H. B. Fuller Company · NYSE:FUL
H. B. Fuller — Investor Day (July 2018)
141 slides from H. B. Fuller's investor day presentation, Jul 19, 2018
Slide 1: Leading the Way: Investor Day 2018
LEADING THE WAY Investor Day 2018
Slide 2: Safe Harbor Statement
2 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 r
Slide 3: Leading the Way: Investor Day 2018
— H.B. Fuller | connecting what matters” ( LEADING THE WAY Ns Investor Day 2018
Slide 4: Jim Owens
LEADING THE WAY Investor Day 2018
Slide 5: Agenda
5 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 6: H.B. Fuller is a global market leader in adhesives
6 H.B. Fuller is a global market leader in adhesives 71 Manufacturing Facilities Global Headquarters: 30 Technology Centers St. Paul, MN Direct Presence in 35 Countries $2.9 Billion* Serve Customers Revenue in 125 Countries $420 Million* ~6,300 Employees EBITDA * 2017 pro forma figures.
Slide 7: Our ongoing transformation builds on FUL's existing, strong foundation
7 Our ongoing transformation builds on FUL’s existing, strong foundation OUTCOME - Leading the Way: • 53% of revenue “highly specified” Ongoing Investments in the Core Business: • Organic growth above industry levels • R&D and market expertise R&D and manufacturing excellence; world-class pricing an
Slide 8: H.B. Fuller is organized to maximize focus on growth
8 H.B. Fuller is organized to maximize focus on growth Engineering and Construction Adhesives businesses operate globally Europe, India, Global Remaining segment organization balanced Middle East, Engineering between global strategy and regional execution Africa Executives develop global strat
Slide 9: H.B. Fuller is organized to maximize focus on growth
9 H.B. Fuller is organized to maximize focus on growth Engineering and Construction Adhesives businesses operate globally Europe, India, Middle East, Global Remaining segment organization balanced Durable Assembly Africa Engineering Hygiene between global strategy and regional Packaging executio
Slide 10: H.B. Fuller is organized to maximize focus on growth
10 H.B. Fuller is organized to maximize focus on growth Engineering and Construction Adhesives businesses operate globally Remaining segment organization balanced between global strategy and regional execution Executives develop global strategy and execute regional operating plans Executive
Slide 11: FUL competes in high-growth, high-margin markets
11 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market value
Slide 12: Engineering Adhesives, Construction Adhesives & Durable Assembly revenue mix
12 2017 Market Pro Forma Net Revenue Diversified end-market portfolio is increasingly shifting to highly specified businesses Pro forma Royal, highly specified segments comprised 53% of a $2.9 billion portfolio $(M) $(M) 800 1,600 1,540 Asia Pacific (Top) 700 677 EIMEA (Middle) 1,400 Americas (B
Slide 13: We help our customers solve their adhesion challenges every day
13 We help our customers solve their adhesion challenges every day FUL helps its customers develop solutions by (i) helping them improve their processes; (ii) introducing new processes; (iii) introducing new products Applications Leveraging convergence of technology between market segments, Expe
Slide 14: Longstanding and deep customer relationships are the cornerstone
14 Longstanding and deep customer relationships are the cornerstone of H.B. Fuller “We have been impressed by the “Excellent support to our plants and seamless interactions across the joint regional teams. H.B. Fuller provided Kömmerling (Royal) and H.B. Fuller breakthrough collaboration in Asia to
Slide 15: Why H.B. Fuller?
15 Why H.B. Fuller? We are a global market leader in adhesives with a significant competitive advantage Resilient, diversified, Diversified end-market portfolio is shifting to highly specified innovation-focused businesses business model Comprised 53% of $2.9 billion portfolio pro forma Royal Le
Slide 16: Agenda
16 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 17: The adhesives market is attractive
17 The adhesives market is attractive Critical material that comprises For most customers, adhesives a small amount of spend for make up less than 1% of COGS customers Annuitized business with high Requires resource intensive switching costs qualification and testing Product formulations use f
Slide 18: Our competitive dynamics are favorable
18 Our competitive dynamics are favorable 38-year industry CAGR: 3.6%* 2017 Adhesives Market: FUL has consistently been the #2 $50 Billion Leader in a player, typically #1 or #2 in markets growing we’re committed to competing in industry Able to choose the most attractive markets in which to o
Slide 19: The adhesives industry is expected to reach approximately $70 billion
19 The adhesives industry is expected to reach approximately $70 billion over the next 10 years Growth will continue as the products the world produces and uses evolve over time Strategy is to build capability and invest in the increasingly high margin segments of the business that also demonstr
Slide 20: Global trends allowing FUL to help customers adapt
20 A number of global trends across a diverse range of markets are allowing FUL to help its customers adapt to a changing world Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller-Enabled Customer Innovation Shift from fasteners to adhesives Waterproof and
Slide 21: Agenda
21 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 22: Topics of recent investor interest
22 Topics of recent investor interest Topic Considerations and Developments Typically increase/decrease in aggregate by 1-2% per year Raw Materials Inflation Largest raw material makes up less than 5% of purchases Developed advanced pricing tools to continuously monitor raw materials Pricing
Slide 23: Raw material inflation is highly manageable
23 Raw material inflation is highly manageable Top 25 individually sourced materials make up less than 20% of annual spend Raw Material Categories of Basket Composition Spend Raw Material Spend Vinyl Acetate Basic Olefin Polymer Polymeric Tackifier A Intermediate 2% Urethane Polymer 11% Specialty
Slide 24: The value we deliver drives our pricing strategy
24 The value we deliver drives our pricing strategy Very High High Moderate Low Specification Adhesion Global Supply Chain Switching Unique Competitive Market Market Level Performance Requirements Costs Chemistry Differentiation Attractiveness Engineering Adhesives YES 10 Construction Adhesives YES
Slide 25: 4.5% organic growth driven by innovation, customer partnerships
25 4.5% organic growth driven by innovation, customer partnerships, and targeted selection of opportunities High Moderate Low Market Market Growth Drivers Share Gain Share Gain Drivers Organic Growth Speed of innovation, global leverage of acquired Engineering Increased product complexity, fastener
Slide 26: Overview of the transformational Royal acquisition
26 Overview of the transformational Royal acquisition Royal Adhesives & Sealants: pure-play adhesives and sealants company ranked in the top 10 with 19 manufacturing facilities across five countries on three continents H.B. Fuller Royal New H.B. Fuller $2,229M + $660M = $2,889M 2017 Royal Financia
Slide 27: H.B. Fuller remains committed to repaying $600M of debt by 2020
27 H.B. Fuller remains committed to repaying $600M of debt by 2020 Debt to EBITDA ($M) Debt Maturities and Fixed/Floating Mix $2,452 $2,282 5.8x Floating $1,852 30% 4.9x Fixed 70% 3.0x $605 $420 $470 FY FY FY FY FY FY FY FY FY FY 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 FY 2017 FY 2018E FY
Slide 28: Agenda
28 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 29: We have been creating a stronger, more agile business
29 We have been creating a stronger, more agile business … 2010 2017 Legacy FUL 2017 Pro Forma with Royal $1.3B Revenue | $148M EBITDA $2.2B Revenue | $287M EBITDA $2.9B Revenue | $420M EBITDA Less Less Less Specified Highly Specified Specified Highly Specified 17% 16% Highly 23% Specified 34% Speci
Slide 30: We have increased some of our 2020 targets
30 … which has enabled us to increase some of our 2020 targets Prior 2020 Plan Updated 2020 Plan $ Millions (as of February 2016) (as of July 2018) Revenue $3,000 $3,400 Organic Growth (2016-2020) % 3-5% ~4.5% EBITDA* $515 $605 EBITDA Margin % 17.2% 17.8% Debt Paydown (2018 to 2020) N/A $600 *Based
Slide 31: 2020 Strategy – Building the best adhesives company in the world
31 2020 Strategy – Building the best adhesives company in the world OUR COMPETITIVE HOW WE WIN FINANCIAL OPERATING ACTIONS TO ADVANTAGE IN THE MARKET TARGETS PRINCIPLES DRIVE SUCCESS Globally-connected: Innovators with: $3.4 billion in revenue High ethical Grow aggressively in Sharing ideas Appl
Slide 32: Agenda
32 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 33: Our action plan is designed to deliver results
33 Our action plan is designed to deliver results Profitable Growth Realization of Efficiency Through in Engineering Royal-Related Manufacturing Adhesives Synergy Targets Excellence Expertise in Technology and Innovation Dedicated and Globally-Connected Team of Experts
Slide 34: Engineering Adhesives will continue to grow profitably
34 Engineering Adhesives will 2020 Action Profitable Growth in Engineering Realization of Royal-Related Efficiency Through Manufacturing continue to grow profitably Plan: Adhesives Synergy Targets Excellence Initial goal (2015 to 2020): double Engineering Adhesives to a $400 million business Exc
Slide 35: The Royal integration is progressing well
35 The Royal integration is 2020 Action Profitable Growth in Engineering Realization of Royal-Related Efficiency Through Manufacturing progressing well Plan: Adhesives Synergy Targets Excellence We remain focused on realizing the targeted synergies Source of Synergies Timing of Realization* ($M) S
Slide 36: Manufacturing excellence is driving efficiency worldwide
36 Manufacturing excellence is 2020 Action Profitable Growth in Engineering Realization of Royal-Related Efficiency Through Manufacturing driving efficiency worldwide Plan: Adhesives Synergy Targets Excellence Global sourcing Leveraging global contracts to lower excellence material costs Lowering
Slide 37: FUL is committed to reducing manufacturing costs
37 FUL is committed to reducing 2020 Action Profitable Growth in Engineering Realization of Royal-Related Efficiency Through Manufacturing manufacturing costs Plan: Adhesives Synergy Targets Excellence Impact of Royal business Conversion costs as % of sales Key drivers of manufacturing cost ratio re
Slide 38: Technical expertise and innovation are the backbone of our company
38 Technical expertise and innovation are the backbone of our company Projects in H.B. Fuller’s innovation pipeline have the potential to deliver >$1B in sales Ideation & Concept Laboratory Scale-up & Commercial Opportunity Development Development Beta Testing Launch Assessment 115 projects > $2M St
Slide 39: FUL is led by a dedicated and globally-connected team of experts
39 FUL is led by a dedicated and globally-connected team of experts Technology teams are focused on specific Market-driven; markets market-focused All teams leverage customer, co-supplier, teams OEM partner interactions to further R&D Development of unique products by Globally- teams that have
Slide 40: Our action plan is focused to deliver growth in EBITDA
40 Our action plan is focused 2020 Action Profitable Growth in Engineering Realization of Royal-Related Efficiency Through Manufacturing to deliver growth in EBITDA ($M) Plan: Adhesives Synergy Targets Excellence $605 $50 $605 $555 $28 $8 $505 $35 $455 $64 $405 $355 $420 $305 FY 2017 PF Engineering
Slide 41: FUL and its peer group have a strong track record of success
41 FUL and its peer group have a strong track record of success EV / 2018E EBITDA 16.6 16.8 15.6 13.5 13.6 10.9 11.0 HBF Henkel RPM 3M Ecolab Sherwin Williams Sika Revenue CAGR 5% 2% 5% 5% 6% 9% 9% (2017-2020) EBITDA CAGR* 10% / 13%** 5% 10% 6% 7% 14% 13% (2017-2020) 2018 2020 2018 2020 2018 2020 20
Slide 42: The transformation is driving shareholder value
42 The transformation is driving shareholder value Actual Results (Fiscal Year End) Strategic Plan 2010 2015 2017* 2020 Revenue $1.4B $2.1B $2.9B $3.4B EBITDA Margin 10.8% 12.8% 14.5% 17.8% EBITDA $148M $268M $420M $605M EV/EBITDA Multiple 7.0x 9.0x 11.0x 11.0x – 12.0x Market Cap $0.9B – $1.2B $1.7B
Slide 43: Agenda
43 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 44: Today's presenters and the broader executive team
44 Today’s presenters and the broader H.B. Fuller executive team are unrivaled by our competitors … Jim Owens Zhiwei Cai Jim East Ted Clark Traci Jensen President and Chief Senior VP Director Senior VP Senior VP Executive Officer Engineering Engineering Royal Adhesives Construction Global Executive
Slide 45: Under their leadership, we solve customers' adhesion challenges
45 … and, under their leadership, we are solving customers’ adhesion challenges every day Steve Kenny Heather Campe Patrick Kivits John Corkrean Dietrich Crail Abe Rezai Senior VP Senior VP Senior VP EVP and Chief VP Chief Technology & Emerging Markets Americas EIMEA Financial Officer Asia Pacific I
Slide 46: Executive team incentives are aligned with investors' interests
46 The FUL executive team’s incentives are aligned with investors’ interests Compensation bonuses are tied 100% to Net business results ROIC Revenue Legacy FUL and Royal executives, in addition to the top 100 leaders in the combined company, are incentivized to deliver the 2020 targets in partic
Slide 47: Our action plan is designed to deliver results
47 Our action plan is designed to deliver results Profitable Growth Realization of Efficiency Through in Engineering Royal-Related Manufacturing Adhesives Synergy Targets Excellence Expertise in Technology and Innovation Dedicated and Globally-Connected Team of Experts
Slide 48: Why H.B. Fuller?
48 Why H.B. Fuller? We are a global market leader in adhesives with a significant competitive advantage Resilient, diversified, Diversified end-market portfolio is shifting to highly specified innovation-focused businesses, which accounts for 53% of $2.9 billion portfolio business model pro forma
Slide 49: Agenda
49 Agenda H.B. Fuller Snapshot Adhesives Industry: An Attractive Market Topics of Recent Investor Interest Update on 2020 Strategy Well Positioned for the Future FUL Team: Long-Tenured & Highly Experienced Q&A
Slide 50: Leading the Way: Investor Day 2018
LEADING THE WAY Investor Day 2018
Slide 51: Today's Agenda
51 Today’s Agenda Zhiwei Cai & Jim East Engineering Adhesives Ted Clark Royal Integration Traci Jensen Construction Adhesives Break Jim Owens H.B. Fuller’s Structure and Regional Management Steve Kenny Durable Assembly Heather Campe Hygiene Patrick Kivits Packaging John Corkrean Financial Update Jim
Slide 52: Engineering Adhesives
52 Engineering Adhesives Zhiwei Cai Senior Vice President Engineering Adhesives
Slide 53: FUL competes in high-growth, high-margin markets
53 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market value
Slide 54: Strategic approach to Engineering markets leverages global R&D
54 Strategic approach to Engineering markets leverages global R&D to deliver next-generation adhesive technology Engineering Sub-segments Markets Served Top Competitors Unique Attributes CLEAN ENERGY Huitian Process-driven technology focused on Battery, PV/Solar, Wind #1 market position Dow lo
Slide 55: On track to achieve our growth objectives
55 We are on track to achieve our growth objectives and are confident that we can deliver our 2020 goals $450 Millions 24% CAGR $400 $350 $300 $250 $200 $150 $100 $50 $0 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Each bar represents trailing 12 months Engineering Adhesives revenue a
Slide 56: Global trends allowing FUL to help EA customers adapt
56 A number of global trends are allowing FUL to help its EA customers adapt to a changing world Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller Solution or Technology Polyurethane structural adhesive eliminate the need for fasteners Shift from fastener
Slide 57: Convergence is driving design and manufacturing trends
57 Convergence is driving design and manufacturing trends across Engineering Adhesives segment GROWTH RATES: Global consumer demand growing Pricing compression Market 10% CLEAN ENERGY FUL plan 10-15% Government regulations Shift manufacturing back to China Dynamic/fast-moving change Chin
Slide 58: Engineering Adhesives is an application-driven market: Automotive
58 Engineering Adhesives is an application-driven market AUTOMOTIVE Elimination of fasteners enables sleeker designs and light-weighting Adhesives and sealants improve resistance to fatigue, contaminants and corrosion Use of new materials provides cost savings and performance improvements for:
Slide 59: Engineering Adhesives is an application-driven market: Electronics
59 Engineering Adhesives is an application-driven market ELECTRONICS Adhesives and sealants enable lighter, thinner designs and ever greater processing power for: • Portable devices • Wearables • Soft goods materials • PCB assembly • Circuit board protection • Fingerprint and image sensors • Flat
Slide 60: Engineering Adhesives segment will grow faster than the market
60 Engineering Adhesives segment will grow faster than the market Delivering differentiated products to key Innovation-driven: accounts in target markets: electronics, Highly engineered transportation, energy formulations that deliver Leverage strengths of regional teams through functionality fa
Slide 61: Engineering Adhesives
61 Engineering Adhesives Jim East Director Engineering Adhesives Global Lead - Automotive
Slide 62: FUL's acquired capabilities and footprint in Engineering Adhesives
62 FUL’s acquired capabilities and footprint have created a powerful force in Engineering Adhesives applications TONSAN expansion outside China Cyberbond expansion into China Royal unlocks the potential of this business Pricing power, volume/mix increased 2020 EBITDA target of 22%
Slide 63: Spotlight on Innovation
63 Spotlight on Innovation: FUL’s focus on innovation enables our customers to push the boundaries of what’s possible Battery Module Wearables Train Bogies Automotive • FUL brings the whole • Water-based coating package - water-based, • Highly engineered critical to drive system of hot melt, reactiv
Slide 64: Spotlight on Innovation
64 Spotlight on Innovation: FUL’s focus on innovation enables our customers to push the boundaries of what’s possible Battery Module Wearables Train Bogies Automotive • FUL brings the whole • Water-based coating package - water-based, • Highly engineered critical to drive system of hot melt, reactiv
Slide 65: Spotlight on Innovation
65 Spotlight on Innovation: FUL’s focus on innovation enables our customers to push the boundaries of what’s possible Battery Module Wearables Train Bogies Automotive • FUL brings the whole • Water-based coating package - water-based, • Highly engineered critical to drive system of hot melt, reactiv
Slide 66: Spotlight on Innovation
66 Spotlight on Innovation: FUL’s focus on innovation enables our customers to push the boundaries of what’s possible Battery Module Wearables Train Bogies Automotive • FUL brings the whole • Water-based coating package - water-based, • Highly engineered critical to drive system of hot melt, reactiv
Slide 67: Spotlight on Innovation
67 Spotlight on Innovation: FUL’s focus on innovation enables our customers to push the boundaries of what’s possible Battery Module Wearables Train Bogies Automotive • FUL brings the whole • Water-based coating package - water-based, • Highly engineered critical to drive system of hot melt, reactiv
Slide 68: Engineering is an attractive segment with great potential
68 Engineering is an attractive segment with great potential ATTRACTIVE COMPETITIVE FINANCIAL MARKET ADVANTAGE PERFORMANCE CAGR 12% • Innovative reputation $700 • $12+ billion market $600 • Diverse technology $500 • Growing at high single solutions and expertise digits $400 $300 $580 • Committed to
Slide 69: Royal Integration
Royal Integration Ted Clark Senior VP Royal Adhesives
Slide 70: H.B. Fuller + Royal has created a stronger, more balanced portfolio
70 H.B. Fuller + Royal has created a stronger, H.B. Fuller Royal more balanced portfolio $2,229M + $660M 13% 20% 20% 11% 34% Business more focused 20% 17% 33% on highly specified 53% of $2.9 billion portfolio 2% 11% adhesive applications 19% Opens opportunities Cross-selling technology New H.B.
Slide 71: Guiding principles and strategies to manage risk and maximize value creation
71 Guiding principles and strategies to manage risk and maximize value creation Protecting and growing the base business is more important 1 Profitable Growth than cost synergies. Create a cash-driven mentality in order to optimize balance 2 Cash Flow Delivery sheet, maximize returns, and drive effi
Slide 72: We are on track to deliver synergies
72 We are on track to deliver synergies Synergy Summary Actions Supporting the Plan (2020 EBITDA, $M) Total Planning completed in 90 days Targets locked Execution underway Sourcing $23 Organizational Groups aligned to H.B. Fuller Operations $9 integration structure in first 120 days SG&A INSER
Slide 73: Spotlight on Synergies: Sourcing
73 Spotlight on Synergies: Sourcing is driving early integration savings Identify and leverage pricing STRATEGY: opportunities Reducing raw material Combine volumes with limited costs to drive producers contribution margin Implement price increases that reflect improvement inflationary environ
Slide 74: Consolidation of production will support cost synergies
Consolidation of production will support operating cost benefits 74 and cost synergies Close Batavia (legacy FUL site) and consolidate production into Consolidation new Royal Frankfort plant ~$400,000 of Engineering Eliminates Batavia fixed costs run-rate Adhesives Automation capabilities redu
Slide 75: Cross-selling collaboration is paying off with customers
75 Cross-selling collaboration is paying off with customers This merger is a perfect fit. We can With your joint global network, FUL was now address all adhesive and sealant- able to deliver a necessary structural related questions to one supplier that glazing product from Kömmerling in offers all p
Slide 76: Combined company creates significant shareholder value
76 Combined company creates significant shareholder value • Higher EBITDA + asset-light businesses = strong Value cash flow Creation • Significantly accretive to EBITDA margin and EPS • Exceptional cash flow generation • Complementary higher value, higher margin segments Portfolio • Expands technolo
Slide 77: Construction Adhesives
77 Construction Adhesives Traci Jensen Senior VP Construction Adhesives
Slide 78: FUL competes in high-growth, high-margin markets
78 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market value
Slide 79: From the floor to the roof and beyond
79 From the floor to the roof and beyond, FUL’s adhesives experts are enabling innovations in construction Construction Subsegments Markets Served Top Competitors Unique Attributes • Membrane Lamination ROOFING • Structural Tapes TPO (Thermoplastic Polyolefin) is the highest Specialty #1 market
Slide 80: Construction Adhesives is a more balanced, more global segment
80 Construction Adhesives is a more balanced, more global segment • New building insulation techniques and roofing Demand for energy efficient, systems create need for advanced adhesive and high-performing commercial sealant opportunities roofing is growing • Focus on retrofit, repair, and reuse, wh
Slide 81: Global trends helping Construction customers adapt
81 A number of global trends are allowing FUL to help its Construction customers adapt to a changing world Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller Solution or Technology Adhesive bonded membrane roofs replacing mechanically secured roofing syste
Slide 82: Spotlight on Innovation: Construction
82 Spotlight on Innovation: FUL’s market experts are creating innovative technology that supports modern construction Commercial Roofing Flooring Adhesive Tile Setting Pole- and Post-Setting • Single ply roofing is fastest • RollFast™ sets faster than • Power Grout® high-end, • Fast 2K™ replaces gro
Slide 83: Spotlight on Innovation: Construction
83 Spotlight on Innovation: FUL’s market experts are creating innovative technology that supports modern construction Commercial Roofing Flooring Adhesive Tile Setting Pole- and Post-Setting • Single ply roofing is fastest • RollFast™ sets faster than • Power Grout® high-end, • Fast 2K™ replaces gro
Slide 84: Spotlight on Innovation: Construction
84 Spotlight on Innovation: FUL’s market experts are creating innovative technology that supports modern construction Commercial Roofing Flooring Adhesive Tile Setting Pole- and Post-Setting • Single ply roofing is fastest • RollFast™ sets faster than • Power Grout® high-end, • Fast 2K™ replaces gro
Slide 85: Spotlight on Innovation: Construction
85 Spotlight on Innovation: FUL’s market experts are creating innovative technology that supports modern construction Commercial Roofing Flooring Adhesive Tile Setting Pole- and Post-Setting • Single ply roofing is fastest • RollFast™ sets faster than • Power Grout® high-end, • Fast 2K™ replaces gro
Slide 86: Spotlight on Innovation: Construction
86 Spotlight on Innovation: FUL’s market experts are creating innovative technology that supports modern construction Commercial Roofing Flooring Adhesive Tile Setting Pole- and Post-Setting • Single ply roofing is fastest • RollFast™ sets faster than • Power Grout® high-end, • Fast 2K™ replaces gro
Slide 87: FUL makes installation solutions that save time and money
87 FUL makes installation solutions that save time and money while delivering high-quality performance over time ATTRACTIVE COMPETITIVE FINANCIAL MARKET ADVANTAGE PERFORMANCE • Recognized innovation CAGR 5% • Preferred material shift in leader $600 flooring and roofing $500 driving our growth • Unde
Slide 88: Break
LEADING THE WAY Investor Day 2018
Slide 89: Jim Owens
LEADING THE WAY Investor Day 2018
Slide 90: Global Reach. Local Expertise.
90 Global Reach. Local Expertise. 71 manufacturing facilities | 30 technology centers Direct presence in 35 countries Sales in >125 countries Global Headquarters: St. Paul, MN, USA
Slide 91: Regional segments deliver global innovation
91 Regional segments deliver global innovation AMERICAS ADHESIVES ASIA PACIFIC ADHESIVES EUROPE, INDIA, MIDDLE EAST, AFRICA 2017 Revenue 2017 Revenue 2017 Revenue $695M $1.06B $269M 2017 EBITDA 2017 EBITDA 2017 EBITDA $ 79M $168M $ 27M Expected Organic Expected Organic Expected Organic Growth throug
Slide 92: FUL competes in high-growth, high-margin markets
92 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market value
Slide 93: Durable Assembly
93 Durable Assembly Steve Kenny Senior Vice President Emerging Markets
Slide 94: FUL competes in high-growth, high-margin markets
94 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market value
Slide 95: Comprehensive product range and global footprint present growth opportunities
95 Comprehensive product range, dedicated team of experts and global footprint present myriad opportunities for growth Durable Assembly Submarkets Markets Served Top Competitors Unique Attributes Residential and commercial INSULATING World leader in partnering with equipment insulating glass seala
Slide 96: Acquisition of Royal results in more robust portfolio
96 Acquisition of Royal results in more robust portfolio in key markets PRO FORMA H.B. Fuller $2,889M Complementary portfolios 23% Increased scale in specified markets Enhanced margin profile Tripled Assembly sales Leadership position in Insulating Glass Durable Assembly
Slide 97: Global trends helping Durable Assembly customers adapt
97 A number of global trends are allowing FUL to help its Durable Assembly customers adapt to a changing world Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller Solution or Technology Shift from mechanical fasteners to adhesives Eliminate rivets in trucks
Slide 98: Spotlight on Innovation: Durable Assembly
98 Spotlight on Innovation: FUL’s scientific expertise helps Durable Assembly customers innovate for the next generation Recreational Vehicles Technical Textiles 4SG Insulating Glass • Replaces traditional • Fabric-to-fabric, fabric-to- • Replaces traditional fasteners to support membrane, and fabri
Slide 99: Spotlight on Innovation: Durable Assembly
99 Spotlight on Innovation: FUL’s scientific expertise helps Durable Assembly customers innovate for the next generation Recreational Vehicles Technical Textiles 4SG Insulating Glass • Replaces traditional • Fabric-to-fabric, fabric-to- • Replaces traditional fasteners to support membrane, and fabri
Slide 100: Spotlight on Innovation: Durable Assembly
100 Spotlight on Innovation: FUL’s scientific expertise helps Durable Assembly customers innovate for the next generation Recreational Vehicles Technical Textiles 4SG Insulating Glass • Replaces traditional • Fabric-to-fabric, fabric-to- • Replaces traditional fasteners to support membrane, and fabr
Slide 101: Spotlight on Innovation: Durable Assembly
101 Spotlight on Innovation: FUL’s scientific expertise helps Durable Assembly customers innovate for the next generation Recreational Vehicles Technical Textiles 4SG Insulating Glass • Replaces traditional • Fabric-to-fabric, fabric-to- • Replaces traditional fasteners to support membrane, and fabr
Slide 102: FUL is well positioned in Durable Assembly market
102 FUL is well positioned in the highly fragmented, highly specified, and growing Durable Assembly market ATTRACTIVE COMPETITIVE FINANCIAL MARKET ADVANTAGE PERFORMANCE CAGR 6% • Trusted brand with $900 • ~$8 billion opportunity outstanding reputation $800 $700 • Growing at >4% per year • Dedicated
Slide 103: Hygiene
103 Hygiene Heather Campe Senior Vice President Americas Adhesives
Slide 104: FUL competes in high-growth, high-margin markets
104 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market valu
Slide 105: One of only a few global players in disposable hygiene products
105 One of only a few global players addressing growing demand for disposable hygiene products Hygiene Submarkets Markets Served Top Competitors Unique Attributes Henkel Disposable product construction, Improved absorption and thinner cores BABY DIAPERS Arkema (Bostik) core, elastic attachment
Slide 106: FUL innovates in response to global hygiene trends
106 FUL continually innovates in response to a number of global trends; comfort, fit and performance are paramount in the hygiene market Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller Solution or Technology Full line of core, positioning, elastic and s
Slide 107: Spotlight on Innovation: Hygiene
107 Spotlight on Innovation: FUL’s focus on innovation enables our customers to perfect adhesives that improve lives Fast and distinct color change performance delivered when it is needed, at the time of wetness Lower odor than other adhesive wetness indicators Lower application temperature than sta
Slide 108: FUL's Hygiene team of experts is driving innovation
108 FUL’s Hygiene team of experts is driving innovation to respond to the needs of a growing, global population ATTRACTIVE COMPETITIVE FINANCIAL MARKET ADVANTAGE PERFORMANCE • #1 or #2 position due to $600 CAGR 6% • Growing global market longstanding, proven innovation leadership $500 • Multinationa
Slide 109: Packaging
109 Packaging Patrick Kivits Senior Vice President EIMEA
Slide 110: FUL competes in high-growth, high-margin markets
110 FUL competes in high-growth, high-margin markets H.B. Fuller Market Net Revenue Level of Pricing Market and Product Examples Top Competitors Unique Attributes Share Estimate (Pro Forma) Cyclicality Power Often sell small quantities of high- ENGINEERING Henkel 2010: <1% Growth Market valu
Slide 111: Four targeted sub-segments within packaging adhesives
111 FUL has targeted four sub-segments within the highly diverse packaging adhesive market Packaging Submarkets Markets Served Top Competitors Unique Attributes END OF LINE / CASE Cartons, cases, trays Henkel Superior bonding across varied substrates and & CARTON SEALING Food & Beverage Region
Slide 112: Global trends helping customers create innovative packaging
112 A number of global trends are allowing FUL to help its customers create innovative, highly functional packaging designs Overall, FUL is well-positioned to benefit from industry trends Industry Trend H.B. Fuller Solution or Technology Better consumer-ready packaging for home delivery of consu
Slide 113: Spotlight on Innovation: E-commerce packaging
113 Spotlight on Innovation: FUL’s enables packaging producers to meet e-commerce demands New technology feeds corrugated roll to automate production of cut-to-size boxes Lowers waste: using less cardboard eliminates excessive material Optimizes freight: right-sized packaging eliminates shipping air
Slide 114: Answering demand for functional and sustainable packaging
114 FUL is answering consumer demand for more attractive, functional, and sustainable packaging ATTRACTIVE COMPETITIVE FINANCIAL MARKET ADVANTAGE PERFORMANCE $600 CAGR 6% • Proven innovation Organic CAGR 3%* • Consolidation of leadership multinational food $500 companies resulting in growth of strat
Slide 115: Financial Update
115 Financial Update John Corkrean Executive Vice President & Chief Financial Officer
Slide 116: Agenda
116 Agenda Our 2020 Targets Historical Viewpoint A New Chapter: Royal Acquisition Our Updated Commitments
Slide 117: 2020 Financial Targets
117 2020 Financial Targets $3.4 Revenue in 2020; ~4.5% organic revenue growth 2017 - 2020 Billion $605 EBITDA in 2020; expected margin of 17.8% Million $230 Free cash flow generated in 2020 Million
Slide 118: Agenda
118 Agenda Our 2020 Targets Historical Viewpoint A New Chapter: Royal Acquisition Our Updated Commitments
Slide 119: Historical Revenue Progression
119 Historical Revenue Progression $2.8 $ Billions $2.6 ~9% CAGR $2.4 $2.2 $2.0 $1.8 $1.6 $1.4 $1.2 $1.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2010 Constant Currency Revenue Net Revenue
Slide 120: Strong Foundation. Portfolio Shift.
120 Strong Foundation. Portfolio Shift. 2010 2017 Legacy FUL $1.3B Revenue | $148M EBITDA $2.2B Revenue | $287M EBITDA* Less Less Highly Specified Specified Specified 17% Highly 23% Revenue 34% Specified 44% Engineering Moderately Construction Moderately Specified Durable Assembly Specified 39% Hygi
Slide 121: Key Financial Metrics – Original Plan
121 Key Financial Metrics – Original Plan ($ Millions) 2015 Results Prior 2020 Plan* Revenue $2,085 $3,000 EBITDA $268 $515** EBITDA % 13% 17% EBITDA less CapEx $209 $440 *Includes approx. $500 million acquired revenue ** Based on revised calculation of EBITDA, which includes JV income and non-opera
Slide 122: Agenda
122 Agenda Our 2020 Targets Historical Viewpoint A New Chapter: Royal Acquisition Our Updated Commitments
Slide 123: Royal's market expertise and technical capabilities strengthen FUL
123 The addition of Royal’s market expertise and technical capabilities significantly strengthens FUL’s future opportunities 2017 Royal Net Sales 2017 Royal Financials* • $660M Revenue Packaging, 2% Other, 11% • $133M Adjusted EBITDA Engineering • $120M Free Cash Flow** Adhesives, Europe & 20% ROW,
Slide 124: Portfolio Shift to Highly Specified Adhesive Applications
124 Portfolio Shift to Highly Specified Adhesive Applications Engineering, Durable Assembly, and Construction Adhesives and Sealants H.B. Fuller Royal New H.B. Fuller $2,229M + $660M = $2,889M 13% 14% 20% 20% 23% 11% 34% 16% 20% 16% 17% 33% 16% 2% 11% 19% 15% Engineering Construction Durable Paper &
Slide 125: 2017 Pro Forma - Key Financial Metrics
125 2017 Pro Forma - Key Financial Metrics ($ Millions) H.B. Fuller Royal Combined Revenue $2,229 $660 $2,889 EBITDA* $287 $133 $420 EBITDA % 12.9% 20.2% 14.5% EBITDA less CapEx $232 $120 $352 * Based on revised calculation of EBITDA, which includes JV income and non-operating income/expense
Slide 126: Royal integration progressing; on track for synergies
126 The Royal integration is progressing well, and FUL is on track to achieve significant synergies opportunities Source of Synergies Timing of Realization* ($M) SG&A $50 6% Manufacturing $3M 18% $39 $15 Sourcing $9M $6M $9 46% achieved YTD $35 $23M $30 $18 $3 $15M $15 Revenue 30% 2018 2019 2020 $50
Slide 127: Agenda
127 Agenda Our 2020 Targets Historical Viewpoint A New Chapter: Royal Acquisition Our Updated Commitments
Slide 128: We have increased some of our 2020 financial targets
128 We have increased some of our 2020 financial targets ($ Millions) Prior 2020 Plan* Updated 2020 Plan Revenue $3,000 $3,400 EBITDA** $515 $605 EBITDA % 17.2% 17.8% EBITDA less CapEx $440 $514 *Includes approx. $500 million acquired revenue ** Based on revised calculation of EBITDA, which includes
Slide 129: Our action plan is focused to deliver results
129 Our action plan is focused to deliver results Profitable Growth Realization of Efficiency Through in Engineering Royal-Related Manufacturing Adhesives Synergy Targets Excellence Expertise in Technology and Innovation Dedicated and Globally-Connected Team of Experts
Slide 130: EBITDA Growth Drivers
130 EBITDA Growth Drivers ($ Millions) $605 $50 $605 $555 $28 $8 $505 $35 $455 $64 $405 $355 $420 $305 FY 2017 PF Engineering Royal Cost Manufacturing Non-EA FY 2020 E Adhesives Synergies Leverage / Volume Growth Efficiencies / All Other
Slide 131: Organic Revenue Growth by Segment
131 Organic Revenue Growth by Segment ($ Millions) $3,500 $3,400 5% $3,300 11% $3,200 7% $3,100 3% $3,000 2% $3,000 $3,400 Acq & FX $2,900 $2,800 $2,889 $2,700 $2,600 FY 2017 PF Americas EIMEA Asia Pacific Engineering Construction FY 2020 E Adhesives Adhesives
Slide 132: EBITDA Growth and Margins by Segment
132 EBITDA Growth and Margins by Segment ($ Millions) 20% 17.8% $605 22% $555 14% $505 14% 18% $455 $605 14.5% $405 $355 $420 $305 FY 2017 PF Americas EIMEA Asia Pacific Engineering Construction FY 2020 E Adhesives Adhesives
Slide 133: Our 2018 results are in line with expectations
133 Our 2018 results are in line with expectations ($ Millions*) Q2 2018 YTD 2018 2018 2017 % Inc 2018 2017 % Inc Revenue $789.4 $733.7 7.6% Revenue $1,502.5 $1,375.6 9.2% Gross Profit 223.5 205.5 8.7% Gross Profit 411.8 389.7 5.7% GP Margin 28.3% 28.0% GP Margin 27.4% 28.3% EBITDA* 122.7 109.9 11.7
Slide 134: Consistent Capital Allocation Philosophy
134 Consistent Capital Allocation Philosophy FUL Long-Term Capital Allocation Philosophy Our Focus Over the Next Three Years Maintain CAPEX at 2.5% of revenue Ongoing Annual dividend of 25% of prior 3 Debt-to-EBITDA leverage between 2x to 3x years average net income Reduce debt-to-EBITDA lever
Slide 135: Free Cash Flow / Debt Repayment
135 Free Cash Flow / Debt Repayment ($ Millions*) $250 $230 $200 $200 $170 $150 $100 $50 $0 FY 2018E FY 2019E FY 2020E *Free cash flow defined as cash available to repay debt balances after satisfying all commitments
Slide 136: Capital Investments – Shift to Strategic Growth
22 Capital Investments – Shift to Strategic Growth ($ Millions) Sustain Strategic Integration $91 $91 100 $80 90 $77 7 11 80 $68 $69 8 70 22 34 11 32 60 26 In Millions 21 50 40 30 58 55 50 47 46 48 20 10 0 FY 2015 FY 2016 FY 2017 FY 2018E FY 2019E FY 2020E 2015 - 2017 pro forma combined with Royal %
Slide 137: Working Capital as a Percentage of Sales
137 Working Capital as a Percentage of Sales 21.0% 20.8% 20.7% 20.5% 20.1% 20.0% 19.6% 19.5% 19.2% 19.0% 18.8% 18.5% 18.0% 17.5% FY 2015 FY 2016 FY 2017 FY 2018E FY 2019E FY 2020E 2015 - 2017 Pro forma combined with Royal; reflect year-end figures
Slide 138: Cash Flow Progression
138 Cash Flow Progression ($ Millions) 2018 Outlook 2020 Target Adjusted EBITDA 470 605 Interest Expense (100) (90) Cash Taxes (55) (104) Acquisition Expense/Adj Items (20) (12) Change in Working Capital (20) (30) Share Based Comp / Other 7 (10) Operating Cash Flow 287 359 Capital Expenditures (80)
Slide 139: H.B. Fuller remains committed to repaying $600M of debt by 2020
139 H.B. Fuller remains committed to repaying $600M of debt by 2020 Debt to EBITDA ($M) Debt Maturities and Fixed/Floating Mix $2,452 $2,282 Floating 5.8x 30% $1,852 Fixed 4.9x 70% Due Amount Interes Size in Maturity Comments Outstanding t rate 3.0x ($ Millions) 2018 Working $605 Local Credit $100 $
Slide 140: FUL has solid upside potential and the 2020 plan is strong
140 FUL has solid upside potential and the 2020 plan is strong ~4.5% organic revenue growth $35 million in cost synergies Majority of these synergies are procurement and have Clear, achievable already been achieved financial commitments $605 million in EBITDA in 2020 $600 million of free c
Slide 141: Closing Remarks and Q&A
LEADING THE WAY Investor Day 2018 Closing Remarks and Q&A