Element Solutions Inc. · NYSE:ESI
Element Solutions — Platform Specialty Products — FY2017 Earnings Presentation
24 slides from Element Solutions's earnings presentation, Feb 27, 2018
Slide 1: Fourth Quarter and Full Year 2017
Fourth Quarter and Full Year 2017 February 27, 2018
Slide 2: Safe Harbor
Safe Harbor Please note that in this presentation, we may discuss events or results that have not yet occurred or been realized, commonly referred to as forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or o
Slide 3: Non-GAAP Information
Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company uses the following non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA guidance, adjuste
Slide 4: Platform Q4 2017 Results
Platform Q4 2017 Results ($ in millions) Q4 2017 Q4 2016 YoY% Constant Organic2* • Net sales grew 12% driven primarily by Currency1* organic growth in Agricultural Solutions as improved weather in LatAm drove Net Sales $1,069 $950 12% 9% 9% strong results in late Q4 Performance Solutions 489 457 7%
Slide 5: Platform FY 2017 Results
Platform FY 2017 Results Constant • Net sales grew 5% driven by mid-single ($ in millions) FY 2017 FY 2016 YoY% Currency* Organic* digit organic growth in both business segments Net Sales $3,776 $3,586 5% 4% 4% • Growth in Alpha, Industrial and core Electronics drove Performance Solutions 1,879 1,77
Slide 6: Performance Solutions 2017 Results
Performance Solutions 2017 Results Net Sales $ in millions • Net sales increased by $109 million over 2016 1,900 78 1,879 due to organic growth in all business units excluding Graphics. Moderate FX and metals 24 1,801 price tailwinds also contributed to reported sales 1,800 4 3 1,770 growth • Organi
Slide 7: Agricultural Solutions 2017 Results
Agricultural Solutions 2017 Results Net Sales $ in millions • Net sales increased ~$81 million over 2016 driven 2,000 by successful new market expansion and return to profitable growth in North American markets 1,897 1,900 52 • FX tailwind driven primarily by the BRL and 30 1,846 1,816 EUR 1,800 • F
Slide 8: 2017 Cash Flow Bridge (Non-GAAP)
2017 Cash Flow Bridge (Non-GAAP) ~$144 million of Free Cash Flow* in 2017 $ in millions 700 Free Cash Flow*1: $144 226 650 600 550 (82) 7 (44) 500 478 8 Make-whole payment of $44 million as part of 10.375% (59) 450 notes re-financing which led 423 to ~$20m of annual interest savings 400 350 300 2 20
Slide 9: 2017 Priorities in Review
2017 Priorities in Review Execution: Build on Operating Momentum • 4% organic sales growth in 2017 with both business segments meeting their growth objectives • Generated adj. EBITDA* growth of ~2x organic sales* growth • Developed and began execution of separation of our businesses to unlock valu
Slide 10: Strategic Organic Long-Term Goals
Strategic Organic Long-Term Goals Ag Solutions Long-Term CAGR: ~5% Average Platform CAGR: ~4% Sales Perf Solutions Growth CAGR: 3 – 4% High Single Digit Adj. EBITDA COGS Reduction: Growth CAGR Five Year Adj. EBITDA Margin ~200 bps Net debt / Adj. EBITDA Operating Expansion: ratio of ~4.5x in two Lev
Slide 11: 2018 Outlook
2018 Outlook Agricultural Solutions Performance Solutions Organic Sales Growth* ~3 – 4% ~3 – 4% Expectations Key Expected ↑ Improving industry-wide channel ↑ Healthy conditions across end markets Drivers of inventories and modest recovery in Performance commodity prices ↑ Continued content growth in
Slide 12: Balance Sheet & Cash Flow Considerations
Balance Sheet & Cash Flow Considerations Key Cash Flow Items Balance Sheet Management • 2017 free cash flow*1 of $144 million • Debt repricings drove ~$30 million of net interest savings • Working capital release continued in Q4 vs FY 2016 • Full year working capital build of $34 million • Issued $8
Slide 13: Tax Considerations
Tax Considerations 2017 Top Countries by Sales (ex-U.S.)1 • U.S. Tax Reform resulted in a one-time $46 million U.S. GAAP Statutory tax benefit in Q4 2017 primarily as a result of the new lower U.S. Country Rate Brazil 34% rate on Platform’s deferred tax liabilities China 25% • Foreign tax credits ar
Slide 14: Separation Update
Separation Update • Continued progress towards 2018 separation • Qualified and experienced leadership teams announced for both companies • Operational workstreams executing against comprehensive plans to prepare both businesses for separation • Transaction-related workstreams underway to separate ca
Slide 15: 2018 Priorities
2018 Priorities Execution: Build on Operating Momentum and Continue to Drive Above Market Revenue Growth Manage Cost and Drive Margin Expansion through Synergies and Continuous Improvement Generate Free Cash Flow and Reduce Leverage Ensure a Successful Separation to Maximize Shareholder Value 15
Slide 16: Appendix
PLATFORM SPECIALTY PR UCTS CORPORATION rl Appendix 16
Slide 17: Capital Structure
Capital Structure $ millions Instrument Maturity Coupon 12/31/2017 Corporate Revolver ($500M) 6/7/2019 $- Term Loan B6 - USD 1,2 6/7/2023 L + 300 1,135 Term Loan B7 - USD 1 6/7/2020 L + 250 630 Term Loan C5 - EUR 1,2 6/7/2023 E + 275 719 Term Loan C6 - EUR 1 6/7/2020 E + 250 701 Other Secured Debt 1
Slide 18: Reconciliation to Adjusted Share Counts
Reconciliation to Adjusted Share Counts (in millions) Q4 2017 Q4 2016 FY 2017 FY 2016 Average Average Basic outstanding shares 287 284 287 255 Number of shares issuable upon conversion of Series B - - - 17 Convertible Preferred Stock Number of shares issuable upon conversion of PDH Common 5 8 6 8 St
Slide 19: Net Loss Attributable to Common Stockholders Reconciliation to Adjusted EBITDA
Net Loss Attributable to Common Stockholders Reconciliation to Adjusted EBITDA (Amounts in millions) Q4 2017 Q4 2016 FY 2017 FY 2016 Net loss attributable to common stockholders $(142) $(2) $(296) $(41) Add (subtract): Gain on amendment of Series B Convertible Preferred Stock — — — (33) Net (loss) i
Slide 20: GAAP Diluted Loss Per Share Reconciliation to Adjusted Diluted EPS
GAAP Diluted Loss Per Share Reconciliation to Adjusted Diluted EPS (amounts in millions, except per share amounts) Q4 2017 Q4 2016 FY 2017 FY 2016 GAAP diluted loss per share $(0.49) $(0.01) $(1.04) $(0.65) Weighted average shares outstanding 287 288 286 272 Net loss attributable to common stockhold
Slide 21: Quarterly Results Overview
Quarterly Results Overview 2016 2017 (Amount in millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net Sales Performance Solutions $420 $438 $455 $457 $447 $462 $481 $489 Agricultural Solutions 404 484 436 493 415 479 424 580 Total Net Sales $824 $922 $891 $950 $862 $941 $904 $1,069 Adjusted EBITDA Performance Solut
Slide 22: Organic Sales Growth Reconciliation
Organic Sales Growth Reconciliation Q4 2017 Organic Sales Growth Reported Constant Organic Impact of Net Sales Metals Acquisitions Sales Currency Currency Growth Growth Performance Solutions 7% (4)% 3% —% —% 4% Agricultural Solutions 18% (3)% 15% —% —% 15% Total 12% (3)% 9% —% —% 9% FY 2017 Organic
Slide 23: Adjusted PBT Calculation
Adjusted PBT Calculation (Amount in millions) FY 2017 FY 2016 Adjusted EBITDA $821 $769 Depreciation expense (78) (75) Investment in registration of products (41) (36) Interest expense, net (342) (376) Adjusted PBT $361 $282 23
Slide 24: Non-GAAP Definitions
Non-GAAP Definitions Adjusted Earnings Per Share (EPS): Adjusted earnings per share is defined as net loss attributable to common stockholders adjusted to reflect adjustments consistent with our definition of adjusted EBITDA. Additionally, the company eliminates the amortization associated with (i)
Platform Specialty Products — FY2017 Earnings Presentation on 6ix