Valvoline Inc. · NYSE:VVV
Valvoline — Investor Presentation (May 2017)
33 slides from Valvoline's investor presentation, May 1, 2017
Slide 1: Valvoline: Ready to Stand Alone – Start Your Engines!
Valvoline: Ready to Stand Alone –Start Your Engines!
Slide 2: Forward-Looking Statements
Forward-Looking StatementsThis presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in the
Slide 3: Today's Presenters
Name Title Industry Experience Selected Experience Sam Mitchell Chief Executive Officer 20 Joined Ashland in 1997 as Director of Marketing for Valvoline’s brand management group; became President of Valvoline in 2002Held brand and category management leadership positions at The Clorox CompanyGraduat
Slide 4: Who We Are and How We Win
Ine. Who We Are and How We Win Valvol
Slide 5: Our Goal
Our Goal 150Years independent Never idle Hands-on expertise Building The world’s leading engine and automotive maintenance business FocusedConnected to our customers Every moment of time we have is an investment. At Valvoline, we choose to invest our time in creating greater value for our customers,
Slide 6: Our Strategy: Leveraging the Valvoline Brand and Capabilities
Our Strategy leveraging the Valvoline brand AND CAPABILITIES Across channels & around the world DIY RETAILERS RAP / MASS QUICK LUBES VALVOLINE INSTANTOIL CHANGE /EXPRESS CARE It starts with great products, and no matter the application, everything we produce is specifically designed to keep engines
Slide 7: Our Brand Is Driving a Growing Global Platform
Our Brand Is Driving a Growing Global Platform 25% Quick Lubes 49% Core North America 26% International Our Sales Are Diversified Across 3 Distinct Channels (4) ____________________Note: All data shown are as of fiscal 2017 quarter ended 3/31 unless otherwise noted. By Volume in the United States DI
Slide 8: A Proven Track Record of Earnings Growth
A Proven Track Record of Earnings Growth Our Strong Cash Flow Affords Investment in All Our Growth Segments Mix shift towards premium products: ~45% in 2016 from ~31% in 2011 (1)10 consecutive years of system-wide SSS growth in VIOC stores (2)Consistent volume and profit growth in international mark
Slide 9: Valvoline's Investment Highlights
Our Roadmap for Success: Valvoline’s Investment Highlights Iconic Brand WithPremium Products Strong and Growing Quick Lube Channel History of Innovation InternationalGrowth Solid Market Fundamentals Unique Multi-Channel Route to Market Significant Free Cash Flow Generation Disciplined Margin Managem
Slide 10: The Critical Aspects to Understanding Valvoline
Margin Management and Pricing Power Quick Lubes Growth Opportunity International Growth Opportunity The Future of Core North America The Critical Aspects to Understanding Valvoline 7
Slide 11: Margin Management and Pricing Power
Margin Management and Pricing Power
Slide 12: Long Base Oil Market Expected to Continue Through 2020
Long Base Oil Market Expected to Continue Through 2020 and Provide Base Oil Pricing Stability Fundamentals of Base Oil Market & Our Pricing Strategy ____________________Source: Polk and Experian data, IHS Chemical Report and internal estimates. Based on raw material pricing for six months ended 3/31
Slide 13: Valvoline Unit Margins Improving Despite Changes in Base Oil Pricing
Valvoline Unit Margins Improving Despite Changes in Base Oil Pricing Prices in USD A Strong Track Record of Managing Unit Margin Improved Unit Margins Through Business and Product Mix Long Base Oil Market Has Enabled Us to Improve Our Purchasing Terms Protected Unit Margins in Rising Cost Environmen
Slide 14: Quick Lubes Growth Opportunity
Quick Lubes Growth Opportunity
Slide 15: Our VIOC Business Model Driving Same-Store Sales Growth
Our VIOC Business Model ...Driving 10 Years of Same-Store Sales Growth (2) System-Wide Average Sales per Store(dollars in thousands) ’07-’16 CAGR: 5.4% ____________________Data represented on a fiscal year basis.SSS growth determined on a fiscal year basis with new stores included after first full f
Slide 16: Significant Opportunities for Growth
Significant Opportunities for Growth ____________________Includes 374 company-owned stores and 734 franchised locations as of fiscal 2017 quarter ended 3/31. Does not include Express Care operators. Broad VIOC Geographic Footprint (1) Significant Whitespace for New Stores Franchised Company-Owned Ne
Slide 17: Valvoline's Playbook for Acquisition Integration
Introduce Valvoline branded products to realize benefits of vertical integrationInstall proprietary POS technologyImplement and train store team on SuperPro management systemLaunch Valvoline’s digital & direct marketing programsRebrand to Valvoline Instant Oil Change and leverage operational synergi
Slide 18: International Growth Opportunity
International Growth Opportunity
Slide 19: We Target Some of the Largest International Growth Markets
We Target Some of the Largest International Growth Markets, including China, India & Latin America Latin AmericaRecent rapid growthAggressive new channel developmentExpanding beyond passenger car products IndiaStrong C&I marketVery strong channelsCummins JVChanging emission rulesGood C&I OEM penetra
Slide 20: Leveraging the Cummins Relationship
Leveraging the Cummins Relationship… …To Provide Ongoing Value Model For Leveraging OEM Relationship Global marketing partnershipFragmented markets provide significant opportunities to expand shareJoint ventures in India & ChinaTechnology partnership to develop products tailored to today’s modern en
Slide 21: The Future of Core North America
The Future of Core North America
Slide 22: Core North America Strategic Pillars
Core North America Strategic Pillars Leading brand in a key category that drives traffic for retailers Continuous innovation around next-generation, fast growing, higher margin synthetics Packaging innovation that delivers both consumer and customer value Targeted digital marketing to high potential
Slide 23: Packaging Innovation Drives Value for Installer Customers
Packaging Innovation Drives Value for Installer Customers Bay Box Rack Benefits to Customers Improves working capital & inventory controlEases space constraintsReduces product waste & increases speed of service Benefits to Valvoline Increases volume & premium penetrationSolidifies current customer r
Slide 24: Marketing Relationships Create Excitement with Consumers and Retail Associates
Marketing Relationships Create Excitement with Consumers and Retail Associates Then return to submit receipt to redeem action figure offer Retail promotions are critical in the categoryValvoline leverages partnership brands such as Hendrick Motorsports to:Provide video content to retailersDrive Valv
Slide 25: Valvoline Leverages Digital Marketing for DIY and Installer Customers
a Valvoline leverages digital marketing to help both DIY and Installer customers market more effectivelyProvides custom content to retailers in the DIY and Installer spaces for use in their own loyalty programsLaunches Valvoline Drives in 2017 in order to drive both customer acquisition and retentio
Slide 26: Long Term Priorities
Valvoline. Long Term Priorities
Slide 27: We Have a Disciplined Approach to Value Creation
We Have a Disciplined Approach to Value Creation Opportunistic acquisitions focused on Quick LubeGrow dividend over timeRecently announced $150mm share repurchase program Strong Gross Profit CAGR & Adj. EBITDA Active management of gross marginValue enhancing quick lube expansionDisciplined approach
Slide 28: 2017 YTD Financial Results
Valvoline. 2017 YTD Financial Results
Slide 29: Consolidated Adjusted Results
Consolidated Adjusted Results (1) ____________________ For a reconciliation of EBITDA and Adjusted EBITDA to Net Income, see the Appendix to this presentation. Factors Affecting Y-o-Y EBITDAFrom Operating Segments (1) 20
Slide 30: Segment Adjusted Results
____________________For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation. Segment Adjusted Results (1) Core North America Quick Lubes International Factors Affecting Y-o-Y EBITDA 21
Slide 31: Appendix
Valvoline. Appendix
Slide 32: Historical EBITDA and Adj. EBITDA Bridges
Historical EBITDA and Adj. EBITDA Bridges ($ in millions) 2011 2012 2013 2014 2015 2016 1H’17 Net income $110 $114 $246 $173 $196 $273 $143 Income tax expense 52 58 135 91 101 148 76 Net Interest and other financing expense - - - - - 9 18 Depreciation and amortization 38 36 36 37 38 38 18 EBITDA $20
Slide 33: Fiscal 2017 Outlook
Fiscal 2017 Outlook Current Expectations 2017 Outlook Operating Segments Lubricant gallons 3-5% Sales 4-7% New stores VIOC company-owned 31-3328 acquired, 3-5 new builds VIOC franchised 15 – 25 VIOC same-store sales 5-7% EBITDA from operating segments $440 - $455 mm Corporate Items Pension income $7