Univar N'V' FirstHalf 2005 Results

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Univar N.V. First-Half 2005 Results

• August 25, 2005 Amsterdam, The Netherlands

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Presentation Agenda

• Discussion of Operating Performance H1 2005
• Outlook H2 2005
• Gary Pruitt, President and CEO
• Review of Financial Results H1 2005
• Patrick Tole, Chief Financial Officer
• Market-Specific Business Review H1 2005
• John Sammons, Chief Administrative Officer
• QA

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Gary PruittPresident and CEO
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We are very pleased with Univars excellent
first-half 2005 results.

• Univar posted strong year-over-year growth in
• Sales 16.4
• EBIT 28.1
• EPS 36.7

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Operating income growth was primarily driven by
three factors

• A strong chemical pricing environment that built
  on the price increases of the latter part of 2004
• Continued operating expense control, whereby
  expense growth was curtailed to rates of
  inflation, and, in fact, declined relative to
  gross margin growth
• Our ability to leverage the significant market
  share growth Univar has taken in the past 1 ½
  years, which we have been able to leverage
  throughout the chemical cycle to improve EBIT

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Volume growth stalled (we believe temporarily) in
H1 05 due to

• The general slowdown in industrial activity in
  the markets we serve in North America and Europe
  (with slowing US manufacturing growth rates from
  August 2004 through May 2005)
• The North American slowdown appears to have been
  temporary, as US manufacturing activity started
  growing again in June and July
• Europe was generally soft, with a contraction in
  manufacturing activity and a downturn in economic
  sentiment. The eurozone appears to be taking
  longer to turn positive
• This pause in the growth cycle is not just a
  Univar phenomenon, but has affected competitors
  and producers as well

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Outlook

• Assuming the business environment remains
  favorable, Univar expects to continue its strong
  performance during the second half of fiscal year
  2005.
• Due to normal seasonal business patterns,
  second-half sales and EBIT from normal operations
  are typically lower than in the first half-year.
  We anticipate this cyclical pattern will prevail
  in 2005.

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Patrick ToleChief Financial Officer
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Key Consolidated Results H1 2005
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Key Results H1 2005

• Gross Margin
• Consolidated gross margin improved by 42.2
  million to 461.3 million as a result of higher
  sales, but gross margin percent declined to 14.7
  from 15.6.
• A decline in margin percent associated with
  intense price competition and substantial
  chemical price increases occurred in the US and
  Europe, causing a decline in GM on a
  consolidated basis.
• However, Canada improved its GM by .1, to 13.1
  from 13.0 a year ago, demonstrating the benefit
  of having a substantial market leadership
  position.

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Key Results H1 2005

• Gross Margin (contd)
• A Closer Look at Gross Margin - The magnitude
  of price increases caused year-over-year gross
  margin percentage comparisons to be less
  meaningful.
• In actuality, gross margin per pound sold, a key
  indicator, increased by more than 7, even though
  overall gross margin percentage on the PL
  declined

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Improvement in EBIT margin occurred despite
the decline in gross margin
14.7 gm
16.3 gm
15.6 gm
16.8 gm
15.3 gm
16.7 gm
15.6 gm
(in millions)
6-Month Period
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Working Capital Growth

• Several dynamics are at work in the current
  high-price environment
• Higher chemical prices result in higher A/R,
  inventory, and A/P values
• Greater pressure from chemical producers to pay
  them faster
• We continue to focus on growth in market share.
  Better payment terms for new business are
  sometimes necessary.

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Working Capital Growth (contd)

• At June 30, trade working capital (trade
  receivables, inventory and accounts payable) had
  increased by 14 over year-end 2004 to
  approximately 778 million.
• Net debt increased to 504 million from 421
  million at year-end 2004.
• This was due to
• Higher chemical prices which result in higher
  working capital
• Normal seasonal spike in working capital
• Redemption of the cumulative financing preference
  shares
• Currency movements

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Working Capital Growth (contd)

• On a relative basis the average number of days
  sales employed in working capital actually
  increased only slightly, to 40.8 days from 39.4
• EBIT return on capital employed in trade working
  capital increased to 15.6 from 14.8 in H1 2004

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Accomplishing Goals

• At the time of the split-off in mid-2002, we set
  several 3-to-5-year goals for the companys
  performance
• 1) Sales growth (1-2 above local GDP
  annually)
• 2) EBIT margin improvement (to 3.5 or better)
• 3) Net debt-to-EBITDA ratio (to 2.51 or
  better)
• 4) Interest coverage (5 X or better)
• We accomplished each of these goals by the end of
  2004 except for EBIT margin.

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Accomplishing Goals (contd)

• As of the first half of 2005, we achieved the
  last goal our EBIT margin goal of 3.5 or
  better. In H1 05, Univars EBIT margin was 3.5
  compared with 3.1 a year ago.
• --Now that weve met each of these goals, we
  wont be emphasizing them as much. We will be
  focusing on ROCE, a goal announced in March, and
  reporting to you at each year-end on our progress
  toward that benchmark.

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John SammonsChief Administrative Officer
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Business Review US

• In the first half, we experienced a bit of an
  inventory bubble, with customers buying in H2 04
  in advance of price increases.
• Therefore, we experienced a slow patch in volume
  growth as our customers worked down inventories
  in H1 05.
• Slowdown in economic activity
• The rate of manufacturing growth slowed from
  November through May
• The selling environment continued to be very
  competitive, where literally every sale was
  contested. Competitors are attempting to reclaim
  lost market share.

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Business Review US (contd)

• Were currently seeing reports of improved
  industrial activity.
• For example, in the US, manufacturing activity
  according to the Institute for Supply Management
  index has grown in both June and July.
• We are hopeful this growth will translate into a
  resumption of volume growth in H2 05.

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Business Review Europe

• In an environment where the economies were less
  robust, Univar Europe grew its business
  organically in every market we serve--despite the
  fact that pricing was not as strong as in North
  America
• Univars reported results were not helped by the
  business climate
• a decline in economic sentiment in the eurozone
  to the lowest point since 2003
• reported fears of stagflation across Europe, and
  negative manufacturing growth early in the year
  fueled by weak consumer demand

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Business Review Europe (contd)

• We saw strong profit improvement in the UK and
  France, our two largest European country markets
• Network infrastructure improvements in France and
  the UK contributed to a reduction in costs
• We are starting to receive the benefits of the
  merger of three companies in France

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Business Review Canada

• A familiar story year-over-year record
  performance in sales, gross margin, and operating
  income
• Sales growth was driven mainly by pricing in the
  industrial chemicals business
• Agricultures growth was driven primarily by
  volume growth
• This despite
• A softening of the manufacturing sector (somewhat
  in parallel with the US)
• A stronger Canadian dollar, compared with the US
  dollar, improved reported results, but reduced
  volumes with customers who export to the US

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Business Review Canada (contd)

• We saw continued strength, especially in the
  resource-based West, and particularly in Energy
• Eastern Canada achieved growth, though not as
  strong as the West due to its dependence on US
  markets. We expect a pickup to mirror that of
  the US as the US industrial economy improves.

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QA
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