H. B. Fuller Company · NYSE:FUL
H. B. Fuller — Fuller H B — Investor Day (February 2016)
122 slides from H. B. Fuller's investor day presentation, Feb 3, 2016
Slide 1: Investor Day 2016
INVESTOR DAY 2016 = H.B. Fuller | conrecting Jim Owens President and CEO
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain matters discussed today may include ‘forward looking statements’ as that term is defined under the Private Securities Litigation Reform Act of 1995. Since such statements reflect our current expectations, actual results may differ as they are subject to the kinds of ris
Slide 3: Strong foundation enables acceleration of financial performance
Slide 4: Summary
INVESTOR DAY 2016 = 48. Fuller Summary = What's new in the 2020 plan? = Market overview and company progress = Detailed strategy review = Q&A e20t6 48, Fler Company
Slide 5: Resetting growth targets and shifting portfolio focus
= 4B. Fuller . increasing EBITDA plan to = = Resetting our growth targets to 3-5% annually = Shifting portfolio focus + High value + High margin + Stronger growth opportunities = Allocating capital differently = Leveraging infrastructure instead of building infrastructure
Slide 6: Adhesives: Our Strategic Market Space
INVESTOR DAY 2016 = HB. Fuller | Adhesives: Our Strategic Market Space Adhesives are an attractive market space: = High value-added product enables: + New product development + Improved manufacturing efficiency + Reduced cost of customer substrates * Small % of customer spend * Consumable with limit
Slide 7: Adhesives Industry Competitive Landscape
INVESTOR DAY 2016 SHB. Fuller | comcvrne ns Adhesives Industry Competitive Landscape Highly fragmented market space + Henkel clear leader + H.B. Fuller #2 with ~5% share Types of competitors = Global adhesive companies ones s as SH. Fuller * Division of global chemical company * Mid-sized focused on
Slide 8: H.B. Fuller Business Model
INVESTOR DAY H.B. Fuller Business Model Target attractive market segments Create global team of market- specific application experts Source of competitive advantage Identify market trends and market drivers Create market and customer solutions and leverage them globally e20t6 48, Fler Company 8
Slide 9: H.B. Fuller Value Creation
INVESTOR DAY 20 H.B. Fuller Value Creation — Develop new va manufacturing H.B. Fuller Products processes Produce manufactured goods help customers Specify new adhesive with three key business Improve processes manufacturing e20t6 48, Fler Company
Slide 10: Our Financial Plan in Perspective
INVESTOR DAY Our Financial Plan in Perspective SsAitions Net Revenue 2,000 1,750 1,500 1,250 - 1,000 - 750 a EBITDA $ 250 2000 2% 11.4% a“ i 150 SY - 100 1995 9% 8.9% ws alll iil lk 1995 2000 2005 2010 2015 10 e20t6 48, Fler Company
Slide 11: Hygiene
Hygiene
Slide 12: Portfolio Shift
Portfolio Shift Higher Growth, More Profitable Segments 2010 2015 (61.3 billion) ($2.1 billion) Target Markets Developed Economies 2016 H8, Fler Company 12
Slide 13: 2015 Plan: Invest in Infrastructure
-_ = H.B. Fuller 2015 Plan Invest in Infrastructure " Capital invested in necessary infrastructure + European business transformation + SAP ERP system = Invested in upgraded capability * Global sourcing + Innovation and R&D + Pricing and sales excellence + Training and development e20t6 48, Fler Com
Slide 14: A Strong Team
Slide 15: Strong foundation enables acceleration of financial performance
Slide 16: Strategic Thrusts and Vision
INVESTOR DAY 20 S HB. Faler | enw nm Gain profitable, global share through application expertise, strong customer relationships Capture high share of global growth with greater participation in emerging markets Innovate to invigorate existing market opportunities, capitalize on emerging trends Build
Slide 17: Key Levers in Plan
Key Levers in Plan A Closer Look at the Major Plan Drivers
Slide 18: Key Levers in the 2020 Plan
INVESTOR DAY 2016 = 48. Fuller Key Levers in the 2020 Plan " Manufacturing cost savings = Engineering adhesives " Differential growth in focus market segments = Expansion in developing and emerging geographies = Leverage infrastructure investments in Europe and SAP " Cash generation and cash deploym
Slide 19: Operational Excellence
INVESTOR DAY 2016 Operational Excellence " Deliver globalized sourcing savings " Standardized global business processes * Drive Zero Defects Quality-focused culture " Eliminate scrap and reject costs = Reduce manufacturing costs by 200bps e20t6 48, Fler Company 19
Slide 20: Manufacturing Cost Reduction Commitments
INVESTOR DAY 2016 = HB. Fuller | Manufacturing Cost Reduction Commitments 2 & 3 $ au Decrease 2 au 200 bps 2 9 % 8 | | {I : G 2010 2011 2012-2013 -2014A- «2015-2016 = «2017-2018 = 2019-2020 2020 Objective: luce Manufacturing Costs 20
Slide 21: Engineering Adhesives
Engineering Adhesives = Introduce new global — operating segment FY = Focus on electronics, A engineered products, new energy, automotive = High margin growth segment = Double this $200 million segment in five years = Invest to drive growth = & =. &. Y 4 Electronics Auto/ Transportation New Energy G
Slide 22: Focus Markets
Slide 23: Differential Growth Targets
INVESTOR DAY 201 S 48. Fuller Differential Growth Targets Engineering Adhesives 15% Hygiene 415 550 6% Construction Products 274 350 5% Durable Assembly 413 475 3% Packaging 407 450 2% Non-Strategic 375 325 3%, Total FUL 2,085 2,550 4% e20t6 48, Fler Company 23
Slide 24: Portfolio Shift
INVESTOR Portfolio Shift Higher Growth, More Profitable Segments 2010 2015 2020 ($1.3 billion) ($2.1 billion) ($2.6 billion) Tngieatna] Eagesring a 10% Target Markets ‘20165. Fur Company 24
Slide 25: Emerging and Developing Markets
INVESTOR DAY 2016 Emerging and Developing Markets Over 35% of revenue by 2020 2010 2015 2020 (81.3 billion) ($2.1 billion) (626 billion) Emerging and Developing Economies 31% (gece errs cae ee Economies e20t6 48, Fler Company 25
Slide 26: Leverage Investments and Grow the Core
INVESTOR DAY 2016 = HB. Fuller | Leverage Investments and Grow the Core SAP Implementation = Uniform, disciplined operating processes SAPA = Standard business information = Operationally efficient 26
Slide 27: Profitability Improvement in Europe
INVESTOR DAY 20 S 48. Fuller Profitability Improvement in Europe = Great progress through the second half of 2015 = Team well positioned to drive significant profit improvement = Turn challenges of the past into future opportunities e20t6 48, Fler Company F
Slide 28: Build Capability and Synergy Through M&A
INVESTOR DAY 2016 = HB. Fuller | Build Capability and Synergy Through M&A = Be the “buyer of choice” for the owners of small independent companies in transition + Recent examples include: TONSAN, Prospec® = Boost organic revenue growth by ~$500 million + Add ~$100 million of acquired revenue per yea
Slide 29: Cash Flow Generation
INVESTOR DAY 2016 Cash Flow Generation $ Millions $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2011-2015 2016-2020 Committed Capital (CapEx, Dividends, Base Share Repurchase) l™ Operating Cash flow e20t6 48, Fler Company 29
Slide 30: Resetting growth targets and shifting portfolio focus
= 4B. Fuller . increasing EBITDA plan to = = Resetting our growth targets to 3-5% annually = Shifting portfolio focus + High value + High margin + Stronger growth opportunities = Allocating capital differently = Leveraging infrastructure instead of building infrastructure 30
Slide 31: Presenters
Traci Jensen Heather Campe Zhiwei Cai Vice President Engineering and Electronics sim Giertz Executive VP Chief Financial Officer Senior VP Vice President ‘Americas Asia Pacific Hassan Rmaile Vice President Chief Technology & Innovation Officer lin Gabriel Patrick Kivits Steve Kenny Vice President Se
Slide 32: Investor Day 2016
INVESTOR DAY 2016 = H.B. Fuller | connec
Slide 33: Today's Agenda
INVESTOR DAY Today’s Agenda = Growth + Zhiwei Cai — Engineering Adhesives + Heather Campe — Hygiene + Traci Jensen — Construction Products ® Infrastructure + Elin Gabriel —- Global Operations + Patrick Kivits — EIMEA Infrastructure + Steve Kenny — Emerging Markets = Financial Performance and Targets
Slide 34: Focus on Growth
FOCUS ON GROWTH INVESTOR DAY 2016 = H.B. Fuller | conrecting
Slide 35: Global Engineering Adhesives Segment
Global Engineering Adhesives Segment Zhiwei Cai Vice President, Engineering & Electronics INVESTOR DAY 2016 SHB. Fuller | c=mcins warmaness 35
Slide 36: TONSAN plus H.B. Fuller
= TONSAN plus H.B. Fuller auto and electronics = Platform for growth + New applications + New technologies = Primary component of 2020 strategy + Revenue growth + Margin expansion + Geographic expansion + Richer business mix e20t6 48, Fler Company New Energy General Markets 36
Slide 37: Why Separate from Durable Assembly?
INVESTOR DAY 2016 = HB. Fuller | Why Separate from Durable Assembly? A Fundamentally Different Business Selling Central Development; Drops Not Truckloads Global Execution © . w= \_ J S (enhanced Opportunity ) 4 Convergence of ) for Profitable Growth Technologies 30% 20% 10% a oo 2015 2020 y, \ y, e2
Slide 38: Engineering Adhesives
INVESTOR DAY 2016 S 4. Fuller Engineering Adhesives ATTRACTIVE MARKET FINANCIAL PERFORMANCE $12 + billion market Growing at high single digits High profitability driven by demanding specifications COMPETITIVE ADVANTAGE Innovative reputation Diverse technology solutions and expertise Committed to kno
Slide 39: Engineering Adhesives Revenue and Market Share Projection
INVESTOR DAY 2016 = 48. Fuller Engineering Adhesives Revenue and Market Share Projection === CAGR === $ii0 Key Takeaways: $350 = Aggressive revenue growth one * Growth expected in all regions $250 oo * Double EBITDA % $150 = Current business near target $100 profit levels; diluted by current $50 inv
Slide 40: Market Landscape
INVESTOR DAY 2016 Market Landscape = Dynamic change in current markets of focus Electronics 40
Slide 41: Key Trends Supportive of Growth
INVESTOR DAY 2016 = 48. Fuller Key Trends Supportive of Growth = Electrification of Vehicles * Miniaturization of Electronics 20168, Fler Company a1
Slide 42: Competitive Position
INVESTOR DAY 2016 = 48. Fuller Competitive Position = #1 in assembly of solar panels = #1 in automotive interior = Developing position in electronics = #2 engineering adhesives supplier in China TONSAN together.we create e20t6 48, Fler Company 42
Slide 43: Strategic Approach: Key Accounts
INVESTOR DAY 2016 & HB. Fuller | om Strategic Approach: Key Accounts eam | Aa eS How We Will Win 43
Slide 44: Electronics
INVESTOR DAY 2016 = 48. Fuller Electronics = Solve customer design challenges = Leverage expertise across applications and technologies = Deliver adhesive solutions for multiple product development programs e20t6 48, Fler Company 44
Slide 45: Automotive
INVESTOR Automotive Expanding Applications Interior Trim Expanding Partnerships Bonding Headlamp Housing e20t6 48, Fler Company Convergence of electronics and =) automotive service and product Design and Sub-Assembly 45
Slide 46: e20t6 48, Fler Company
e20t6 48, Fler Company 46
Slide 47: Global Hygiene
Global Hygiene Heather Campe Vice President, Asia Pacific INVESTOR DAY 2016 SHB. Fuller | c=mcins warmaness 47
Slide 48: Hygiene: Attractive Market and Competitive Advantage
ATTRACTIVE MARKET FINANCIAL PERFORMANCE Growing global market Multinationals growing significantly in emerging markets Consumers driving new product development opportunities 2020E COMPETITIVE ADVANTAGE Proven innovation leadership Local industry experts supported by world-class, global R&D centers
Slide 49: Hygiene Revenue and Market Share Projection
INVESTOR DAY 2016 = HB. Fuller | Revenue and Market Share Projection 2010-2015 Key Takeaways: CAGR 11% = Successful track record = Will continue to grow above 5415 the market rate $250} = Goal to become clear market 2010 2015 +2020 leader Revenue Revenue Revenue e20t6 48, Fler Company 49
Slide 50: Market Landscape
INVESTOR DAY 20 S 48. Fuller Market Landscape = Concentrated, global customer base = Current and future prospects for strong unit volume growth + Increasing populations + Utilization rates in emerging markets e20t6 48, Fler Company 50
Slide 51: Competitive Landscape
INVESTOR DAY Competitive Landscape = Few global players H.B. Fuller = Rigorous qualification process = Global product consistency required e20t6 48, Fler Company 51
Slide 52: Increased
Increased use of stretch Softer substrates Lower cost Faster line of ownership speeds
Slide 53: How We Will Win
INVESTOR DAY 20 S 48. Fuller How We Will Win = Mature markets — gain share by working directly with customers to enable functionality = Emerging markets — focus on productivity gains and use of local raw materials ‘20165. Fur Company 53
Slide 54: Customer Need and H.B. Fuller Solution
= Customer Need + Low odor * Supply security + Improved performance * H.B. Fuller Solution + Technical experts * Sourcing innovation * Applications center 54
Slide 55: Key Initiatives to Drive Success
INVESTOR DAY 2016 = Holisee eee Key Initiatives to Drive Success fm _ Drive significant growth in emerging markets 55
Slide 56: Estimated 2015-2020 Hygiene Revenue
INVESTOR DAY 2016 = HB. Fuller Estimated 2015 -2020 CAGR 6% $415) $250) 2010 ©2015 =——-2020 Revenue Revenue Revenue e20t6 48, Fler Company Key Takeaways: = Will grow in excess of market rate = Consolidated customer base = Few global competitors = Favorable market trends = Continue to be innovation p
Slide 57: Construction Products Segment
Construction Products Segment Traci Jensen Sr. Vice President, Americas INVESTOR DAY 2016 SHB. Fuller | c=mcins warmaness 57
Slide 58: Construction Products
INVESTOR DAY 2016 Construction Products ATTRACTIVE MARKET * Shift toward hard surfaces * Rapidly growing end market * Growth in retail channels COMPETITIVE ADVANTAGE Recognized innovation leader Understand end consumer High quality products Scalable business on fixed cost ‘e20t6 48, Fur Company -_ =
Slide 59: Market Landscape
INVESTOR DAY Market Landscape $1 billion + tile setting market, growing faster than GDP = Growth in residential and commercial construction = Changing distribution models creating opportunity = Growth in retail/big-box 59
Slide 60: Competitive Landscape
INVESTOR DAY = 48. Fuller Competitive Landscape = Top four players own 70% Market Share market share 2015 Revenue + The leader is almost entirely dependent on its success with Home Depot + The second market player is reliant on its success within the wholesale channel = H.B. Fuller is balanced with
Slide 61: Key Trends that Support Growth
Key Trends that Support Growth = Increases in Do-It- Yourself and Do-It-For- Me channels = End consumers: + Preferences for hard surface or natural flooring + Focused on long-term sustainable products for a variety of surfaces = Contractors: Value quality and innovation + Attracted to products that
Slide 62: How We Will Win
INVESTOR DAY 2 How We Will Win True end user Innovation consumer through product understanding or packaging Installation efficiencies for contractors Cleaner, more efficient store experience 62
Slide 63: Winning in Retail
INVESTOR DAY 20 = HB. Fuller Winning in Retail = We have 100% of the flooring installation products = Their research showed that contractors trust the TEC™ brand = We provide great merchandising, marketing and sales associate training = We stand behind our products 63
Slide 64: Winning in Wholesale
INVESTOR DAY 2016 = HB. Fuller Winning in Wholesale = Wholesaler looking for installation materials manufacturer + Annual growth of >30% per year, national footprint = Value proposition: Full line of high quality, technically advanced products + Innovation + Responsive and flexible e2016 48, Fur Com
Slide 65: EBITDA Margin Improvement
INVESTOR DAY 2016 SHB Fuller | sncmamnnen EBITDA Margin Improvement Operational transformation underway + Acquired ProSpec to expand national footprint + $40 million investment program to upgrade manufacturing capabilities Lower manufacturing costs by up to 500 basis points a a Leverage fixed invest
Slide 66: Construction Products Revenue History & Projection
INVESTOR DAY 201 = HB. Fuller Construction Products Revenue History & Projection /G* projetea20152000 2015-2020 CAGR 5% $350 $300 $260 $200 a) $274} $100 $50 : $0 2010 2015 «=—-2020 Revenue Revenue Revenue EBITDA 13.1% 18% 2016 H8, Fur Company Key Takeaways: * Solid growth market = We have capitaliz
Slide 67: Break
15 MINUTE BREAK INVESTOR DAY 2016 = H.B. Fuller | conrecting
Slide 68: Investing in Infrastructure
INVESTING IN INFRASTRUCTURE INVESTOR DAY 2016 = H.B. Fuller | connectin
Slide 69: Creating Value Through Operational Excellence
Creating Value Through Operational Excellence Elin Gabriel Vice President, Global Operations INVESTOR DAY February 3, 2016 201 6 SHB. Fuller | c=mcins warmaness
Slide 70: Key Elements in 2020 Plan
INVESTOR DAY 2016 = HB. Fuller | Key Elements in 2020 Plan (2) Sourcing Excellence 1) Lower Manufacturing Cost @ Zero Defects Quality Mindset Leverage SAP Globally ~4 70
Slide 71: Global Culture of Sourcing Excellence
INVESTOR DAY 2016 = HB. Fuller | Global Culture of Sourcing Excellence = Improvement in COGS is an important lever * Built global strategic sourcing group with superior capability over past two years = Finding proper materials at a strategic cost is instrumental for innovation capabilities = Sourcin
Slide 72: Drive Lower Manufacturing Cost
INVESTOR DAY 2016 = 48. Fuller Drive Lower Manufacturing Cost Increased Decrease 440 bps | | 200 bps 2010-2011 2012, 2013 2014A 2015 2016) 2017-2018 = 2019-2020 Manufacturing costs as % of sales " Identify efficient and effective ways to manufacture = Investment phase completed in Europe " Continue
Slide 73: Zero Defects Quality Mindset
INVESTOR DAY 2016 = HB. Fuller | Zero Defects Quality Mindset " Drive quality process in everything we do, not just Apr neu product manufacturing os * Built global quality team, established good foundation for improvement = Using cost of non-conformance metrics and zero defects mentality to prioriti
Slide 74: Leverage SAP Globally
= 4B. Fuller Leverage Globally = Detailed postmortem on North America roll-out completed = SAP benefits H.B. Fuller worldwide + One source of truth + Stronger business process + Stronger operating discipline = Future rollouts completed at slower cadence, smaller events + Latin America is next + Targ
Slide 75: Supply Chain Excellence
INVESTOR DAY 2016 = 48. Fuller Supply Chain Excellence Key focus is inventory waste reduction = Improves operating cash flow = Reduces unfavorable income statement impacts = Improves return on invested capital e20t6 48, Fler Company 75
Slide 76: Summary
INVESTOR DAY & HB Fuller Summary " World class facilities in place * Solid plan: + Sourcing excellence + Lower manufacturing cost + Improve quality + Leverage SAP globally + Improve supply chain management = Poised to capture momentum of our investments and win e20t6 48, Fler Company 76
Slide 77: What We Have Built: Moving Forward in EIMEA
What We Have Built Moving Forward in EIMEA Patrick Kivits Sr. Vice President, EIMEA INVESTOR DAY 2016 SHB. Fuller | c=mcins warmaness 7
Slide 78: Major Elements of European Transformation
INVESTOR DAY 2 Major Elements of European Transformation Consolidate Upgrade Upgrade Rationalize and pan-regional technical and simplify Achieve streamline commercial support product procurement back office team capability offering efficiencies Optimize manufacturing footprint All aspects of the tra
Slide 79: Manufacturing Investments
INVESTOR DAY 2016 SHB. Fuller | comeinosisimatos Manufacturing Investments Blois, France
Slide 80: Manufacturing Investments
uf mie Investments Ltinebur 2
Slide 81: Lüneburg Adhesive Academy
Slide 82: State-of-the-Art Centers of Excellence
Slide 83: Emerging Markets Investment
Slide 84: Mindelo, Portugal, Center of Expertise
Slide 85: Trends: Improvements and Remaining Gaps
Slide 86: Supply Chain and Operations Performance
Slide 87: EIMEA Strategic Agenda
Slide 88: Summary
Slide 89: Emerging Markets
Slide 90: Agenda
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Slide 92: Market Overview
Slide 93: Emerging Markets Strategic Imperatives
Slide 94: India
Slide 95: S.E.A.
Slide 96: Surabaya, Indonesia: Greenfield Site Under Construction
Slide 97: Turkey
Slide 98: LATAM
Slide 99: Africa
Slide 100: Revenue Estimate
Slide 101: Investor Day 2016: Jim Giertz, CFO
Slide 102: Agenda
Slide 103: New Financial Targets
Slide 104: Historical Revenue
Slide 105: Historical Revenue at 2010 Exchange Rates
Slide 106: 2010 - 2015 Growth Elements
Slide 107: 2010 - 2015 Growth By Segment
Slide 108: 2015 EBITDA margin Targets/Performance
Slide 109: Capital Allocation Summary
Slide 110: New Segment Structure – Focus is Key
Slide 111: The 2020 Financial Plan
Slide 112: Revenue Growth: New Operating Segments
Slide 113: EBITDA $ Growth: New Operating Segments
Slide 114: EBITDA % Growth: New Operating Segments
Slide 115: Revenue Growth: Global Market View
Slide 116: Balance Sheet Philosophy
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