Key developments in Automotive Catalysts Capital Markets Event Seoul, 23 May 2012
What is an automotive catalyst? Combustion engines produce toxic emissions due to incomplete combustion of fuel and the generation of by-products Automotive catalysts are needed for reducing these toxic emissions Legislation enforces this by setting emission limits for vehicles Toxic pollutants Carbon Monoxide (CO) Hydrocarbons (HC, NMOG) Nitrogen Oxides (NO x ) Particulate Matter (PM) Non-toxic by-products Carbon Dioxide (CO 2 ) Water (H 2 O) Nitrogen gas (N 2 ) 2
Umicore Automotive Catalysts business drivers Growing global light duty vehicle production Light duty vehicles (LDV): passenger cars, SUVs and light trucks Heavy duty diesel (HDD): trucks and buses Non-road applications Emission legislation and air quality standards are becoming more stringent in developed and emerging markets CO 2 emission reduction Impacts engine complexity and fuel types used in different regions Determines choice of powertrain 3
Global light duty vehicle production outlook Established Car production Markets Emerging Car production Markets 60 [M vehicles] 60 [M vehicles] 50 50 40 40 30 30 20 20 10 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Japan/Korea Middle East/Africa North America South America South Asia Europe China Source: Umicore estimate based on external Source: data Umicore sources estimates based on external Source: databases Umicore estimate based on external data sources 4
Global powertrain development Internal Combustion Engine (ICE) remains dominant 120 Car production [M vehicles] 100 80 60 40 Contains combustion engine Requires catalyst system 20 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 EV (Electric Vehicle) PHEV (Plug-in Hybrid Electric Vehicle) HEV (Hybrid Electric Vehicle) ICE flex fuel, CNG, LPG ICE gasoline (Internal Combustion Engine) ICE diesel Source: Umicore estimate based on external data sources 5
Global emission legislation present in most regions and becoming more stringent EU regulation EU inspired regulation US regulation Japanese regulation No legislation 6
Umicore s global leadership position Russia North America Europe China India Korea Japan Regional positions Market leader (#1 or #2 position) South America Australia Smaller player (distant #3) Circles indicative of 2011 light duty vehicle production volumes ( catalyst revenues) 7
Umicore s global footprint in automotive catalysts Production plant R&D / Technology development centre Burlington Canada Ansan Korea Auburn Hills USA Tulsa USA Americana Brazil Onsan Korea Himeji Japan Suzhou China Production plant R&D / Technology development centre Production plant & R&D / Technology development centre Port Elisabeth South Africa Florange France Rheinfelden Germany Hanau Germany Karlskoga Sweden 8
Impact of CO 2 regulation
Challenging CO 2 emission targets will push the use of advanced engine configurations CO 2 emission targets for light duty vehicles [g/km] actual enacted proposed 240 estimated -37% 181 185-22% 167 154-38% 152 141-23% 130 125 145 109 95 Advanced engine configurations Down-sized turbo-charged gasoline engines Gasoline direct injection Lean burning gasoline engines Diesel Hybrid electric vehicles 2010 2015 2020 2010 2015 2020 2010 2015 2020 2010 2015 2020 All these configurations require complex catalyst solutions Europe USA Japan China Source: Continental (2011) 10
Downsized turbo-charged direct injection gasoline engines are being implemented more widely Turbo-charged Direct Injection (DI) engines enable reduced fuel consumption By reduced engine displacement and decreased engine speed By flexible combustion process By significant torque increase, esp. at low rpm Profile of exhaust gases is different Hydrocarbons (HC) emissions increase NO x emissions decrease Exhaust gas temperature range increase due to heat sink - turbo charger effect Catalyst requirements more complex Lower light-off temperature for the catalyst Catalyst bed temperatures above 1000 C require greater durability High dynamic lambda behaviour 11
Lean combustion provides the best fuel economy Lean burning conditions offer better combustion properties Principle already used in diesel cars Introduced in lean burning gasoline engines Works in oxygen-rich environment TWC conversion NO x No oxygen Rich exhaust Operating range TWC Lean burning CO HC Excess of oxygen Lean exhaust Direct NO x reduction with excess oxygen is not possible 1 Lambda Engine optimisation offers limited possibilities CO 2 emission CO 2 penalties EURO 6 NO x limit 1 CO 2 advantage 50% NO x reduction NO x aftertreatment solutions required in most cases Selective Catalytic Reduction (SCR) CO 2 benefits 2 NO x aftertreatment 2 1 NO x Storage Catalyst (NSC) NO x engine output 12
Electrification of the powertrain impacts catalyst size and catalyst complexity ELECTRIFICATION ICE HEV PHEV EV Normal Start-stop Mild Full Parallel system Range extender BEV FCEV Relative size +++ +++ +++ ++ ++ + Relative complexity + + + ++ +++ + No emission control catalyst 13
Hybrid powertrains require new operational conditions for the ICE and the catalyst Engine-stop phases causes significant cooling of the emission control system Lower catalyst light-off temperature required High temperature stability especially required for gasoline applications Engine restarts cause very high emissions peaks Emission control for hybrid applications needs dedicated solutions CO emission [mg/s] 300 250 200 150 100 50 0 60 40 20 NOx emission [mg/s] Vehicle speed [km/h] 120 80 40 0 0 1000 0 0 20 40 60 80 100 120 140 160 180 200 Time [s] Engine speed [rpm] 14
Market status in Europe
Moderate growth of light duty vehicle production expected in Europe Production in 2014 expected to reach record 2008 level CO 2 targets drive fuel efficiency 130g/km, phasing in in 2012, full compliance by 2015 95 g/km further reduction by 2020 Engine configurations changing Diesel should keep market share of ~50% Gradual introduction of electrified vehicles Downsized turbo-charged gasoline direction injection should grow fast EURO 6 legislation comes into force in 2014 Air quality requirements in cities drive NO X aftertreatment introduction for diesel Car production Particulate emissions regulation could drive Gasoline Particulate Filter (GPF) requirement 25 20 15 10 5 0 2011 [M vehicles] 2015 2019 XEV ICE flex fuel, CNG, LPG ICE gasoline ICE gasoline DI ICE diesel Source: Umicore estimate based on external data sources 16
Strengthening EURO 6 NO x limits for diesel cars require NO x aftertreatment systems NO x EURO 3 EURO 4 EURO 5 EURO 6 0.5 g/km -84% 0.25 g/km 0.18 g/km 2000 2005 0.08 g/km 2010 2015 17
Diesel NO x aftertreatment system concepts 2014 EURO 5 EURO 6 NSC cdpf H 2 S slip DOC cdpf Replacement of DOC by NO x storage catalyst (NSC) and addition of Sulphur slip catalyst Diesel oxidation catalyst (DOC) with catalysed Diesel Particulate Filter (cdpf) Urea DOC cdpf SCR SCR Addition of Urea-based Selective Catalytic Reduction (SCR) 18
Strengthening EURO 6 PM limits may require gasoline particulate filters EURO 6 legislations addresses the number of particulates, with a transition period of 3 years for gasoline engines Gasoline Direct Injection (DI) engines have higher Particulate Matter (PM) emissions (in number of particles) compared to diesel engines with Diesel Particulate Filter 2008 2011 2014 2017 2020 Euro 5 Euro 5b Diesel: 6.10 11 /km Gasoline DI: 6.10 12 /km Euro 6b Euro 6c Diesel & Gasoline DI: 6.10 11 /km PM [mg/km] 10 1 Gasoline PFI Gasoline DI Diesel with DPF EURO 6c EURO 6b PM limit PM limit 0.1 10 10 10 11 10 12 10 13 10 14 PN [#/km] 19
Potential Gasoline particulate reduction system concepts 2017 EURO 5 / EURO 6 EURO 6c TWC cgpf TWC Three Way Catalyst (TWC) Combination of TWC and cgpf cgpf All-in-one catalysed Gasoline Particulate Filter 20
Umicore s market position in Europe European catalyst market should continue to outpace vehicle production due to the introduction of new legislation Umicore has a strong leadership position in the European market Catalyst production in Europe started in 1974 Umicore has strong technology portfolio and system knowledge available to support the market requirements First to market with NO x storage catalysts and SCR systems Strong position in cgpfs established, critical IP generated and patents granted R&D centre supports development programmes with OEMs Karlskoga plant, Sweden Florange plant, France New contract wins for EURO 6 diesel legislation (related to NO x aftertreatment systems) should allow Umicore to further strengthen market position Rheinfelden plant, Germany 21
Market status in North America
Moderate growth of light duty vehicle production expected in North America Production in 2016 expected to reach record 2000 level Corporate Average Fuel Economy (CAFE) regulation 35.5mpg (miles per gallon) to be reached by 2016 (now 23.1 27.5) From 2017 to 2025 fuel economy will increase to an average of 54.5mpg CAFE regulation pushes towards more efficient engine types Focus on turbocharged gasoline direct injection Diesel market acceptance is increasing gradually Car production [M vehicles] 20 15 10 5 0 2011 2015 2019 New Emission legislation 23 EPA Tier 3 is currently under discussion LEV (Low Emissions Vehicle) III cuts emissions by 50% of current most stringent SULEV legislation Green House Gas Standards (GHG) includes standards for secondary emissions (N 2 O, methane and particulates) XEV ICE flex fuel, CNG, LPG ICE gasoline ICE gasoline DI ICE diesel Source: Umicore estimate based on external data sources
Gradual implementation of LEV III (SULEV20) emission standards to be reflected in vehicle fleet Emission categories Sales share to be reached to meet emission norms NMOG*+NO x [mg/mile] 160 125-88% 100% Sales share 70 50 30 20 0% LEV ULEV ULEV70 ULEV50 SULEV SULEV20 * NMOG: Non-Methane Organic Gases 2010 2010 2020 Source: CARB 2010 24
Various emission categories require more and more advanced catalyst technologies System requirements ULEV TWC TWC Low light-off On-board diagnostics Increased Hydro Carbon (NMOG) SULEV TWC TWC TWC performance Robustness over lifetime Combined NMOG/NO x performance SULEV20 TWC TWC TWC Stricter particulate mass standards Durability increased to 150,000 miles 25
Umicore s market position in North America LEVIII and EPA Tier III pending legislation offers catalyst growth opportunities Umicore has a leadership position in the North American market Catalyst production in North America started in 1983 Acquisition of Delphi catalysts activities in 2007 Strong technology portfolio and system knowledge available to support the market requirements State of the art technology development centre in Auburn Hills to manage local development programs R&D centre in Tulsa to support local engine development Burlington plant, Canada Auburn Hills tech centre, USA Tulsa plant, USA 26
Market status in Japan / Korea
Moderate growth of domestic light duty vehicle market expected in Japan and Korea Korean and Japanese OEMs strongly positioned worldwide Japanese OEMs have strong growth path globally and especially South East Asia Strong position of Hyundai/Kia in Korea with global growth path Decision making power remains strongly in the home country Strong local automotive catalyst presence is therefore essential OEM s development focus for domestic and global markets Gasoline ICE mainly Strong focus on electrification Emission legislation in Japan changing beyond 2015 14 12 10 Car production 8 6 4 2 0 2011 [M vehicles] 2015 2019 XEV ICE flex fuel, CNG, LPG ICE gasoline ICE gasoline DI ICE diesel Source: Umicore estimate based on external data sources 28
Umicore s market position in Japan and Korea Korean and Japanese OEMs driven by growing export markets Umicore has a leadership position in Korea Catalyst production started in 1987 Distant follower in Japan Catalyst production started in 1993 Core strategy to increase position with Japanese OEMs First successes gained, mainly related to diesel for export markets Onsan plant, Korea Himeji plant, Japan Umicore is established in Japan and Korea through 29 Local production facilities fully integrated into the global network Technology development centres in Korea and in Japan and R&D centre in Japan Umicore supplies catalysts for various hybrid vehicles including PHEV
Market status in China
Continued strong growth of light duty vehicle production expected in China Car production Continued strong growth of vehicle production expected Powertrain development mainly focused on conventional gasoline engines 35 30 25 20 15 10 5 0 [M vehicles] Diesel gaining momentum Legislation follows European norms with a 3 to 5 year lag 2011 2015 2019 XEV ICE flex fuel, CNG, LPG ICE gasoline ICE gasoline DI ICE diesel Source: Umicore estimate based on external data sources 31
Chinese emission legislation closely following European standards 2000 2005 2010 2015 2020 Europe Euro 3 Euro 4 Euro 5 Euro 6 China gasoline C3 C4 C3 C5 C5+ C4 C5 C5+ Beijing Countrywide China diesel C3 C4 C3 C5 C4 Beijing Countrywide 32
Umicore s market position in China Umicore has a leadership position in China Local production capacity since 2005 Platform exposure with both global and domestic OEMs Suzhou plant, China New production line for LDV and HDD being built in Suzhou (commissioning in Q3 2012) Technology development centre under construction in Suzhou (commissioning in Q3 2012) Suzhou tech centre, China 33
Market status in South America
South American market drivers South American market for light-duty vehicles is growing Constant growth since early 2000 Forecasts show local manufacturing of 6 million vehicles by 2017 (IHS) Strongest market is Brazil Brazil emission legislation with upcoming PL6 regulations Flex Fuel systems are dominant for passenger vehicles and light duty power trains Driven by the Brazilian energy portfolio Specific flex fuel Technologies Car production 8 6 4 2 0 2011 [M vehicles] 2015 2019 XEV ICE flex fuel, CNG, LPG ICE gasoline ICE diesel Source: Umicore estimate based on external data sources 35
Umicore s market position in South America Umicore has a strong leadership position in the market Pioneer for Catalyst production in South America, started in 1991 Launching of Vehicle Emission Tech Centre in 1992 Americana plant, China Umicore has strong technology portfolio for bio-fuels and can provide system development capabilities locally Investment in new vehicle test cell in Americana, Brazil was recently approved to help OEMs meet the upcoming PL6 and PL7 regulations 36
Market status in India, Russia and South-East Asia
Markets in Russia, India and South-East Asia Car production growing with economic development of these countries Legislation currently at low level Following European legislation with 5-7 year delay Very low durability requirements No in-use control Umicore ready to invest when markets develop further 38
On- and non-road HDD market
Expansion of scope of emission norms 1985 2006 2011/2012 2016 40
More stringent legislation enforces the use of emission control systems worldwide USA/Canada Korea On-road 2017 US HDD fuel economy On-road 2015 EURO VI Non-road 2014-2015 Tier 4 final Non-road 2013 Tier 4 Brazil Japan On-road 2012 EURO V On-road 2014 Post JP 2009 Non-road 2015-2017 Stage IIA China Chile On-road 2013 EURO IV On-road 2012 EURO IV + DPF / EPA 2007 Argentina On-road 2014 EURO V Europe On-road 2013 EURO VI Non-road 2014 Stage IV & Tier 4 final Russia On-road 2015 EURO V India On-road 2015 BS IV 41
HDD Global Technology Trends Advanced legislation require PM and NO x aftertreatment 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 USA Canada US 2007 DOC cdpf DOC cdpf US 2010 SCR Europe DOC cdpf EURO IV/V or SCR DOC cdpf EURO VI SCR Japan JP 2005 DOC Post JP 2009 DOC cdpf SCR India Brazil China DOC cdpf EURO IV/V or SCR 42
Umicore s market position in Heavy Duty Diesel Umicore s position in on- and non-road HDD Decided in 2005 to step in HDD market and started R&D efforts Technology gap with competitors closed by 2008-2009 followed by market positioning Contract wins in all regions with relatively more success in Europe and emerging markets Umicore continues to position itself for additional HDD business to be awarded in the near future Technology, system design and customer intimacy are key for success Existing HDD test capability in Korea, Japan, Brazil, Europe and North America New technology development centre in China to be commissioned in Q3 2012 HDD production capability being established in North America, Europe and China Dedicated HDD facility in Florange, France will be commissioned mid 2012 Expansion of flexible capacity in Suzhou, China will be commissioned in Q3 2012 43
Conclusion
Umicore Automotive Catalysts Automotive catalysts market set to grow faster than vehicle production due to more stringent emission legislation in all the major markets Umicore is a global leader for light duty applications Well positioned in Europe, North America and Korea Strongly positioned in fast growing Chinese and Brazilian markets Aiming to increase position with Japanese OEMs Ready to seize opportunities in India Umicore is gradually gaining ground in HDD, supported by customer awards Umicore is continuing to invest in manufacturing and testing capabilities 45
Forward-looking statements This presentation contains forward-looking information that involves risks and uncertainties, including statements about Umicore s plans, objectives, expectations and intentions. Readers are cautioned that forward-looking statements include known and unknown risks and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Umicore. Should one or more of these risks, uncertainties or contingencies materialize, or should any underlying assumptions prove incorrect, actual results could vary materially from those anticipated, expected, estimated or projected. As a result, neither Umicore nor any other person assumes any responsibility for the accuracy of these forward-looking statements. 46
The presenter Dipl.-Ing. Wilfried Mueller Global Technology Director, Research & Technology Umicore AG & Co. KG Wilfried Müller started at the Applied Technology Group Automotive Catalysts of Degussa AG in 1990. He became the Head of the Global DaimlerChrysler Businessteam at Degussa/Umicore AG in 1996 and was appointed Director Research & Development NOx-Storage Catalysts Gasoline and Diesel at Umicore AG in 2003. Since 2006 he is the Director System Integration Automotive Catalysts, Light- and Heavy Duty Vehicles at Umicore AG. Wilfried holds a Mechanical Engineering diploma with the focus on internal combustion engines (University of Applied Sciences, Frankfurt). 47