Avient Corporation · NYSE:AVNT
Avient — PolyOne — Global High Yield & Leveraged Finance Conference 2020
65 slides from Avient's conference presentation, Feb 24, 2020
Slide 1: Global High Yield & Leveraged Finance Conference
GLOBAL HIGH YIELD & LEVERAGED FINANCE CONFERENCE FEBRUARY 2020
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS In this presentation, statements that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or for
Slide 3: Use of Non-GAAP Measures
USE OF NON-GAAP MEASURES • This presentation includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures include: adjusted EPS, adjusted operating income, and return on invested capital. • PolyOne’s chief operating decisio
Slide 4: Vision and Core Values
VISION CORE VALUES To To be be the the world’s world’s premier premier provider provider of of Collaboration Innovation Excellence specialized polymer specialized polymer materials, materials, services services and and solutions solutions Commercial Excellence Operational Excellence Globalization PE
Slide 5: Safety First
SAFETY FIRST Injuries per 100 Workers 1.3 Spartech Acquisition 1.1 1.1 0.97 0.85 0.84 0.74 0.74 0.69 0.65 0.57 0.56 0.54 0.51 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 PolyOne Corporation 5
Slide 6: Commodity to Specialty Transformation
COMMODITY TO SPECIALTY TRANSFORMATION Volume Value Transformation The Future • Volume driven, • Shift to value-based • Accelerated growth commodity selling & an innovative with world class production culture vitality index • Landmark portfolio • Heavily tied to cyclical • New leadership team • Signi
Slide 7: PolyOne
POLYONE 2019 REVENUE | $2.9 BILLION Segment End Market Geography Transportation Distribution Specialty 15% Healthcare Engineered United States 41% 15% Europe Materials 54% 19% 25% Appliance 3% Textiles Industrial 5% 14% Asia 11% Electrical & Electronics 6% Building & Construction Packaging Latin 6%
Slide 8: Proof of Performance: Adjusted EPS Expansion
PROOF OF PERFORMANCE ADJUSTED EPS EXPANSION $1.69 10 $1.51 CONSECUTIVE YEARS PolyOne Corporation 8
Slide 9: Sustainable Path to Double-Digit EPS Growth
SUSTAINABLE PATH TO DOUBLE-DIGIT EPS GROWTH Repurchase 600K-1M Double digit shares annually Innovate and develop new annual EPS technologies and services growth Expand specialty portfolio with strategic acquisitions Enhance efficiencies through Lean Six Sigma Double acquired and commercial excellenc
Slide 10: Expansion of Commercial Resources Driving Growth
EXPANSION OF COMMERCIAL RESOURCES D R I V I N G G R O W T H $4.0 880 $3.5 $3.2 Total + 9% 663 Total + 33% $2.9 $2.9 + 10% 208 504 + 32% 1,042 164 + 27% 130 + 26% 710 Organic 531 Organic + 5% + 47% + 7% + 34% 2014 2018 2019E PF* 2015 2016 2017 2018 2019E PF* 2019E PF R&D / Technical Marketing Sales R
Slide 11: The Evolving Customer Relationship
THE EVOLVING CUSTOMER RELATIONSHIP Traditional Path Customer Strategic Accounts/ Business Service Field Sales Development Expanded Path Lead Web and Social Inside Sales Specialists Media PolyOne Corporation 11
Slide 12: Expanded Path: Adding Customer Touchpoints
EXPANDED PATH ADDING CUSTOMER TOUCHPOINTS Investments in digital and dedicated inside sales to improve customer experience 110% increase in leads (from 6,000 to 12,700) driven by website, phone, and online chat Inside sellers Inside sales/digital revenue 33 $87M 4 $11M 2014 2019 2014 2019 PolyOne Co
Slide 13: Aligning with Trends for Growth
ALIGNING WITH TRENDS FOR GROWTH TRANSPORTATION PACKAGING HEALTHCARE CONSUMER Facilitate Reduce Reduce Light- alternative Improve packaging spread of weighting energy recyclability materials infection solutions PolyOne Corporation 13
Slide 14: Revenue from Sustainable Solutions
REVENUE FROM SUSTAINABLE SOLUTIONS Lightweighting Reduced Material Requirements Improved Recyclability Renewable Energy Applications Eco-conscious Bio-derived Content Reduced Energy Use VOC Reduction $410M 14% Total Annual Growth $355M $325M 9% Organic Annual Growth $275M 2016 2017 2018 2019 PolyOne
Slide 15: Innovation
INNOVATION Innovation comes from Research & Development Spend ($ millions) $51 Customization 55% $20 2006 2019 Vitality Index % of sales from products launched last 5 years M&A 37% 30% Innovation Pipeline 12% 15% 2006 2019 PolyOne Corporation 15
Slide 16: Horizons of Development
3 HORIZONS OF DEVELOPMENT INNOVATION Market Create new Transformational markets, target Opportunity for Growth Fiber-Line new customer Through M&A needs ColorMatrix – Liquid Color & Additives Gordon Composites/ Polystrand – Composites Service adjacent Adjacent Opportunity for GLS – Thermoplastic Ela
Slide 17: Innovation Spotlight: Composites
INNOVATION SPOTLIGHT: COMPOSITES PolyOne Corporation 17
Slide 18: Composite Materials
COMPOSITE MATERIALS Focused End Markets • Wire & Cable / Electrical • Consumer • Transportation • Industrial Fibers Polymers Glass Thermosets Carbon Aramid Thermoplastics PolyOne Corporation 18
Slide 19: Composites Portfolio
COMPOSITES PORTFOLIO DIVERSE CAPABILITIES AND SOLUTIONS SERVING MANUFACTURERS AND OEMS LFT Tapes Laminates/Panels Shapes Pultrusion Engineered Fibers PolyOne Corporation 19
Slide 20: PolyOne Applications in Fiber Optic Cables
POLYONE APPLICATIONS IN FIBER OPTIC CABLES 3. Optical fibers –Two parts of an optical fiber: core (carries the signal and cladding Fiber-Line Product 1. Loose buffer tube – made of PBT, PTFE, Nylon 12, PP or other (reflects the signal to move it forward). Both parts are made of silica/glass or polym
Slide 21: Fiber Optical Growth Drivers
FIBER OPTICAL GROWTH DRIVERS 5G technology will be a leading growth driver in fiber optic cable for several years 5G vs. 4G 5G Networks Enable lower latency, greater flexibility & efficiency 10x Installation of these networks are in the very early stages Speed Increase Installation will start
Slide 22: Invest-to-Grow M&A Strategy
INVEST-TO-GROW M&A STRATEGY Safety Technology Geography Service People Financial Low EH&S New and Leverage our Strong Motivated team Foundational risk profile complementary global footprint customer with a specialty operating technologies relationships culture margins of 8-10% with ability to double
Slide 23: Invest-to-Grow M&A Playbook
INVEST-TO-GROW M&A PLAYBOOK Invest in commercial resources 18-20% Innovate with operating Implement LSS to combined margins drive efficiency portfolio improvements Leverage Safety Retain PolyOne’s employees global reach First! Capture Cross-sell Protect customers sourcing & blend Phase 3 synergies t
Slide 24: Invest-to-Grow Proof of Performance
INVEST-TO-GROW PROOF OF PERFORMANCE Established Acquisitions (> 7 years) Commercial Operating Operating Resources Income Margins ($ in millions) 309 19% $100 + 20% + 165% + 1000 bps 256 $36 9% At Acquisition Today At Acquisition Today At Acquisition Today PolyOne Corporation 24
Slide 25: Clariant Masterbatch Acquisition Drives Next Level Specialty Transformation
CLARIANT MASTERBATCH ACQUISITION DRIVES NEXT LEVEL SPECIALTY TRANSFORMATION ACCELERATING GROWTH WITH SUSTAINABLE SOLUTIONS
Slide 26: Transformation Headlines
TRANSFORMATION HEADLINES PolyOne Corporation 26
Slide 27: Fit with Four Pillar Strategy
FIT WITH FOUR PILLAR STRATEGY Specialization Globalization • Innovation-led organization with • Diverse geographic portfolio with heavy emphasis on R&D an established presence in every • World-class expertise in color major region formulation • Expands PolyOne’s ability to serve • Strong presence in
Slide 28: End Market Transformation
END MARKET T R A N S F O R M A T I O N Percentage of Total Revenue Building & Construction High Growth End Markets 50% 38% 20% 22% Packaging 18% 8% Consumer 5% 10% 12% 4% Healthcare 2006 2019E PF* 2006 2019E PF* * 2019E Pro Forma for PP&S Divestiture and Clariant Masterbatch business PolyOne Corpora
Slide 29: End Market Transformation
END MARKET T R A N S F O R M A T I O N 2006 2019E PF* Healthcare 4% Healthcare 12% Textiles Electrical & Packaging Appliance 6% Electronic 8% 7% 3% Electrical & Industrial Electronic 10% 5% Consumer 10% Packaging Industrial 20% 12% Wire & Cable 11% Wire & Transportation Cable 12% 6% Building & Const
Slide 30: Complementary Geographic Presence
COMPLEMENTARY G E O G R A P H I C PRESENCE Net Sales by Geographic Region Color & Engineered Clariant Masterbatch Pro Forma Color & Materials Business Engineered Materials United States United States 22% 31% United States 38% Europe Europe & 33% Middle East Europe & 39% Middle East Latin America 48%
Slide 31: Unified Focus on Sustainability
UNIFIED FOCUS ON SUSTAINABILITY Clariant Masterbatch PolyOne Business • Uses packaging additives & • Building mini-recycling plants to colorants to improve recyclability facilitate customer projects on and enhance automated sorting design for recycling - CycleWorks • Combines UV-blocking additive •
Slide 32: PolyOne + Clariant Masterbatch Business
POLYONE + CLARIANT MASTERBATCH BUSINESS PolyOne Clariant Color & New (Continuing Additive Masterbatch Synergies PolyOne Operations) Business ($ in millions) 2019 Total Sales $2,863 $1,150 $4,013 2019 Adjusted EBITDA $309 $130 $60 $499 % Margin 10.8% 11.3% 12.4% 2019 CapEx $68 $85 % Sales 2.4% 2.1% 2
Slide 33: Over 85% of Adjusted EBITDA from Specialty
OVER 85% OF ADJUSTED EBITDA FROM SPECIALTY 100% % of Adjusted EBITDA* 80% 60% 87% 40% 66% 20% 46% 7% 0% 2005 2010 2015 2019E PF ** Specialty EBITDA $14M $117M $273M $500M JV's Performance Products & Solutions Distribution Specialty * Adjusted EBITDA is EBITDA excluding corporate costs and special it
Slide 34: Transaction Overview
TRANSACTION OVERVIEW Transaction • $1.45 B net purchase price Value • Represents 11.1x adjusted EBITDA (excluding synergies), 7.6x adjusted EBITDA (including synergies) • Pre-tax synergies of $60MM expected to be fully realized by the end of 2023 Synergies • Synergies realized from sourcing, operati
Slide 35: Significant Synergy Opportunities
SIGNIFICANT SYNERGY OPPORTUNITIES • Expect EBITDA synergies of $60MM – Proven integration expertise with a decade of acquisition experience $60MM – Administrative synergies reflect reduction of duplicative internal and third-party costs Administrative 30% • Run rate synergies of $20MM by the end of
Slide 36: Attractive Financing Structure
ATTRACTIVE FINANCING STRUCTURE • $465 million of cash from the balance sheet expected to fund a portion of the purchase price • Bridge financing for remainder fully committed from Citi, Morgan Stanley and Wells Fargo • Permanent financing expected to include a combination of long-term debt and new e
Slide 37: PolyOne Corporation
PolyOne Corporation 37
Slide 38: Returning Cash to Shareholders
RETURNING CASH TO SHAREHOLDERS OVER $1.2 BILLION SINCE 2011 Cumulative Share Repurchases Increasing Annual Dividend (In millions) $917M $0.81 $900 $0.78 $0.70 $750 $0.54 $600 $0.48 $0.40 $450 $0.32 $300 $0.24 $0.20 $0.16 $150 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2
Slide 39: Why Invest in PolyOne?
WHY INVEST IN POLYONE? THE NEW POLYONE: A SPECIALTY GROWTH COMPANY Transformational M&A with PP&S divestment and pending acquisition of Clariant Masterbatch business Growing leadership position in attractive markets Innovation, technology and service are differentiators Capital management is
Slide 40: Service: The Timeless Differentiator
SERVICE: THE TIMELESS DIFFERENTIATOR PolyOne Corporation 40
Slide 41: Talent Development
TALENT DEVELOPMENT Campus Hires PolyOne LSS Blackbelts Leadership Program Participants 2008 0 2008 0 2012 0 2013 47 2011 25 2011 67 2014 86 2014 47 2014 147 2015 125 2017 90 2019 2016 169 134 247 2019 2019 412 PolyOne Corporation 41
Slide 42: IQ Design
IQ DESIGN Computer Industrial Design Aided Design Strategy Engineering A UNIQUE CUSTOMER EXPERIENCE Designers & Opportunity funnel Total Revenue Engineers $87M $15M 15 3 $4M $0 2014 2019 2014 2019 2014 2019 PolyOne Corporation 42
Slide 43: LSS Customer First
LSS CUSTOMER FIRST Enables sales growth by building more intimate customer relationships, giving us insight to customers’ needs, with a service that is not easily replicated Customer Engagements 2014 2019 2 210 PolyOne Corporation 43
Slide 44: Segment Highlights
SEGMENT HIGHLIGHTS INNOVATING WITH POLYONE PolyOne Corporation 44
Slide 45: Color, Additives & Inks: End Markets & Solutions
COLOR, ADDITIVES & INKS END MARKETS & SOLUTIONS Packaging Industrial 31% 14% Solid Liquid Textiles 13% Colorants Colorants Electrical & Electronics 1% Appliances 2% Wire & Cable Healthcare 10% 5% Transportation 7% Consumer Building & Construction 8% 9% Performance Screen Additives Printing Inks Poly
Slide 46: Color, Additives & Inks
COLOR, ADDITIVES & INKS 2019 REVENUE | OVER $1 BILLION Revenue by Region Operating Income & Margin 14.7% 12.2% $147 Canada 1% Europe 34% United States Asia 5.5% $104 44% 15% Mexico 3% 0.9% South America 3% $25 $4 2005 2009 2013 2019 PolyOne Corporation 46
Slide 47: Specialty Engineered Materials: End Markets & Solutions
SPECIALTY ENGINEERED MATERIALS END MARKETS & SOLUTIONS Telecommunications (FOC) 13% Consumer 19% Wire & Cable 15% Appliance 2% Transportation 14% Building & Construction Engineered Advanced Thermoplastic 2% Formulations Composites Elastomers Packaging 6% Electrical & Electronics Industrial 12% 8% He
Slide 48: Specialty Engineered Materials
SPECIALTY ENGINEERED MATERIALS 2019 REVENUE | $750 MILLION Revenue by Region Operating Income & Margin 11.6% 9.3% Canada $87 2% Europe 27% Asia United 17% 5.1% States $57 54% $21 0.1% 2005 2009 2013 2019 PolyOne Corporation 48
Slide 49: Distribution
DISTRIBUTION END MARKETS & SUPPLIERS 2019 Revenue | $1.2 Billion Operating Income & Margin 6.3% 5.9% Transportation Healthcare 23% $75 28% 4.0% $63 Wire & Cable 1% 2.9% Packaging 2% Industrial Building & 19% Construction $25 4% $20 Electrical & Electronics 5% Appliance Consumer 6% 12% 2005 2009 2013
Slide 50: Overview of Raw Material Purchases
OVERVIEW OF RAW MATERIAL PURCHASES Performance Additives 15% Other Raw Materials 31% Polyethylene 13% Plasticizers 3% Pigments 9% Dyestuffs 4% Nylon Polypropylene 7% 5% TiO2 Styrenic Block 6% Copolymer 7% $900 million of raw material purchases in 2019 excluding Distribution business Note: All figure
Slide 51: Target End Markets & Application Examples
TARGET END MARKETS & APPLICATION EXAMPLES PolyOne Corporation 51
Slide 52: Target End Markets: Healthcare
Target End Markets… Healthcare Structural Composites Elastomeric Grips and Handles Antimicrobial Technologies Thermally Conductive Technologies Anti-Counterfeiting Technologies Catheter Technologies Chemical Resistant Technologies Polymer Colorants
Slide 53: Target End Markets: Automotive
Target End Markets… Automotive Roof Systems Interior Structural Components Exterior / Interior Trim Seals & Flaps Fasteners Lighting Under-hood Components Electronics and Cameras Braces & Brackets Air Management Sound & Vibration Management
Slide 54: Target End Markets: Consumer
Target End Markets… Consumer Elastomeric Grips and Handles Polymer Colorants Thermally Conductive Components Structural Composite Components
Slide 55: Target End Markets: Packaging
Target End Markets… Packaging UV Light Barrier Technologies Cap & Closure Colorants Laser Marking Additives Oxygen Scavenger Technologies Antistatic Technologies Process Optimization Technologies Antioxidant Technologies Density Modified Technologies
Slide 56: Luxury Packaging
GravitechTM Density Modified Polymers Luxury Packaging Impart weight, sound and metallic finish to caps and closures for cosmetics and spirits applications Elevate quality and prestige perceptions among high-end consumers Eliminate time and cost associated with secondary operations and assembl
Slide 57: Optimize Color Usage
OnColorTM Super Concentrates Optimize Color Usage Eliminate costs by increasing pigment density Enhance color performance without altering form and formulation Increase design capabilities by reducing weight and layer thickness
Slide 58: Combat Bacteria Formation
WithStandTM Antimicrobial Technology Combat Bacteria Formation Inhibit microbial growth on polymer surfaces Enhance value or products and devices Highly versatile concentrate with the ability to be incorporated into a wide variety of products
Slide 59: Medical Device Housings
Chemically Resistant Engineered Polymers Medical Device Housings Durable, long-lasting products stand up to the most aggressive disinfectants Minimize environmental stress cracking and discoloration One of the broadest medically approved polymer and colorant portfolios
Slide 60: Color & Design Services
Color & Design Services Greater control of color development and supply chain Work across entire design process from concept to commercialization Inspire creativity in the use of polymer materials, colors, and effects Innovative brand differentiation Faster development timelines
Slide 61: Outdoor Applications
Outdoor Applications Leading provider of high performance specialty materials for the recreational and sports & leisure industry Well positioned across all segments to address market needs Metal to Polymer Conversion Lightweighting Thermal Management Impact Performance
Slide 62: Fiber Colorants
Fiber Colorants ColorMatrix Fiber Colorant Solutions Proprietary advanced liquid color formulations and equipment enable greater efficiency and productivity Eliminates aqueous dyeing and its associated wastewater treatment Solid Color Concentrates Extrusion-spun fibers colored via solid ma
Slide 63: PolyOne Corporation
PolyOne Corporation 63
Slide 64: Reconciliation of Non-GAAP Financial Measures (Unaudited)
Reconciliation of Non-GAAP Financial Measures (Unaudited) (Dollars in millions, except per share data) ‘Senior management uses comparisons of adjusted net income from continuing operations attributable to PolyOne shareholders and diluted adjusted earnings per share (EPS) from continuing operations a
Slide 65: Reconciliation of Non-GAAP Financial Measures (Unaudited)
Reconciliation of Non-GAAP Financial Measures (Unaudited) (Dollars in millions) Adjusted EBITDA is calculated as follows: Reconciliation of Adjusted EBITDA: 2019 Interest expense, net 59.5 Income tax expense 33.7 2019
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