Ingevity Corporation · NYSE:NGVT
Ingevity — Investor Day (April 2016)
70 slides from Ingevity's investor day presentation, Apr 26, 2016
Slide 1: Analyst Meeting New York City April 26, 2016
Analyst Meeting New York City April 26, 2016
Slide 2: Disclaimer
Disclaimer This presentation contains “forward - looking statements,” including, but not limited to, statements that give guidance or estimates for future periods. “Forward - looking statements” include information related to future, not past, events. Such statements generally include the words “may
Slide 3: Form 10 Pro Forma vs. Carve Out EBITDA
Form 10 Pro Forma vs. Carve Out EBITDA Source: Company information and Form 10 (1) Per the Form 10 “Unaudited Pro Forma Combined Financial Statements”, management estimates that there will be additional cos ts of $2 million to $4 million before - tax annually, over and above amounts currently includ
Slide 4: Transaction Overview
4 Exchange / Ticker ▪ NYSE: NGVT Key Dates¹ ▪ When Issued Trading Dates: May 2 nd to May 13 th ▪ Record Date: May 4th ▪ Distribution Date: May 15 th ▪ Regular Way Trading Date: May 16 th Tax Impact ▪ Intended to be a tax - free spin - off to WestRock shareholders for U.S. federal income tax purposes
Slide 5: Today's Presenters from Ingevity
Source : Company information Today’s Presenters from Ingevity Michael Wilson – President and Chief Executive Officer Mr. Wilson joined Ingevity in September 2015 from Albemarle Corporation, where he was executive vice president and president of their Performance Chemicals business. Michael served as
Slide 6: Agenda
Section Speaker Time Welcome & Lunch All 11:30 am Introducing Ingevity Michael Wilson 12:00 pm Performance Materials Ed Woodcock 12:30 pm Performance Chemicals Ed Rose 1:00 pm Business Wrap - Up Michael Wilson 1:30 pm Financial Overview John Fortson 1:35 pm Q&A Session All 2:00 pm Agenda 6
Slide 7: Introducing Ingevity
Introducing Ingevity Michael Wilson President and CEO 7
Slide 8: Investment Highlights
8 Investment Highlights 8 Source: Company information and Form 10 Note: (1) Please see appendices included at the end of this presentation for Ingevity's use of non - GAAP financial measures, definitions of those financial measures as well as the reconciliation to the nearest GAAP financial measure
Slide 9: Purify, Protect and Enhance
Purify, Protect and Enhance 9
Slide 10: Who We Are
10 73% 27% ▪ A leading global manufacturer of specialty chemicals and high performance carbon materials ▪ Create high - value added products from renewable raw materials ▪ Meet highly specialized, complex customer needs through proprietary formulated products 2015 Revenues by Segment 2015 Revenues b
Slide 11: Our History
11 Our History 1846 1888 1900s 1934 1954 1964 1977 1984 2003 1997 2002 2011 2012 Jan - 2015 Jun - 2015 Jul - 2015 Sep - 2015 May - 2016 Our Future Ingevity announced as name of specialty chemicals business MWV merges with RockTenn to become WestRock Ingevity Zhuhai, China carbon facility opened Inge
Slide 12: Our Core Strengths
12 Our Core Strengths Leading Global End - Market Positions Flexible and Strategically Located Manufacturing Network Deep Technical Expertise With a History of Product Innovation Collaborative Customer and End User Relationships 1 2 3 4 Strong Track Record of Delivering Profitable Growth Experienced
Slide 13: Leading Global End-Market Positions
Performance Materials Performance Chemicals 2015 Sales $257 million $711 million 2015 Segment EBITDA (1) $92 million $111 million Est. Market Size $3B $800M - $1B $2B $3 - 5B Market Position #1 in automotive #1 or #2 Top tier #1 or #2 Applications ▪ Automotive ▪ Process purification ▪ Pavement prese
Slide 14: Flexible and Strategically Located Manufacturing Network
14 Palmeira , Santa Catarina, Brazil DeRidder, La. Waynesboro, Ga. Covington, Va . Wickliffe, Ky. Zhuhai , China Wujiang , China Shanghai , China Charleston, S.C. Lille , France Charleston , S.C. Manufacturing Technical Administration and Sales Headquartered in North Charleston, South Carolina and o
Slide 15: Collaborative Customer Relationships and Technical Expertise Drive Innovation
Collaborative Customer Relationships and Technical Expertise Drive Innovation 15 • Extend the paving season • Enable service to distant jobsites • Accelerate project completion • 250,000 miles of Evotherm , or 7 times around the world • Engineered to nanoscale porosity • Life - of - vehicle performa
Slide 16: Strategic Focus on High-Value Added Products and Markets
Strategic Focus on High - Value Added Products and Markets Basic Materials Essential Ingredients Technology Partner Ingevity Business Models Across the Value Chain ~85% ~15% Pricing Mechanism Margin Profile Low Med - High High Market Market / Value - Add Value - Add Influence on Pricing Ingevity’s S
Slide 17: Strong Track Record of Delivering Profitable Growth and High Margins
676 811 939 980 1,041 968 156 214 233 227 247 203 23% 26% 25% 23% 24% 21% 0% 10% 20% 30% 40% 0 250 500 750 1,000 2010 2011 2012 2013 2014 2015 ($M) Strong Track Record of Delivering Profitable Growth and High Margins Averaged greater than 20% percent Combined Adjusted EBITDA margins over the past si
Slide 18: Peer comparison of return on assets and margins
Source: Public Company filings, Ingevity presented on a pro forma combined adjusted EBITDA basis Note: Albemarle, Chemtura , FMC, Huntsman, Kraton and Olin adjusted for acquisitions and / or divestitures occurring from 2014 – 2015 (1) Albemarle 2014 data pro forma for acquisition of Rockwood on Janu
Slide 19: Experienced Management Team
Name Title Years of Experience Prior Firms Michael Wilson President and CEO 30 John Fortson EVP, CFO and Treasurer 26 Ed Rose EVP, President, Performance Chemicals 30 Ed Woodcock SVP, President, Performance Materials 27 Alex Zalesky SVP, Global Markets 32 Marty Heyne SVP, Operations 33 Source: Compa
Slide 20: Multiple Avenues to Growth
Multiple Avenues to Growth Basic Materials Essential Ingredients Technology Partner Organic Growth in Attractive End Markets Geographic Expansion New Applications Broadened Technology Platform Strategic M&A 20 Source: Company information Disciplined, return - based approach to investing for growth
Slide 21: The Meaning Behind Ingevity
The Meaning Behind Ingevity 21
Slide 22: Performance Materials
Performance Materials Ed Woodcock SVP and President, Performance Materials 22
Slide 23: Investment Highlights – Performance Materials
23 ▪ Market and technology leadership position provides significant competitive advantage ▪ Increasingly stringent gasoline vapor emission regulations could double the market over the next five to seven years ▪ Growth will also be accelerated by gasoline vehicle demand forecast at 2.4 percent CAGR f
Slide 24: The Leading Manufacturer of Activated Carbon for Automotive Applications
▪ Global manufacturer of activated carbon, focused on automotive ⁃ Gasoline emissions control for cars, trucks, motorcycles and boats ⁃ Minor participation in process purification for food, beverage, water ▪ Market share and technology leadership in gasoline vapor emissions control ▪ Highly technica
Slide 25: Collaborative Process and Deep Technical Skills Drive Innovation
Gov’t / Regulators OEMs / End - Users Direct Customers Collaborative Process and Deep Technical Skills Drive Innovation OEMs / End - Users • Risk avoidance, trust, 30 years in business, 750 million canisters • Quality, consistency = life - of - vehicle performance • Security of supply • Viewed as ex
Slide 26: Products That Enable Regulatory Compliance
25 - 35 grams /day 1970 – 80s technology / 0.5 - 1.0L One Day Parking 1990s technology / 2.0 - 3.0L • multi - day parking & running loss • plus refueling Modern technology “Near Zero” 2.0 - 3.0L + scrubber India - China - Europe Japan - Brazil - S. Korea US / Canada California (PZEV) Control Technol
Slide 27: Advanced Technology With Increasingly Stringent U.S. Regulations
Advanced Technology With Increasingly Stringent U.S. Regulations Over 30 Years Source: Company information regarding US automotive regulations and corresponding affect to technology used to control evaporative emissions EPA Tier 0 EPA Tier 1 EPA ORVR EPA Tier 2 EPA Tier 3 1970s / 80s One Day Parking
Slide 28: Technical Expertise Helping to Inform Regulation Development
Technical Expertise Helping to Inform Regulation Development Region 2014 Vehicle Sales (M) Status Evaporative Emission Regulations One Day Parking Two Day Parking Multi - Day Running Loss / Refueling Near Zero US & Canada 17.7 Completed (2016 start) S. Korea 1.4 Completed (2014 start) Europe 7.5 Fin
Slide 29: Growth Accelerated by Global Vehicle Sales
0 25 50 75 100 2015 2020 2025 US & Canada China RoW Source: IHS, Form 10 Gasoline - fueled Light Duty Vehicles Sales Volume (M) Growth Accelerated by Global Vehicle Sales US and Canada: • Even with a flat 10 - year CAGR, will see significant growth from regulatory - driven content increase China: •
Slide 30: Strategically Located Manufacturing Facilities
Facility Site Regulation ~ # of Employees Covington, Virginia U.S. ORVR 190 Wickliffe, Kentucky U.S. ORVR 110 Waynesboro, Georgia California Regulations (LEV II and PZEV) 80 Wujiang, China China ORVR 50 Zhuhai, China China ORVR 110 Source: Company information and Form 10; IHS Note: ORVR=Onboard Refu
Slide 31: Recent Investment in New Chinese Manufacturing Facility
31 Recent Investment in New Chinese Manufacturing Facility ▪ Invested ~$100M in construction of a new manufacturing facility in Zhuhai, China ▪ Construction was completed in fourth quarter 2015 ▪ Facility is focused on the global automotive emissions control market ▪ Facility location strategically
Slide 32: Financial Results – Performance Materials
95 78 100 92 35.3% 40.2% 35.8% 0.0% 10.0% 20.0% 30.0% 40.0% 0 50 100 2013 2014 2015 ▪ Strong 2014 and 2015 revenue results driven by volume growth in the automotive emissions market and favorable pricing and product mix improvements ▪ 2014 segment EBITDA benefited from strong volume growth and incre
Slide 33: Investment Highlights – Performance Materials
33 ▪ Market and technology leadership position provides significant competitive advantage ▪ Increasingly stringent gasoline vapor emission regulations could double the market over the next five to seven years ▪ Growth will also be accelerated by gasoline vehicle demand forecast at 2.4 percent CAGR f
Slide 34: Performance Chemicals
Performance Chemicals Ed Rose EVP and President, Performance Chemicals 34
Slide 35: Investment Highlights – Performance Chemicals
35 ▪ Market - driven strategy focused on segments poised for strong growth ▪ Deep customer collaboration supported by technical expertise ▪ Long - term customer relationships; often more than 20 years ▪ High degree of customer diversity; top 10 make up approximately 43 percent of sales… next 100 mak
Slide 36: Critical Inputs in High-Performance Applications
18% 4% 11% 67% 2015 Revenue: $711M 2015 Revenues by Geography Critical Inputs in High - Performance Applications North America EMEA South America APAC ▪ A leading manufacturer of pine - based performance chemicals ▪ Converts Crude Tall Oil (CTO) into higher value derivative products ▪ Stable, yet di
Slide 37: Strategic Focus on Value-Added Derivative Products and Technologies
Biorefinery Derivative Products ▪ Pavement preservation ▪ Evotherm (warm mix asphalt) ▪ Asphalt recycling ▪ Oil well service additives ▪ Oil production & downstream chemicals ▪ Rubber emulsifiers ▪ Lubricants ▪ Intermediates ▪ Adhesives ▪ Inks ▪ Paper size ▪ Rubber emulsifiers Renewable Forests Tall
Slide 38: The Markets We Serve
The Markets We Serve Pavement Technologies Est. Market Size: $800M – 1B Oilfield Technologies Est. Market Size: $2B Industrial Specialties Est. Market Size: $3 - 5B Ingevity Products Pavement preservation products, w arm mix additives Well service additives, production and downstream products (corro
Slide 39: Global Leader in Asphalt Additive Technology
Business Highlights Product Applications Business Strategies ▪ Supplies a broad line of innovative additives, systems and technologies for road construction, resurfacing, preservation, maintenance and recycling globally ▪ Over 100 asphalt additive products and technologies to approximately 500 custo
Slide 40: Capitalizing on Growing Global Infrastructure Spending
Aggregate Supplier Liquid Asphalt Supplier Asphalt Plant Paving Contractor Government Agencies Ingevity Additives Pavement Technologies Capitalizing on G rowing Global Infrastructure Spending 40
Slide 41: Oilfield Chemicals Provide Productivity Benefits
• Horizontal drilling is ~80 % of the NAFTA market • Over 60 global customers ▪ Innovation: New products targeting efficiency and performance primarily in well service applications ▪ Commercial Excellence: Expand market share at key accounts by leveraging flexibility, application expertise and manuf
Slide 42: Industrial Specialties Are Essential Ingredients
▪ Adhesives: Leading global supplier of tackifier resins which provide superior adhesion ▪ Agrochemicals: Dispersants for crop protection products as well as other naturally derived products for agrochemicals ▪ Lubricants: Lubricant additives and corrosion inhibitors for the metalworking and fuel ad
Slide 43: Flexible Manufacturing Facilities Adapt to Market Demand Changes
Facility Site Products Applications ~ # of Employees Charleston, S. C. • Emulsifiers • Rosin • TOFA • Lignin • Asphalt • Oilfield • Inks • Dispersants • Specialties 210 DeRidder, Louisiana • Emulsifiers • Rosin • TOFA • Asphalt • Oilfield • Inks • Adhesives • Specialties 230 Palmiera, Brazil • Tall
Slide 44: Long-Term, Secure CTO Supply
Source: Form 10 (1) Midpoint of 45 - 55% range ▪ Crude Tall Oil (CTO) is primary raw material for P erformance Chemicals ▪ Most CTO supply is under contract ▪ Ingevity will source ~50% 1 from WestRock and ~50% from other providers ▪ Attractive 10+ year supply agreement ▪ Market - based pricing ▪ 100
Slide 45: Financial Results – Performance Chemicals
739 759 792 711 0 250 500 750 2013 2014 2015 120 149 147 111 19.6% 18.6% 15.6% 0.0% 5.0% 10.0% 15.0% 20.0% 0 50 100 150 200 2013 2014 2015 ▪ Strong 2014 revenue results driven by volume growth primarily in pavement, inks, adhesives, oilfield and other industrial specialties markets ▪ 2015 revenue de
Slide 46: Investment Highlights – Performance Chemicals
46 ▪ Market - driven strategy focused on segments poised for strong growth ▪ Deep customer collaboration supported by technical expertise ▪ Long - term customer relationships; often more than 20 years ▪ High degree of customer diversity; top 10 make up approximately 43 percent of sales… next 100 mak
Slide 47: Business Wrap-Up
Business Wrap - Up 47
Slide 48: Investment Highlights
48 ▪ Well - established, specialty chemicals business with a 100 - year history of innovation ▪ Collaborative customer relationships and end - market technical expertise drive the creation of high - value products and technologies that account for approximately 85 percent of revenues ▪ High - margin
Slide 49: Financial Overview
Financial Overview John Fortson EVP, Chief Financial Officer 49
Slide 50: Key Financials
676 811 939 980 1,041 968 2010 2011 2012 2013 2014 2015 156 214 233 227 247 203 2010 2011 2012 2013 2014 2015 182 260 297 295 323 281 2010 2011 2012 2013 2014 2015 76 114 122 118 133 85 2010 2011 2012 2013 2014 2015 Source: Company information and Form 10, carve out basis Note: (1) Please see append
Slide 51: Historical Sales & Adjusted EBITDA Bridges
1,041 968 (23) (19) (31) 2014 Actual Volume Price / Mix FX 2015 Actual '14 vs '15 Revenue Bridge ($M) 980 1,041 60 6 (5) 2013 Actual Volume Price / Mix FX 2014 Actual '13 vs '14 Revenue Bridge ($M) 227 247 19 5 (2) (2) 2013 Actual Volume Price / Mix Cost / Productivity Currency 2014 Actual '13 vs '1
Slide 52: Capital Investments
% of Sales D&A $M Capex /D&A 3% 30 0.8 3% 29 1.0 4% 32 1.2 6% 33 1.9 10% 33 3.0 10% 35 2.9 Capital Investments Source: Company information 22 29 40 63 101 102 0 30 60 90 120 2010 2011 2012 2013 2014 2015 10 20 10 28 23 14 48 17 11 41 33 12 ($M) 4 14 11 4 13 5 9 14 16 52
Slide 53: Working Capital
Working Capital ($M) 2013 2014 2015 Sales 980 1,041 968 Accounts Receivable 107 108 96 Inventory 103 130 151 Accounts Payable 81 105 65 Net (AR+ Inventory - AP) 129 133 182 Accounts Receivable / Sales % 11% 10% 10% Inventory / Sales % 11% 12% 16% Accounts Payable / Sales % 8% 10% 7% Net (AR + Invent
Slide 54: Historical Condensed Cashflow Statement
Historical Condensed Cashflow Statement 2013 Actual 2014 Actual 2015 Actual Income before income taxes 184 203 138 Provision for income taxes 66 70 53 Net Income 118 133 85 DD&A 33 33 35 Deferred income taxes 2 2 10 Gain on sale of assets 11 1 4 Changes in inventory (20) (29) (25) Changes in AR (11)
Slide 55: Capital Structure Allows Flexibility for Focused, Returns Driven Growth
▪ Conservative capital structure to maintain financial and strategic flexibility ▪ Initial leverage ratio of 2.5x (1) ▪ Termed debt to broaden maturity profile ▪ Working capital efficiency Capital Structure Allows Flexibility for Focused, Returns Driven Growth Financial Objectives Leverage ratio per
Slide 56: Sources and Uses; Pro Forma Capitalization
Source and Uses Pro Forma Capitalization Source: Management projections, Form 10 Note: Please see appendices included at the end of this presentation for Ingevity's use of non - GAAP financial measures, definitions of those financial measures as well as the reconciliation to the nearest GAAP financi
Slide 57: 2016 Business Outlook
Near - Term Headwinds Near and Long - Term Tailwinds ▪ Continued strength of the U.S. dollar vs. foreign currencies ▪ Expansion capacity in place to supply demand growth ▪ On - going price weakness for crude oil ▪ Low oil drives auto sales ▪ Growth in vehicle sales volume due to underlying populatio
Slide 58: Oil Sensitivity
Oil Sensitivity Carbon Technologies Pavement Technologies ▪ Lower gas prices act as a stimulus for vehicle sales ▪ Limited impact on the cost of raw materials ▪ Lower oil prices translate to lower liquid asphalt prices ▪ Stimulate government spending on infrastructure Sensitivity Assessment Mitigant
Slide 59: 2016 Profitability Improvement Focus Areas
59 Ingevity 2016 Profitability Improvement Focus Areas • Executed reduction in force in February • Identified and executing SG&A cost reduction initiatives • Control public company costs • Supply chain n etwork optimization program • Negotiated raw materials savings • Reduce spending and match manuf
Slide 60: Modeling Guidance
Item FY16 Long Term Revenue $870 M to $910M Mid single digit growth Combined Adjusted EBITDA (1) $175M to $195M High single digit growth Tax 38% < 38% Capex $60M to $70M $40M to $50 M continuity (excludes growth / cost improvement) Free Cash Flow (1) $40M to $50M + >$100MM within 3 years *assumes no
Slide 61: Q&A
Q&A 61
Slide 62: Presenter biographies
Michael Wilson – President and Chief Executive Officer Mr. Wilson joined Ingevity in September 2015 from Albemarle Corporation, where he was executive vice president and president of their Performance Chemicals business. Michael served as president of Albemarle’s Catalyst Solutions business from 201
Slide 63: Appendix
Appendix 63
Slide 64: Non-GAAP Financial Measures
Non - GAAP Financial Measures 64 Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to the most directly comparable financial measure calculated in
Slide 65: Reconciliation of Net Income to Combined Adjusted EBITDA
Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non - GAAP) to Combined Adjusted EBITDA Margin (Non - GAAP) 65 (Year Ended December 31, 2015) In millions Pro Forma Adjustments Unaudited Pro Forma Net income (GAAP) $ 85 $ 7 (A) $ 93 Provision for income taxes 53 1 (D) 53 Interest exp
Slide 66: Notes to the Unaudited Pro Forma Adjustments
Notes to the Unaudited Pro Forma Adjustments 66 For more information regarding the Ingevity’s unaudited pro forma combined statements of operations for the year ended December 31, 2015, see “Unaudited Pro Forma Combined Financial Statements” in Ingevity’s registration statement on Form 10 and amendm
Slide 67: Reconciliation of Net Income to Combined Adjusted EBITDA
Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non - GAAP) to Combined Adjusted EBITDA Margin (Non - GAAP) 67 In millions 2015 2014 2013 2012 2011 2010 Net income (GAAP) $ 85 $ 133 $ 118 $ 122 $ 114 $ 76 Provision for income taxes 53 70 66 67 59 38 Interest expense 21 16 13 12 12 1
Slide 68: Reconciliation of Segment Operating Profit to Segment EBITDA
Reconciliation of Segment Operating Profit (GAAP) to Segment EBITDA (Non - GAAP) 68 Source: Company information and Form 10 Performance Chemicals In millions 2015 2014 2013 Segment operating profit (GAAP) $ 87 $ 124 $ 126 Depreciation and amortization 24 23 23 Segment EBITDA (Non - GAAP) $ 111 $ 147
Slide 69: Historical Income Statement
2013 Actual 2014 Actual 2015 Actual Sales 980 1,041 968 COGS 685 718 687 Gross Profit 295 323 281 SG&A 103 112 114 Other (income) expense, net (5) (8) (9) Separation Costs 0 0 17 Interest Expense 13 16 21 Income before Tax 184 203 138 Tax Provision 66 70 53 Net Income 118 133 85 DD&A 33 33 35 Key Ra
Slide 70: Historical Balance Sheet
Historical Balance Sheet Source: Company information Note: Financial results presented on Form 10, carve out basis Assets Dec. 31, 2014 Dec. 31, 2015 Cash 20 32 Accounts Receivable, net 108 96 Inventory, net 130 151 Prepaids & other current assets 13 20 0 0 Current Assets 271 299 PP&E 410 438 Goodwi