37 slides from Rayonier Inc. Reit's investor presentation, Jun 11, 2014
Slide 1: Rayonier Advanced Materials Investor Presentation
RAYONIER INVESTOR PRESENTATION Advanced Materials.
Slide 2: Safe Harbor
Safe Harbor Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to future events, developments or financial or operational performance or results of Rayonier Ad
Slide 3: Table of Contents
Table of Contents The Separation 4 Business Overview 8 Strategy 21 Financial Review 25 Value Proposition 31 Appendix 33 3
Slide 4: The Separation
The Separation 4
Slide 5: Strategic Rationale for the Separation
Strategic Rationale for the Separation Separation will create two independent, industry-leading public companies Different Markets, Drivers and Value Creation Strategies More Efficient Allocation of Capital Distinct Investment Identities Enhanced Strategic and Management Focus Positions each best-
Slide 6: Optimal Timing for the Separation
Optimal Timing for the Separation Optimal timing as both companies have strong growth prospects in years ahead Expectations beyond 2014 2014 2013 2011 - 2012 6 Completion of technically demanding CSE • Additional 190K tons of cellulose specialties capacity • High quality of cellulose specialties p
Slide 7: Two Companies with Strong Financial Profiles
Sales Revenue by segment Segment EBITDA* (% Margin) CapEx Net debt $1.7B $0.7B $1.0B Forest Resources 22% Perf. Fibers 61% Real Estate 9% Trading & Other 8% $641M (38%) $159M ~$1.4B Forest Resources 57% Real Estate 22% Trading & Other 21% Cellulose specialties ~ 89% $255M (38%) $386M (37%) $63M $96M
Slide 8: Business Overview
Business Overview 8
Slide 9: A Leader in Specialty Chemicals
A Leader in Specialty Chemicals Global leader across cellulose specialties (“CS”) product portfolio • Greater than 2x sales volume versus competition: #1 in acetate / strong position in ethers and high-strength viscose/specialty • High purity product for technically demanding end uses • Extensive
Slide 10: Cellulose Specialties is a High-Value Product
Cellulose Specialties is a High-Value Product Dissolving Pulp Commodity Viscose Fluff 5.3 MMT Commodity Market Pulp 52 MMT Cellulose Specialties 4.4 MMT Total: 1.6 MMT Total: 63 MMT Cellulose Specialties segment Market pulp industry (1) Increasing Specialization * Includes some lower purity, less de
Slide 11: Production Focus on High End Cellulose Specialties
Production Focus on High End Cellulose Specialties Cellulose Specialties: 486,000 MTs Advanced Materials: 643,000 MTs Cellulose Specialties 76% Commodity Products 24% Acetate 81% High value ethers 6% Other Cellulose Specialties 13% 2013 Production Volumes 11
Slide 12: Participate in Diverse, Growing End-Markets
Participate in Diverse, Growing End-Markets Illustrative End Products 12 High Value Ethers High Strength Viscose Other Cellulose Specialties Specialty High Value Acetate
Slide 13: End Use Breakdown
End Use Breakdown Estimated Segment Size ~ 503,000 MT (pulp) 4 – 6% growth p.a. End Use Breakdown Estimated Segment Size ~ 355,000 MT (pulp) 2 – 3% growth p.a. End Use Breakdown Estimated Segment Size ~ 710,000 MT (pulp) 1 – 2% growth p.a. Textiles 4% Acetate High Value Ethers (3) Other
Slide 14: The Cellulose Specialties Standard Bearer
Rayonier Advanced Materials: The Cellulose Specialties Standard Bearer Source: Public information and privately commissioned studies 14 Estimated 2013 Sales Announced Additional Capacity/ Potential Additional Volume • Rayonier AM - 190K MT • Buckeye – 42K MT • Sateri – upper limit undetermined
Slide 15: Technical Leadership in Cellulose Specialties
Technical Leadership in Cellulose Specialties Process Knowledge Process Flexibility Juvenile, exterior fiber, center fiber, region hardness Caustic (high ph) Ammonia (low ph) Process sequence, bleach sequence: Cl2, Cl02, peroxide, concentrations, temperature, wash type/sequence, cold caustic extract
Slide 16: Turning Wood into a High-End Specialty Polymer
Turning Wood into a High-End Specialty Polymer Black Liquor Organics - Energy Inorganics - Recovery Extractives 1 - 5% Water Cellulose 43 - 45% Hemicellulose 27 - 30% 17 tons CS or 20 tons Viscose or 25 tons Fluff Inorganics /Organics Waste Treatment Lignin 20 - 28% Bleaching Process 100 Green tons
Slide 17: Purity is Critical to Customers
Purity is Critical to Customers Potential for molecular buildup of impurities Cigarette Filter Spinerette Acetate Filament Hair Spinerette Hole (smaller than a human hair) Acetate Tow (Filter) Manufacturing Process 17
Slide 18: Low Cost, Flexible Manufacturing Facilities
Low Cost, Flexible Manufacturing Facilities Jesup, GA Kraft mill Three production lines 520,000 MT of capacity Ability to be dedicated CS producer; produces acetate, ethers and high- strength viscose Purchases 1.8 million tons of hardwood chips and 1.4 million tons of softwood chips annual
Slide 19: World Class, Customer Focused R&D Effort
World Class, Customer Focused R&D Effort Strong technical partnerships with our customers and their customers • Customer-driven research • Experienced scientists and engineers with leading expertise in cellulose chemistry • Comprehensive understanding of our customers' processes - Majority of rela
Slide 20: Leadership
Leadership 20 Management Board of Directors * Current Rayonier Board members Paul G. Boynton* - Chairman C. David Brown, II* - Lead Director De Lyle W. Bloomquist Mark E. Gaumond* James F. Kirsch Lisa Palumbo James H. Miller* Thomas I. Morgan* Ronald Townsend* Paul G. Boynton – C
Slide 21: Strategy
Strategy 21
Slide 22: Rayonier Advanced Materials Strategy
Rayonier Advanced Materials Strategy Strengthen global leadership position in cellulose specialties • Currently possess 2x the capacity and sales of next largest competitor • Differentiate through purity, consistency and technical expertise Enhance strong relationships with key customer base • F
Slide 23: CS Strategy Focused on Highest End of the Value Chain
M a rgi n Technical Expertise Required Purity (alpha) 85 Fluff Viscose CS 98 Rayonier Advanced Materials CS Strategy Focused on Highest End of the Value Chain High Low Low High 23
Slide 24: CSE Expansion Focused on Strategic Growth
* Does not include sales of off-grade product Absorbent Materials Cellulose Specialties without cost surcharge Product Mix $/MT CSE completion June 2013 Cellulose Specialties Command Premium Price $385 million to convert commodity capacity to CS in Jesup completed June 2013 • Customer-driven proje
Slide 25: Financial Review
Financial Review 25
Slide 26: Q1 Financial Highlights
Q1 Financial Highlights Short term pricing softness due to transitional markets fueled by capacity additions, mostly from RYAM CSE Revenue Drivers • Pricing down 3% relative to the first quarter of 2013 or 6% relative to 2013 year end • New CS capacity outpacing consistently growing demand in sh
Slide 27: Financial Performance Highlights
($ in Millions) Financial Performance Highlights Note: Management Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP figures. See Appendix for reconciliations * Includes adjustment for $25M overhead * LTM volume lower due to timing of extended shutdown in Q1’14 * 27 *
Slide 28: Attractive Capital Structure with Low-Cost, Long-Term Debt
Attractive Capital Structure with Low-Cost, Long-Term Debt (1) 1 month LIBOR plus 1.08% (2) $250 million capacity (undrawn at closing) (3) Net of 67 bps of patronage (4) Non-GAAP measure (see Appendix for definition and reconciliations) Corporate Ratings of BB+ and Ba2 Interest Cumulative Debt Rate(
Slide 29: Key Financial Metrics
Key Financial Metrics 29 Year Ended December 31, ($ in millions) 2011 2012 2013 Tons sold (000s of MT) Cellulose specialties 504 503 486 Commodity viscose / absorbent materials 227 214 157 Sales Cellulose specialties $824 $935 $930 Commodity viscose / absorbent materials / other 197 160 117 Gross ma
Slide 30: 2014 Financial Guidance
2014 Financial Guidance (2) Excludes corporate expenses. After the separation, normalized corporate expenses are expected to be $25M for Rayonier Advanced Materials. 2013 2014 Guidance Sales 1,042 Comparable CS Volumes (000s of MT) (1) 486 ~ 30 Operating Income (2) 311 ↓ ~ 25% Segment EBITDA (2)(3)
Slide 31: Value Proposition
Value Proposition 31
Slide 32: Attractive Shareholder Value Proposition
Attractive Shareholder Value Proposition Best-in-class margins and cash flows with material upside as new capacity is absorbed and operational efficiency improves Completed investment in cellulose specialties expansion provides runway for significant future growth Attractive cash flows allow f
Slide 33: Appendix
Appendix 33
Slide 34: Global Consumption Growing 1% – 1.5% Per Year
Global Consumption Growing 1% – 1.5% Per Year B illi o n s o f Ci ga re tt es Cigarette Volume by Region The Asia Pacific region (including China) contains seven of the world’s largest markets and six of the fastest-growing 5,630 6,184 5,811 34 Source: Euromonitor 2013
Slide 35: CS Market / Pricing Largely Independent of Commodity Viscose Pricing
CS Market / Pricing Largely Independent of Commodity Viscose Pricing Source: PCI Fibres, CCF Group and Rayonier Advanced Materials $/MT Note: CS prices were higher in Q2 2011, Q2 2012 and Q3 2012 due to sales mix. 35
Slide 36: Definitions of Non-GAAP Measures
Definitions of Non-GAAP Measures EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative
Slide 37: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Three Months Ended Last Twelve Months Ended Year Ended December 31, March 31, 2014 March 31, 2013 March 31, 2014 2013 2012 2011 Operating income $43 $87 $245 $289 $342 $283 Depreciation, depletion and amortization 21 15 80 74 60 56 EBITDA 64 102 325 363 402 339 Co