3.0

-10.6

7.0

1.9

-0.5

0.9

GDP Var. (%)

3.6

2.3

2.8

3.8

5.1

4.7

5.2

5.3

2.7

-0.4

5.2

3.9

3.1

3.0

Demand (mn t)

FUCHS PETROLUB SE

*Without Marine Oils

Macroeconomics & Lubricants

Development Regional Breakdown

Demand*

36.4

Western
Europe
11% (14%)

35.3

(mn t)

27%

Africa
5% (5%) Middle East
5% (5%)

Eastern
Europe
9% (13%)

20%

Latin
America
9% (8%)

28%
34%

2013
(2000)

52%
39%

North
America
19% (26%)

Asia-Pacific & Rest of World

FUCHS PETROLUB SE

Americas

Asia-Pacific
42% (29%)

Europe

*Without Marine Oils

Macroeconomics & Lubricants

Regional Per-Capita Consumption 2013

kg

20

15

10

FUCHS PETROLUB SE

W
or
ld

a
Af
ric

fic
ci
As
ia
-P
a

Am
er
ic
a

La

tin

dl
e

Ea
s

e
M
id

Eu
ro
p
st
er
n

Ea

n
te
r
W
es

or
th

Am

Eu

er
ic

ro
p

Macroeconomics & Lubricants

Development Regional Demand

2013 : 2012
Variance (%)

FUCHS PETROLUB SE

North America

0.0

Latin America

1.7

Western Europe

-0.6

Eastern Europe

0.9

Middle East

1.5

Africa

0.9

Asia-Pacific

1.4

World

0.9

Macroeconomics & Lubricants

Development West European Demand

2013 : 2012
Variance (%)
Germany
UK

-0.5

France

-2.8

Italy

10

FUCHS PETROLUB SE

2.4

1.0

Spain

-4.8

Others

-1.9

Western Europe

-0.6

Macroeconomics & Lubricants

Ranking Top 20 Lubricant Countries 2013

K tons

6,000

5,000

4,000

3,000

2,000

1,000

11

FUCHS PETROLUB SE

ly
Ita

da
Fr
an
c
Th e
ai
la
nd
Ta
iw
an
Tu
rk
Au ey
st
ra
lia
Eg
yp
t

K
U

an
a
C

es
ia

on

Ir a
n
In
d

In
di
a
R
us
si
a
Ja
pa
n
Br
az
G
i
er l
m
an
y
Ko
re
a
M
ex
ic
o

SA
U

hi
n

Macroeconomics & Lubricants

Regional Breakdown Product Segments 2013
Automotive

Industrial

100%
24%

29%
80%

36%

42%

43%

44%

49%

56%
60%

40%

76%

71%

64%

58%

57%
44%

20%

56%

51%

0%
North
America
12

FUCHS PETROLUB SE

Latin
America

Western
Europe

Eastern
Europe

Middle
East

Africa

AsiaPacific

World

Macroeconomics & Lubricants

Breakdown Product Groups

Global Lubricants Market 2013: 35.3 mn t

Process Oils
10%
Greases
3%
MWF/CP*
5%
Automotive
Oils
56%

Industrial Oils
26%

13

FUCHS PETROLUB SE

*Metalworking Fluids / Corrosion Preventives

Macroeconomics & Lubricants

Breakdown European Product Groups 2013

West European Lubricants Market: 3.7 mn t

Process Oils
Greases
6%
4%

Process Oils
17%
Greases
3%

East European Lubricants Market: 3.2 mn t

MWF/CP
5%
Automotive
Oils
44%

MWF/CP
7%
Industrial Oils
28%

Industrial Oils
29%

14

FUCHS PETROLUB SE

Automotive
Oils
57%

Macroeconomics & Lubricants

Development European Demand

Western Europe

Eastern Europe

K tons

10,000

7,500

5,000

2,500

0
2000

15

2001

FUCHS PETROLUB SE

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Macroeconomics & Lubricants

Country Breakdown European Lubricants Demand

European Lubricants Market 2013: 7 mn t

Germany
15%

Russia 21%

UK 9%
Ukraine 5%
Poland 4%
Czech
Republic 2%

France 8%

Kazakhstan
2%
Other
Eastern
Europe 11%

16

FUCHS PETROLUB SE

Italy 6%
Spain 5%
Other
Western
Europe 11%

Agenda
Macroeconomics & Lubricants, Competitive Landscape, Sustainability

Macroeconomics & Lubricants

Competitive Landscape
Sustainability
Outlook

17

FUCHS PETROLUB SE

Competitive Landscape
Structure Global Lubricants Industry*

1,500
1,200

"Independents"
"Majors"

590

200

mid-90s

18

FUCHS PETROLUB SE

180

2000

130

2005

*Number of Players > 1,000 tons

Competitive Landscape
M&A Deals Global Lubricants Sector

20
18
16
14
*

12
10
8
6
4
2
0
2005

19

2006

FUCHS PETROLUB SE

2007

2008

2009

2010

2011

2012

2013

*Half-Year 2013 / Source: Young & Partners

20
FUCHS PETROLUB SE

G
U

LF

O
U

AS

NE

G
S

TO

O
N
G
H

PE
TR
/H

IN

IL

IN

O
LI

O
LD

TA
M

LU
KO

VA
LV

JX

PE
R

O
PE

HI
NA

C
EM
IT
SU
FU
C
HS

SI
N

O
C

ID

RO

O
L

TO
TA

HE
V

AS
TR

PE
TR

BP
C

EX
XO

SH
EL

ID

LU
KO

IL
TO
TA

ZO

PC

BP

RO
N

HE
V

C/
CN

PE
N

PC

EP
S

O
L

AG
IP

IL
EM
IT
SU
N
IP
PO
N
O
IL
VA
LV
O
LI
NE
FU
C
HS
IN
D
IA
N
O
IL

SH
EL

EX
XO

Competitive Landscape

Ranking Top 15 Lubricants Manufacturers

2000

2013

Competitive Landscape
Driving Forces

Vertical
Diversification
Globalization of
NOCs

Private Equity

Competitive Landscape

Restructuring
of Majors

Retraction from
Niches

New Market
Participants
21

FUCHS PETROLUB SE

Agenda
Macroeconomics & Lubricants, Competitive Landscape, Sustainability

Macroeconomics & Lubricants

Competitive Landscape
Sustainability
Outlook

22

FUCHS PETROLUB SE

Sustainability
Scarcity of Resources

23

FUCHS PETROLUB SE

Sustainability
FUCHS Triple-Bottom-Line

24

FUCHS PETROLUB SE

Sustainability
FUCHS Framework

25

FUCHS PETROLUB SE

Source: Graduate School Rhein-Neckar

Sustainability
FUCHS Three Pillars of Sustainability

Sustainability

Economic

Company &
Shareholder
Value

26

Investor
Value

FUCHS PETROLUB SE

Ecological

Raw Materials:
Availability/Sourcing

Finished Lubricants:
R&D / Production /
Processes

Social

Internal:
Employees

External:
Society

Agenda
Macroeconomics & Lubricants, Competitive Landscape, Sustainability

Macroeconomics & Lubricants

Competitive Landscape
Sustainability
Outlook

27

FUCHS PETROLUB SE

Outlook
GDP Growth
2013
2014

7.7 %

7.5 %
3.7 %

2.8 %
1.0 %

3.0 %

1.9 %

-0.4
%

Euro Area

USA

China

Opportunities

28

World

Risks

Strengthened global activity during 2nd half 2013

Possible deflation in advanced economies

Euro area moving from recession to recovery

Weak domestic demand in emerging markets

Higher export demand in emerging markets

Stagnation in euro area

U.S. budget deal to boost final demand in 2014

Capital flow volatility to some emerging markets

FUCHS PETROLUB SE

Source: IMF

Outlook
Global Production Growth Forecast 2014

Car Industry

6.0%

Engineering

6.0%

Chemical Industry

4.5%

Steel Industry

3.6%

Lubricants

~1-1.5%

0%

29

FUCHS PETROLUB SE

1%

2%

3%

4%

5%

6%

7%

Sources: DB Research, IHS, VCI, World Steel

Outlook
Lubricants Market, Competitive Landscape, Sustainability

Regional lube market dynamics of the past years in terms of quantity and quality
will continue in mature markets, emerging markets and markets in transition

European lubricants market development will depend on resolution of euro crisis,

economic situation in Asia and development of energy prices

Lubricant companies in Europe can succeed, when focusing also on high-quality end
of the market and towards Eastern Europe (Russia, Ukraine, etc.)
Competitive landscape will remain challenging to all market players, but should offer
opportunities, especially for Independents, focusing on niches of the industry
Sustainability along the dimensions of economic, ecological and social responsibility
will remain a driving force in the lubricants industry to sustain ability in the future
30

FUCHS PETROLUB SE