18 September 2019

Inks, trends and developmentsERA Annual Meeting, Munich 2019

Volume Trends Europe

Advertising Trends

Raw Material Trends

Technology Trends

Printer - / Enduser -Trends

3

Terms and Sources

• Publication = Heatset + Coldset + Publication Gravure• All other = Packaging, Sheetfed

• The following slides are using a mix of internal market intelligence and some external references (PIRA, EuPIA…)

Volume Trends Europe

5

0

200

400

600

800

1 000

1 200

1 400

EU15 + EFTA Central Europe Russia, Turkeyand the rest of

Europe

Exports outsideEurope

GRAND TOTAL

Volume (kT)2005 2018

Europe total ink volumes sold

• The market has shifted towards Central and Eastern Europe• Total market size down by about 10% in volume• Adjusted for inflation*, the sales value dropped in that period by about 20%

No. 5* Source: ECB inflation index 2005 > 2018

Total European ink market 2005 2018 EvoVolume (kT) 1,15 1,03 -10%Value (Billion €) 3,39 3,33 -2%Value (inflation adjusted) * 4,13 3,33 -20%

82%68%

6%

12%

5%11%

8% 9%

0%

20%

40%

60%

80%

100%

2005 2018

Volume relative share

Exports outside Europe

Russia, Turkey and therest of Europe

Central Europe

EU15 + EFTA

6

40% 38%24% 20%

60% 62%76% 80%

0%

50%

100%

2005 2007 2016 2018

Value Share

Publication All other

59% 56%41% 35%

41% 44%59% 65%

0%

50%

100%

2005 2007 2016 2018

Volume Share

Publication All other

Publication inks vs other markets in Europe – 2005 to 2018

Note: Publication = HS+CS+PG

Publication share is now nearly halved vs 2005and shrinkage seems to accelerate

7

0,6

0,9

1,2

1,5

1,8

2,1

2,4

2,7

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Billion

s

MAT Value 

Publication All other

250

400

550

700

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Thou

sand

s

MAT Volume 

Publication All other

Publication inks vs other markets in Europe – 2005 to 2019

Note: Publication = HS+CS+PG

After the financial crisis, publication ink businesses suffered most and never recovered

(MAT = Moving Annual Total)

8

60

130

200

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19Thou

sand

s

MAT Volume 

Publication Gravure Gravure Packaging (estimate)

Publication Gravure vs Packaging Gravure ink markets

• The packaging gravure has a much different marketenvironment compared to publication gravure and although subject to threatsfrom other processes (flexo, digital).

• It still benefits from overallgrowth in markets

• The curve seems to flatten out (capacity used or market flat?)

Note: Gravure packaging estimated based on a typical ratio of gravurein key end use markets

(MAT = Moving Annual Total)

9

0%

50%

100%

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

MAT Volume trend(100% = Q4 '07)

Publication HS CS PG

Publication markets dynamics since the 2008 financial crisis

• Publication Gravure suffered most in volume comparedto CS and HS

• Heatset flattened out since a few years, possibly cannibalizing some business from PG(wide web presses)…BUT seems also to experience a recent fall

• Since 2016, CS and PG decline speed increases

10

Publication ink manufacturing consolidation

• C2E (Brie Comte Robert, FR)• Gebr. Schmidt (Frankfurt, DE)• Flint (Frankfurt, DE)• SunChemical (Etten, NL)• Siegwerk (Siegburg, DE)• Baglini (IT)• Huber (Celle, DE)• Ruco (Eppstein, DE)• Roto Smeets (Etten, NL)• Burda (Schutterwald, DE)• Print Color (CH)

Publication Gravure historical suppliers

• C2E (Brie Comte Robert, FR)• Gebr. Schmidt (Frankfurt, DE)• Flint (Frankfurt, DE)• SunChemical (Etten, NL)• Siegwerk (Siegburg, DE)• Baglini (IT)• Huber (Celle, DE)• Ruco (Eppstein, DE)• Roto Smeets (Etten, NL)• Burda (Schutterwald, DE)• Print Color (CH)

Publication Gravure suppliers today

11

Publication ink manufacturing consolidation

• Brancher• Coates Lorilleux• Flint• SunChemical• Siegwerk• Huber/Hostmann• CIBA• Usher Walker• Trenal• Premier• Schuite & Schuite• …

Heatset historical suppliers Heatset suppliers today

• Brancher• Coates Lorilleux• Flint• SunChemical• Siegwerk• Huber/Hostmann• CIBA• Usher Walker• Trenal• Premier• Schuite & Schuite

…. and the same has happened in Coldset…

Advertising Trends

No. 13

Advertising Expenditure: EuropeUS$ millions at current pricesLatest available data to end of September 2017

Source: Zenith Optimedia, September 2017 report

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Total Advertising

Print Advertising

~ +30%

~ ‐50%

14

Digital advertising and medium continues to gain ground

• Although at a slower pace, digital advertising still gains against other forms and hits traditional media financingoptions

• Print media is on the front line when ad spend choicesare made by publishers

• Still, quantity does not always mean quality

15

… but traditional printing in volume still is a big part of the total

~50%

Technology Trends

17

Print process trend

• Clearly, the biggesthit expected on coldset web offset

• Heatset, also willdecline, but not as much

18

Global printing output by process

*

* includes gravure packaging

19

Printing technology developments

• In heatset, nearly all recentinvestment in presses are with80pp, 96pp or 160pp (2x80pp), a majority being installed in Germany

• This allowed heatset to taketraditional publication gravure high volume printing jobs

• In Publication Gravure, no more laser engraving system is beingused

• Digital presses installations are gaining ground too, putting pressure on narrow‐web mainly, but also screen printing

Raw Material Trends

21

Current Market Realities• Oil price volatility• Force Majeure declarations in the chemical industry at an all time high

– Both our direct suppliers and their suppliers impacted

• Severe shortages on some basic chemical building blocks• Regulations driving supply restrictions

– China government mandated manufacturing shutdowns

• Geopolitical uncertainty (policy, trade, e.g. changing duty status between countries, tariffs implementation)

• Weather-related supply issues• Raw material costs are increasing as suppliers push for profitability • Supply security getting more difficult within tighter markets

22

Supplier Force Majeures Remain at an All-Time High

The number of force majeure declarations have increased almost 8X since 2010 and has been a major factor in raw material supply shortages and price escalation over the past two years.

18 months ago the factor was 4X since 2010.

23

Resin prices

• Rosin resins are still at high prices comparedto the long termaverage by about +35%

• Prices fluctuatebetween 1500 and 2000€/MT with highervolatility

1 541

423

2 410

0

500

1 000

1 500

2 000

2 500

3 000

Jan '00 Jan '04 Jan '08 Jan '12 Jan '16

Rosin and Resin acids (380610) ‐ Import prices (€ /Ton)

Avg Price Latest LT Avg MaxMin Mov Avg 12m

Reporter:  EU28 | Partner: CN

24

0

100

200

300

400

500

600

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

Jan '16 Jan '17 Jan '18 Jan '19

'000

 TonsVolume Avg Price

Latest LT Avg

7 420

3 693

7 721

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

Jan '00 Jan '03 Jan '06 Jan '09 Jan '12 Jan '15 Jan '18

Pigments (320417) ‐ Import prices (€ /Ton)

Avg Price Latest LT Avg MaxMin Mov Avg 12m

Reporter:  EU28 | Partner: CN

Pigments prices

• There was again a sharpincrease early 2018

• Since, prices are veryvolatile and supply of manypigments is short, this is a very demanding market

25

Environmental Inspections Implemented in China – Current Situation

First RoundJune 2106

Second RoundNov.2016Third RoundJuly 2017Fourth RoundAug 2017

As China becomes more environmentally focused this will continue to be an issue – along with other developing countries like India.

In 1st half of 2017 only

ProvinceZhejiang Jiangsu Shandong

Environmental violation cases 17 077 5 615 10 228

Penalty (Mio RMB) 500 Mio RMB 340 Mio RMB 484 Mio RMB

Plants limited or closed 347 490 306

Plants relocated 1 407 ‐ ‐

Cases registeredadministrative detention 591 ‐ 629

Cases registered criminal detention 640 80 167

26

China – Additional Environmental Assessments Initiated where Key Suppliers are Located

Jiangsu ProvinceStrictly remediation on coastal chemical parksCoverage - all the chemical companies and parks in Nantong, Lianyungang and Yancheng

Zhejiang Province / HangzhouClose or eliminate high polluting companiesTarget industry – chemical, printing and dying, papermaking, smelting and molding

Shandong ProvinceOnly 85 chemical parks will be reservedAim – no more than 75 comprehensive parks and 10 professional parks left

Market has suffered significant supply and cost increase issues on pigments, intermediates and photo-initiators as a result.

Printer - / Enduser - Trends

28

Publication Gravure printing Europe consolidation

• Austria• Belgium• Czech Republic• Denmark• Finland• France• Hungary• Germany• Italy• Netherlands• Poland• Russia• Slovakia• Spain• Sweden• Switzerland• United Kingdom

Historical Publication Gravure markets

• Austria• Belgium• Czech Republic• Denmark• Finland• France• Hungary• Germany• Italy• Netherlands• Poland• Russia• Slovakia• Spain• Sweden• Switzerland• United Kingdom

Publication Gravure markets today…

29

Environmental concerns, opportunities and threats

• Environmental aspects are increasingly important for governments, publishers… and NGOs like Food watch, WWF…etc

• These concerns circle mostly around deinkability because of residues in carton (public health)

• There is already a tax on publication products paper tonnage in France which mightincrease depending on the type of ink used– Mainly offset inks would be affected, also UV inks are already getting a malus– It is unclear presently what kind of inks will get exemption from this additional tax

(aromatic free, mineral oil free…)– Could this lead to shifts in printing method choices from publishers ?

(Heatset and Coldset to PubG)– What will happen with the residual toluene content of publication gravure produced

prints?• Will the French governmental initiative spread further accross Europe?

30

Packaging industry environmental market drivers

• Supermarkets and distributorsare pushing for less plastic packaging

• EU and local governments plan different initiatives to reduceusage of plastic based packages

• NGOs raise concerns concerningpollution of micro‐plastics

• …

• Solutions are :– Compostable inks– Inks based on renewable

materials– Functional coatings to avoid

migration into food– Put virgin fibers back into the 

carton sourcing system

18 September 2019Thank you for your attention