Element Solutions Inc. · NYSE:ESI
Element Solutions — Platform Specialty Products — Investor Day (September 2016)
161 slides from Element Solutions's investor day presentation, Sep 12, 2016
Slide 1: 2016 Investor and Analyst Day
2016 Investor and Analyst Day September 12, 2016
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 For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are i
Slide 4: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 3
Slide 5: Chairman's Update
CHAIRMAN’S UPDATE Welcome and Introduction Leadership and Progress Update $600m Series B Preferred Update − Convertible in October 2016 for 22.1 million shares plus cash make-whole which has a current value of ~$400m(1) (for total value of $600m) − Alternative Option 1: Defer until up to April
Slide 6: Strategic Asset Value Considerations
STRATEGIC ASSET VALUE CONSIDERATIONS 14.8x 14.5x 12.9x 12.5x 13.0x 12.3x 11.8x Trading Comparables(1) x2016F EBITDA American Scotts Miracle- FMC Ecolab Newmarket Albemarle(2) Quaker Vanguard Gro 16.6x 16.3x 15.8x 15.8x 15.8x 11.7x Transaction Comparables xLTM Adj. EBITDA(3) ChemChina / Bayer / FMC /
Slide 7: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 6
Slide 8: Agenda: State of the Company
AGENDA State of the Company Platform Overview How Did We Get Here Revisiting the Platform Thesis Strategic Objectives 7
Slide 9: Platform Comparable Financial Overview (Non-GAAP)
PLATFORM COMPARABLE FINANCIAL OVERVIEW (NON-GAAP) 2015 Sales: $3.6bn Adj. EBITDA: $742m Employees: ~8,500 $741mm $955 mm $948 mm Performance Agricultural Solutions Solutions Sales: $1.8 bn Sales: $1.8bn Adj. EBITDA: Adj. EBITDA: $407m(1) $382m (1) $687 mm $289 mm Employees: ~4,500 Employees: ~4,000
Slide 10: Performance Solutions "MPS" Overview
PERFORMANCE SOLUTIONS “MPS” OVERVIEW $1.8bn 2015 Comparable Sales $407m 2015 Comparable Adj. EBITDA INDUSTRIAL SOLUTIONS ELECTRONIC SOLUTIONS GRAPHIC SOLUTIONS OFFSHORE SOLUTIONS Corrosion resistance Circuit board metallization Solder paste Flexographic Temperature and PRODUCTS Decorativ
Slide 11: Growth Trends in Electronics
GROWTH TRENDS IN ELECTRONICS ESTIMATED GROWTH IN ELECTRONICS MARKET SELECTED HIGH GROWTH PRODUCT SECTORS IN ELECTRONICS ($ in billions) Overall: 2015 2.7% CAGR Product Market 5 Year MPS $2,500 Sector ($Bn) CAGR Opportunity 2-in-1 $38 20% Semiconductor plating, Personal Circuit board chemicals, Compu
Slide 12: Automotive Electronic Growth Opportunity
AUTOMOTIVE ELECTRONIC GROWTH OPPORTUNITY PRIMARY TRENDS BENEFITING MPS GROWTH PERFORMANCE SOLUTIONS MARKET CATEGORIES Automotive unit growth outpaces GDP Electronics content per vehicle grows 5-8% CAGR Electrical content in new vehicles is much more complex than existing circuitry. MPS special
Slide 13: MacDermid Performance Solutions - Growth in Industry Context
MACDERMID PERFORMANCE SOLUTIONS - GROWTH IN INDUSTRY CONTEXT 2015 – 2020 INDUSTRY CAGR DRIVERS OF MPS OUTPERFORMANCE Assembly Electronics Equipment: 2.7% New materials with quantified value propositions for leading OEMs in printed electronics, auto, mobile device, power modules, solar, and LED Ele
Slide 14: Agricultural Solutions "Arysta" Overview
AGRICULTURAL SOLUTIONS “ARYSTA” OVERVIEW $1.8bn 2015 Comparable Sales $382m 2015 Comparable Adj. EBITDA FUNGICIDES HERBICIDES INSECTICIDES BIOSOLUTIONS SEED-TREATMENT KEY PRODUCTS SALES BY CROP SALES BY CROP FOCUS SALES SALES BY BY PRODUCT PRODUCT SALES SALES BY BY GEOGRAPHY GEOGRAPHY Fungicides 2
Slide 15: Current Agricultural Industry Climate
CURRENT AGRICULTURAL INDUSTRY CLIMATE 1 WEAK COMMODITY PRICES (SINCE MID–2014) 2 INCREASING ACTIVE INGREDIENT COSTS Corn price since Jan 2014 Total Cost to Bring New AI to Market (in mill USD) 286 256 184 152 Jul-14 Jul-15 Jul-16 Jan-14 Nov-14 Jan-15 Nov-15 Jan-16 Sep-14 Sep-15 Mar-14 May-14 Mar-15
Slide 16: 30+ Years of Industry Growth
30+ YEARS OF INDUSTRY GROWTH $ billions of revenue 57 54 50 51 47 43 41 40 36 33 33 32 30 30 30 29 29 29 27 26 28 26 24 24 24 22 23 21 19 17 15 15 13 14 14 14 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2
Slide 17: Attractive Long-Term Agricultural Fundamentals
ATTRACTIVE LONG-TERM AGRICULTURAL FUNDAMENTALS DECLINING ARABLE LAND / CAPITA WEALTH EFFECT DRIVES PROTEIN CONSUMPTION Global Population Growth Projected Sources of Growth More Income – More Calories in Crop Production % of every new dollar spent on food World Population (bn) 10 100 8 Arable 80 6 Cr
Slide 18: Arysta's Long-Term Growth Objectives
ARYSTA’S LONG-TERM GROWTH OBJECTIVES AG MARKET ARYSTA’S PRIMARY FOCUS MARKETS $91bn $54bn $13bn $18bn Total Crop Protection Primary Focus Primary Focus Agricultural Markets Addressable Markets Market(1) (2015) (2021) Market(1) Crop Protection Proprietary Off Patent Crop Establishment Plant Stress GM
Slide 19: Platform & the Business Units
PLATFORM & THE BUSINESS UNITS Governance Strategy & Execution Commercial Public Company Audit & Compliance R&D Requirements Shared Services Supply Chain and Operations Objectives & Incentives Risk Management Capital Allocation Leadership & HR Strategy 18
Slide 20: Leadership Structure
LEADERSHIP STRUCTURE Chairman Chief Executive Officer Martin E. Franklin Rakesh Sachdev President EVP Operations President Agricultural Solutions Chief Financial Officer General Counsel and Strategy Performance Solutions Diego Lopez Sanjiv Khattri John Capps Benjamin Gliklich Scot Benson Casanello 1
Slide 21: Agenda: State of the Company
AGENDA State of the Company Platform Overview How Did We Get Here Revisiting the Platform Thesis Strategic Objectives 20
Slide 22: Platform Strategic Timeline
PLATFORM STRATEGIC TIMELINE 2013 2014 2015 2016 CAS Acquisition Arysta Acquisition − ~$1.0 billion − ~$3.5 billion − Closed: Nov 2014 − Closed: Feb 2015 Agricultural Solutions Agriphar Acquisition − ~€300 million − Closed: Oct 2014 MacDermid Acquisition OMG Acquisitions OMG Malaysia Acqu
Slide 23: Performance Solutions Build Up
PERFORMANCE SOLUTIONS BUILD UP Global Addressable Market: ~$15bn Current Addressable Market: ~$ 8bn Asset-Lite Offshore High-Touch Assembly Materials Graphics Electronic Chemicals Industrial Surface Treatment Memory Disk Complementary portfolio across large and diverse end-markets Source: Management
Slide 24: Agricultural Solutions Build Up
AGRICULTURAL SOLUTIONS BUILD UP Global Addressable Market: ~$54bn Global Western Proprietary European Asset-Lite Regional High-Touch Proprietary Off-Patent Off-Patent Crop Protection BioSolutions Seed Treatment Complementary portfolio across large and diverse end-markets Source: Management estimates
Slide 25: Platform GAAP Financial Performance
PLATFORM GAAP FINANCIAL PERFORMANCE GAAP SALES (2012–2015) REPORTED SEGMENT ADJ. EBITDA (1) (2012 – 2015) ($ in millions) ($ in millions) 568 2,542 343 212 162 153 16 196 224 27 1,741 2012 1/1-10/31 Inception - 2014 2015 2013 12/31 2013 MacDermid acquisition CAPEX (INCLUDING REGISTRATION RIGHTS) clo
Slide 26: Platform Financial Performance
PLATFORM FINANCIAL PERFORMANCE COMPARABLE SALES (2012–2015)(1) COMPARABLE ADJ. EBITDA (2012–2015)(1)(2) ($ in millions) Constant ($ in millions) Constant Currency Currency 4,082 4,154 4,161 (1)% (1)% 847 816 3,620 745 742 2,044 2,162 2,171 438 441 1,829 382 358 2,038 1,992 1,990 408 1,791 363 375 38
Slide 27: Compelling Cash Flow Conversion
COMPELLING CASH FLOW CONVERSION COMPARABLE ADJ. EBITDA – CAPEX (% of ADJ. EBITDA)(1)(2) ($ in millions) Cash Conversion (%)(3) 900 160% 735 750 727 630 617 120% 600 450 89% 87% 80% 83% 85% 300 40% 150 0 (5) 0% (5) 2012 (4) (5) 2013 2014 2015 EBITDA-CapEx (EBITDA-CapEx)/EBITDA Asset-Lite / High-Touch
Slide 28: 2016 Adjusted EBITDA Guidance (Non-GAAP)
2016 ADJUSTED EBITDA GUIDANCE (NON-GAAP) 2016 ADJUSTED EBITDA GUIDANCE: $735 – $775 MILLION(1) ($ in millions) 800 775 780 760 ~10 740 722 720 735 700 680 ~$23 million to mid-point 660 640 620 600 1H Annualized 2H Incremental Organic Growth FX Tailwind 2016 Guidance Synergies (net of price) 1H 2016
Slide 29: Observations and Assessment
OBSERVATIONS AND ASSESSMENT STRENGTHS CHALLENGES & OPPORTUNITIES Diversified global portfolio of high-quality specialty Ag markets impacted by lower commodity prices and a chemical businesses challenging FX environment Healthy blend of stable (electronics, automotive, − Platform’s Ag business
Slide 30: Agenda: State of the Company
AGENDA State of the Company Platform Overview How Did We Get Here Revisiting the Platform Thesis Strategic Objectives 29
Slide 31: Review of the Platform Thesis
REVIEW OF THE PLATFORM THESIS We aspire to build a leading, global diversified specialty chemicals company focused on “Asset-Lite, High-Touch” businesses Our ability to drive shareholder value relies on: 1. Existence of large and fragmented end-markets with growing product categories 2. Availabi
Slide 32: Large and Attractive Specialty Chemical End-Markets
LARGE AND ATTRACTIVE SPECIALTY CHEMICAL END-MARKETS Platform Specialty Products Flavors Coatings Water Market Assembly Surface Electronic Offshore Specialty Oilfield Treatment Packaging & (Niche Materials Treatment Materials Specialty Agricultural Chemicals & Cleaning Segment: Fragrances Application
Slide 33: Agenda: State of the Company
AGENDA State of the Company Platform Overview How Did We Get Here Revisiting the Platform Thesis Strategic Objectives 32
Slide 34: Platform's Long-Term Objectives
PLATFORM’S LONG-TERM OBJECTIVES 1 Portfolio of high-quality and differentiated businesses 2 Leading positions in our priority markets 3 Organic sales growth faster than end-markets we serve 4 Healthy and flexible balance sheet 5 Best-in-class margins and returns on invested capital Platform’s long-t
Slide 35: Winning Strategies – MacDermid Performance Solutions
WINNING STRATEGIES – MACDERMID PERFORMANCE SOLUTIONS ORGANIC REVENUE GROWTH PATH Become integral: products and people without which the supply chain breaks down Two-pronged selling strategy − Strategic OEM relationships which leverage market leading position across several complementary portions
Slide 36: Winning Strategies – Arysta LifeScience
WINNING STRATEGIES – ARYSTA LIFESCIENCE ORGANIC REVENUE GROWTH PATH Focus on fast-growing niche segments where Arysta can lead with differentiated solutions Continue to be a favored post-patent partner given formulation and regulatory expertise Leverage our access to active ingredients via tec
Slide 37: Strategic Priorities – Platform Corporate
STRATEGIC PRIORITIES – PLATFORM CORPORATE Tax Planning − Tax strategy and planning is a critical priority − Structural changes are underway to drive meaningful improvement in cash taxes paid over the next several years Treasury Management − Improvements in working capital efficiency will drive s
Slide 38: Strategic Organic Long-Term Goals
STRATEGIC ORGANIC LONG-TERM GOALS Ag Solutions LONG-TERM CAGR: ~5% AVERAGE Platform CAGR: SALES Perf Solutions ~4% GROWTH CAGR: 3 – 4% High Single Digit Adj. EBITDA Growth CAGR Adj. EBITDA COGS Reduction: Margin FIVE YEAR ~200 bps Expansion: OPERATING Goal to achieve LEVERAGE Mid-Single Digits Debt
Slide 39: Guiding Principles
GUIDING PRINCIPLES TODAY IN CONTEXT Achieve 2016 financial commitments – EBITDA & CF On track to realize $150M of acquisition synergies Platform Path to Value Over the plan period, organically grow revenues above our Achieve Creation end markets - in the mid-single-digit range Financial Achi
Slide 40: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 39
Slide 41: Performance Solutions
Performance Solutions Overview Market Growth Strategy in Action Our Competitive Advantage Financial Performance 40
Slide 42: A Combination of High Quality Businesses
A COMBINATION OF HIGH QUALITY BUSINESSES MACDERMID PERFORMANCE SOLUTIONS Acquired Oct. 2013 OM Group Assets Acquired Oct. 2015 / Jan. 2016 Acquired Dec. 2015 41
Slide 43: MacDermid Performance Solutions Overview
MACDERMID PERFORMANCE SOLUTIONS OVERVIEW 50+ Countries 14,000+ Customers Served ~4,500 Employees Oil & Gas Consumer Automotive Consumer Mobile Exploration & Electronics Packaged Goods Communications Construction Production Automotive Food Automotive Consumer Electronics Medical
Slide 44: Diversified Revenue Base & Durable Margins
DIVERSIFIED REVENUE BASE & DURABLE MARGINS FIGURES PRESENTED ON A COMPARABLE BASIS APPROXIMATE REVENUE BY VERTICAL (2015) RELATIVE GROSS MARGIN BY VERTICAL (2015) 5% >45% 10% 30% 25% MPS ~45% Average 30% <45% Alpha ES IS Graphics Offshore GROSS PROFIT AND % MARGIN (2012–2015) ($ in millions) (% marg
Slide 45: Alpha Assembly Solutions
ALPHA ASSEMBLY SOLUTIONS OVERVIEW Assembly Industrial Electronics Graphics Offshore ASSEMBLY CONSUMABLES END MARKETS ~$2.7bn market INDUSTRY Specialty metal alloys, chemicals, and polymers for electronics assembly ■ Solder Paste 34% Electronics component assemblers and related supply chain ■ Bar 3
Slide 46: Alpha Assembly Footprint
ALPHA ASSEMBLY FOOTPRINT Naarden, Netherlands Manufacturing Siheung-city, S. Korea Altoona, PA Manufacturing, Service Manufacturing S-Hertogenbosch, Netherlands, Mfg Laboratory Hiratsuka, Japan R&D Laboratory Shenzhen, China Manufacturing Chennai, India Dunaharaszti, Hungary Manufacturing Shanghai,
Slide 47: MacDermid Enthone Industrial Solutions
MACDERMID ENTHONE INDUSTRIAL SOLUTIONS OVERVIEW Assembly Industrial Electronics Graphics Offshore INDUSTRY INDUSTRIAL SPECIALTY FINISHING END MARKETS ~$1.6bn Market Chemical formulations for surface treatment Automotive, household sanitary fixtures and industrial parts ■ Automotive 43% Most manu
Slide 48: Industrial Solutions Footprint
INDUSTRIAL SOLUTIONS FOOTPRINT New Hudson, MI Langenfeld, Germany Norrköping, Sweden R&D, Service Laboratory Manufacturing, R&D, Service Laboratory Suzhou City, China Maple Plain, MN Service Laboratory Manufacturing, Manufacturing Service Laboratory den Bosche Netherlands Manufacturing, Service Labo
Slide 49: MacDermid Enthone Electronics Solutions
MACDERMID ENTHONE ELECTRONICS SOLUTIONS OVERVIEW Assembly Industrial Electronics Graphics Offshore ELECTRONICS SPECIALTY CHEMICALS END MARKETS INDUSTRY ~$2.3bn Market Chemistry formulations for circuitry and Si wafers Printed Circuit Boards and semiconductor packaging PCB - ■ 46% Semiconductor w
Slide 50: Electronics Solutions Footprint
ELECTRONICS SOLUTIONS FOOTPRINT New Hudson, MI R&D, Service Laboratory West Haven, CT Kyungki-Do, S. Korea R&D Laboratory Glenrothes, UK Service Laboratory Bridgeview, IL Manufacturing Kawasaki, Japan Manufacturing Birmingham, UK Service Laboratory Manufacturing, R&D, Maple Plain, MN Service Laborat
Slide 51: MacDermid Graphics Solutions – Overview
MACDERMID GRAPHICS SOLUTIONS – OVERVIEW OVERVIEW Assembly Industrial Electronics Graphics Offshore GRAPHIC CONSUMABLES END MARKETS INDUSTRY ~$1.0bn Market Consumables to transfer ink in printing operations Consumer-level food packaging Newspaper printing ■ Corrugated 43% Industrial packaging a
Slide 52: Graphic Solutions Footprint
GRAPHIC SOLUTIONS FOOTPRINT Morristown, TN Manufacturing Wigan, UK Manufacturing, Sales / Service Laboratory Cernay, France Sales / Service Laboratory Middletown, DE Manufacturing Hiratsuka (Tokyo), Japan Sales / Service Laboratory Tlalnepantla de baz, Wantage, UK Mexico Manufacturing, Sales / Sales
Slide 53: MacDermid Offshore Solutions – Overview
MACDERMID OFFSHORE SOLUTIONS – OVERVIEW OVERVIEW Assembly Industrial Electronics Graphics Offshore OFFSHORE SPECIATLY FLUIDS END MARKETS INDUSTRY ~$0.2bn Market Environmentally friendly water-based fluids for subsea valve control Offshore oil and natural gas exploration and production Americas,
Slide 54: Offshore Solutions Footprint
OFFSHORE SOLUTIONS FOOTPRINT Stavanger, Norway Service Laboratory Pasadena, TX Manufacturing, R&D, Service Laboratory Ghangzhou, China Service Laboratory Wigan, UK Manufacturing, R&D + Service Laboratory Singapore Service Laboratory Jandira, São Paulo, Brazil Takoradi, Ghana Manufacturing, Service S
Slide 55: Diverse End Markets
DIVERSE END MARKETS MOBILE AUTOMOTIVE OIL & GAS HOME CONSUMER 54
Slide 56: Experienced Management
EXPERIENCED MANAGEMENT Performance Solutions Scot Benson President, Performance Solutions 32 Years of Industry Experience Frank Monteiro COO, Performance Solutions 27 Years of Industry Experience Functional Leads Business Unit Leads Allan MacDonald Mark Fleiner Joe D’Ambrisi Mike Siegmund VP, Human
Slide 57: Performance Solutions
Performance Solutions Overview Market Growth Strategy in Action Our Competitive Advantage Financial Performance 56
Slide 58: Growth Trends in Electronics
GROWTH TRENDS IN ELECTRONICS ESTIMATED GROWTH IN ELECTRONICS MARKET SELECTED HIGH GROWTH PRODUCT SECTORS IN ELECTRONICS ($ in billions) Overall: 2015 2.7% CAGR Product Market 5 Year MPS $2,500 Sector ($Bn) CAGR Opportunity 2-in-1 $38 20% Semiconductor plating, Personal Circuit board chemicals, Compu
Slide 59: Automotive Electronic Growth Opportunity
AUTOMOTIVE ELECTRONIC GROWTH OPPORTUNITY PRIMARY TRENDS BENEFITING MPS GROWTH PERFORMANCE SOLUTIONS MARKET CATEGORIES Automotive unit growth outpaces GDP Electronics content per vehicle grows 5-8% CAGR Electrical content in new vehicles is much more complex than existing circuitry. MPS special
Slide 60: Key MPS Growth Initiatives
KEY MPS GROWTH INITIATIVES MARKET TREND GROWTH INITIATIVE Assembly Increasingly influential OEMs Sintered materials adopted in new products for increased reliability Novel chemistries and alloys Share gain in the automotive, mobile communication, LED, and power module markets Industrial Pl
Slide 61: MacDermid Performance Solutions - Growth in Industry Context
MACDERMID PERFORMANCE SOLUTIONS - GROWTH IN INDUSTRY CONTEXT 2015 – 2020 INDUSTRY CAGR DRIVERS OF MPS OUTPERFORMANCE Assembly Electronics Equipment: 2.7% New materials with quantified value propositions for leading OEMs in printed electronics, auto, mobile device, power modules, solar, and LED Ele
Slide 62: Performance Solutions
Performance Solutions Overview Market Growth Strategy in Action Our Competitive Advantage Financial Performance 61
Slide 63: MPS Strategic Objectives
MPS STRATEGIC OBJECTIVES Create the most responsive, innovative company in all the markets we serve − Develop and maintain broad-based extensive interaction within the entire supply chain of each end market − Focus on developing more touch points and relationships than any of our competitors − Our
Slide 64: Integral to Customer Success
INTEGRAL TO CUSTOMER SUCCESS Our PEOPLE are integral to our customers’ success: Specialized experts in the chemical interactions of our customers’ processes Dependency on our comprehensive technical service Frequent on-site visits by our sales/service staff Our SOLUTIONS are integral to our cu
Slide 65: Consistent, Multi-Pronged and Cross-Business Selling
CONSISTENT, MULTI-PRONGED AND CROSS-BUSINESS SELLING Proactive and responsive Customer needs accessed daily Multiple “Touch Points” in each relationships with with access to information at all Industry’s Supply Chain specifier and applicator steps of design-to-build Every day contact at High-lev
Slide 66: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy CUSTOMER AWARENESS OF OUR BRANDS Tradeshows & advertising 2. Strategic analysis and resource allocation Direct sales 3. From innovation to service Legacy relationships Supply chain referrals 4. A typical sale 5. Supply chain – a holisti
Slide 67: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy Capabilities assessment Total available market 2. Strategic analysis and resource allocation Qualifies as a “sticky sale” 3. From innovation to service Risk/reward analysis R&D in USA, Germany, UK, Japan and India 4. A typical sale 5.
Slide 68: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy Stage-Gate development discipline Knowledge transfer R&D to applications 2. Strategic analysis and resource allocation Schools: internal, external, regional 3. From innovation to service Global development applications centers 4. A typi
Slide 69: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy Sales staff: “Value Proposition” 20L, 220L, 1500L containers at $5–$200 per liter 2. Strategic analysis and resource allocation Chemistry is consumed; repeat orders 3. From innovation to service Typical customer is $100k - $2,000k/year
Slide 70: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy Maintain focus on end-product quality Specification and qualification support 2. Strategic analysis and resource allocation Partnerships with equipment vendors 3. From innovation to service First to know about future designs Effective
Slide 71: The Path of Value to Our Customers
THE PATH OF VALUE TO OUR CUSTOMERS 1. Customer Intimacy WE DEVELOP A “MOAT” THROUGH: Long-term, in-depth knowledge of the 2. Strategic analysis and resource allocation industry and supply chain needs Patents and OEM specifications 3. From innovation to service Highly efficient, low asset manuf
Slide 72: Metallization in Action
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Slide 73: Performance Solutions
Performance Solutions Overview Growth in our Markets Strategy in Action Our Competitive Advantage Financial Performance 72
Slide 74: MacDermid's End-User Markets Group
MACDERMID’S END-USER MARKETS GROUP ■ Our End-User Markets Group is tasked with coordinating cross MPS, global initiatives and selling these value What propositions to OEMs, Tier 1s, and other key end-customers ■ The team is composed of seasoned, commercially-oriented sales leaders with a big picture
Slide 75: Expertise at Every Step in Electronics Manufacturing
EXPERTISE AT EVERY STEP IN ELECTRONICS MANUFACTURING MACDERMID ENTHONE ELECTRONIC SOLUTIONS SEMICONDUCTOR WAFER LEVEL PACKAGE PRINTED CIRCUIT ASSEMBLY METALLIZATION PACKAGING SUBSTRATES BOARD PROCESSING MATERIALS 74
Slide 76: Enhanced Product Portfolio
ENHANCED PRODUCT PORTFOLIO MACDERMID ENTHONE ELECTRONIC SOLUTIONS ELECTRONICS PACKAGING PRINTED CIRCUIT FABRICATION Post- Post- Package Component Process MacDermid Fabrication Step Process MacDermid Integration Integration Solderable Oxide Connectors Innerlayer Processing Precious Metal Oxide Altern
Slide 77: The Benefits of Multiple Touch Points in the Supply Chain
THE BENEFITS OF MULTIPLE TOUCH POINTS IN THE SUPPLY CHAIN MACDERMID ENTHONE ELECTRONIC SOLUTIONS END USER MARKET EXPERTS HIGHLY-TECHNICAL CUSTOMER SERVICE AND SALES SUPPLY CHAIN MANAGEMENT DEVICE MATERIAL CIRCUIT COMPONENT ORIGINAL END DESIGN SUPPLY FABRICATION ASSEMBLY EQUIPMENT USER TACTICAL SALES
Slide 78: The Benefits of Multiple Touch Points in the Supply Chain
THE BENEFITS OF MULTIPLE TOUCH POINTS IN THE SUPPLY CHAIN MACDERMID ENTHONE ELECTRONIC SOLUTIONS END USER MARKET EXPERTS HIGHLY-TECHNICAL CUSTOMER SERVICE AND SALES SUPPLY CHAIN MANAGEMENT WE BELIEVE THAT NO OTHER SUPPLIER TO OUR TARGET INDUSTRIES HAS OUR REACH INTO ALL ASPECTS OF DESIGN, MANUFACTUR
Slide 79: Smartphones: Quantifying Our Products
SMARTPHONES: QUANTIFYING OUR PRODUCTSTHE MPS CONTRIBUTION Interposers Solder balls, flux: Printed PCB plating: circuits Solder balls, $0.033/phone MEIS Phonetreatments: Housing Total: $0.366/phone ViaFill preforms MEIS $0.016/phone treatments ~$0.90 / phone Flexible Solder Paste: circuit: Direct $0.
Slide 80: The Benefits of Multiple Touch Points in the Supply Chain
THE BENEFITS OF MULTIPLE TOUCH POINTS IN THE SUPPLY CHAIN MACDERMID ENTHONE INDUSTRIAL SOLUTIONS END USER MARKET EXPERTS HIGHLY-TECHNICAL CUSTOMER SERVICE AND SALES SUPPLY CHAIN MANAGEMENT FUTURE AUTO MATERIAL TIER TIER ORIGINAL END SPECIFICATION SUPPLY TWO ONE EQUIPMENT USER TACTICAL SALES HIGHLY-T
Slide 81: The Benefits of Multiple Touch Points in the Supply Chain
THE BENEFITS OF MULTIPLE TOUCH POINTS IN THE SUPPLY CHAIN MACDERMID ENTHONE INDUSTRIAL SOLUTIONS END USER MARKET EXPERTS HIGHLY-TECHNICAL CUSTOMER SERVICE AND SALES SUPPLY CHAIN MANAGEMENT WE BELIEVE THAT NO OTHER SUPPLIER TO OUR TARGET INDUSTRIES HAS OUR REACH INTO ALL ASPECTS OF DESIGN, MANUFACTUR
Slide 82: Taking a Combined Message Up the Supply Chain – Braking
TAKING A COMBINED MESSAGE UP THE SUPPLY CHAIN – BRAKING End-User Markets Focus System – End-user Market Focus Car Makers (OEM’s and/or Tier 1’s) Braking Braking Electronics Hardware Sub-system Focus Braking Electronics Sensors Calipers (Alpha, (Alpha, (Industrial) Electronics) Electronics) Business
Slide 83: The Automotive Example Quantified – Higher End Car
THE AUTOMOTIVE EXAMPLE QUANTIFIED – HIGHER END CAR Total: ~$30-50 / unit Assembly $16.00 per unit Autotype $5.00 per unit Decorative trim Decorative $3.00 per unit Wheels $1.00 per unit IS Functional IS Metallurgy Fasteners $1.00 per unit $3.00 per unit IS Wear IS Functional Resistance Circuit Chemi
Slide 84: Automotive Opportunity – Higher End Car
AUTOMOTIVE OPPORTUNITY – HIGHER END CAR Industrial - Decorative Industrial - Surface Prep Assembly Materials ~$16 per car Industrial Chemicals ~$15 per car Industrial - Anticorrosion Industrial - Autotype Films Industrial - Engineering Addressable Market Electronics - PCB Plating Specialty Consumabl
Slide 85: Performance Solutions
Performance Solutions Overview Growth in our Markets Strategy in Action Our Competitive Advantage Financial Performance 84
Slide 86: Performance Solutions Comparable Financial Overview
PERFORMANCE SOLUTIONS COMPARABLE FINANCIAL OVERVIEW SALES (2012–2015) ADJ. EBITDA (2012–2015)(1) ($ in millions) ($ in millions) Constant Currency: (4)% 4% % growth: (2)% 0% (10)% 3% 11% (2)% 2,038 . 1,992 1,990 416 175 407 174 172 1,791 30 375 31 163 363 33 32 175 155 1,131 1,071 1,063 919 161 168
Slide 87: Performance Solutions Comparable Capital Expenditures
PERFORMANCE SOLUTIONS COMPARABLE CAPITAL EXPENDITURES CAPEX AND CAPEX % OF SALES (2012–2015) ($ in millions) 70 60 2.1% 2.0% 2.0% 1.5% 50 43 40 40 35 18 12 30 30 15 12 20 27 25 10 20 18 0 2012 (1) 2013 2014 2015 Maintenance CapEx Growth CapEx CapEx % of Sales Note: For a reconciliation of non-GAAP f
Slide 88: Performance Solutions Cost of Goods
PERFORMANCE SOLUTIONS COST OF GOODS COMPARABLE COST OF GOODS SOLD BREAKDOWN (2015) 2015 material costs of $800 million - 1% decrease in material cost would improve Adj. EBITDA margin by 50 bps Procurement initiatives in 2016 have already secured run-rate savings in excess of $4 million Focused
Slide 89: Stable and Improving Gross Margins
STABLE AND IMPROVING GROSS MARGINS COMPARABLE GROSS PROFIT AND % MARGIN (2012–2015) ($ in millions) (% margin) 1,000 55% 874 840 818 813 750 45% 44% 45% 42% 40% 500 35% 250 0 25% 2012 2013 2014 2015 Gross profit % margin Note: For a reconciliation of non-GAAP financials, please refer to the appendic
Slide 90: Meaningful Cost Synergy Potential (Non-GAAP)
MEANINGFUL COST SYNERGY POTENTIAL (NON-GAAP) REALIZED AND RUN-RATE COST SYNERGIES ($ in millions) $11 million in synergies realized through 1H 2016 80 70 $33 million in run-rate savings captured 70 $70 million run-rate expected by 2018 year-end 60 55 50 Additional 2016 synergies expected in
Slide 91: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 90
Slide 92: Agricultural Solutions
Agricultural Solutions Overview Industry Considerations Strategy for Growth 91
Slide 93: The New Arysta: More Than the Sum of Its Parts
THE NEW ARYSTA: MORE THAN THE SUM OF ITS PARTS Specialty player with global scale Balanced portfolio and geographic presence Leader in BioSolutions and seed treatments Enhanced R&D, regulatory and formulation capabilities Leading supply chain and sourcing organization Unique asset light
Slide 94: Unique Business Model in the Industry
UNIQUE BUSINESS MODEL IN THE INDUSTRY ASSET-LITE / HIGH-TOUCH “Generics”: Discovery focused Arysta: Asset-Light, Off-Patent AI Value chain Manufacturers Companies High-Touch focus Active ingredient Arysta has access to a library of Discovery hundreds of active ingredients (AIs) New Product Develop
Slide 95: Arysta LifeScience Primary Offices & Facilities
ARYSTA LIFESCIENCE PRIMARY OFFICES & FACILITIES KEY FACTS Evesham, UK More than 6,000 registrations Guelph Liege, Belgium St. Malo, France South Korea 13 formulation sites and 5 Beaulieu, France Pau, France Cary, NC Nanjing, China Tokyo, Japan formulation labs Valdosta, GA Mexico Senegal India
Slide 96: Balanced Portfolio
BALANCED PORTFOLIO PRODUCTS(1) GEOGRAPHIES(2) CROP FOCUS{3) Broad portfolio to serve all stages of the Greater presence in high growth Latin Greater diversification among end- crop lifecycle, combining conventional America and Africa/Middle East markets markets, with greater reliance on Fruit & crop
Slide 97: Key Products by Crop
KEY PRODUCTS BY CROP SOYBEAN CEREALS & CORN FRUITS & VEGETABLES PERENNIAL CROPS Herbicides Fungicides Insecticides Bio Solutions Seed Treatment Arysta’s broad offering across crops makes it a valued partner to distributors 96
Slide 98: Key Products by Region
KEY PRODUCTS BY REGION EMEA LATAM NAANZ ASIA Herbicides Fungicides Insecticides IPM Portfolio: Bio Solutions Natural Enemies and Pollinators Seed Treatment Critical mass in all four regions enable further global expansion 97
Slide 99: Agricultural Solutions Financial Overview
AGRICULTURAL SOLUTIONS FINANCIAL OVERVIEW COMPARABLE FINANCIAL OVERVIEW COMPARABLE SALES (2012–2015)(1) COMPARABLE ADJUSTED EBITDA (2012–2015)(1) (2) (US$ in millions) (US$ in millions) % growth: 6% 0% (16%) 15% 1% (14)% Constant Currency: 1% 3% 2,162 2,171 441 446 2,044 41 50 171 195 382 382 168 1,
Slide 100: Agricultural Solutions: Industry Considerations
AGENDA Agricultural Solutions Overview Industry Considerations Strategy for Growth 99
Slide 101: 30+ Years of Industry Growth
30+ YEARS OF INDUSTRY GROWTH $ billions of revenue 57 54 50 51 47 43 41 40 36 33 33 32 30 30 30 29 29 29 27 26 28 26 24 24 24 22 23 21 19 17 15 15 13 14 14 14 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2
Slide 102: Megatrends and Their Impact on the Ag Industry
MEGATRENDS AND THEIR IMPACT ON THE AG INDUSTRY GROWING FOOD DEMAND FOOD SAFETY CONCERNS CLIMATE CHANGE LIMITED ARABLE LAND AgChem market expected to grow in volume driven by demographics and other secular trends Higher regulatory hurdles driving increase in R&D costs Globalization of crop comm
Slide 103: Impact of Industry Consolidation
IMPACT OF INDUSTRY CONSOLIDATION Expected rise of two to three new mega-players with larger portfolios Consolidation Trends and market leverage Further ability to target differentiated, niche markets that are less meaningful to larger competitors Partnerships with discovery based companies tha
Slide 104: Agricultural Solutions: Strategy for Growth
Agricultural Solutions Overview Industry Considerations Strategy for Growth Financial Performance 103
Slide 105: Arysta Aspires to Profitable Growth Through Leading Positions
ARYSTA ASPIRES TO PROFITABLE GROWTH THROUGH LEADING POSITIONS IN CHOSEN SPECIALTY SEGMENTS OUR GOALS Organically grow 2% p.a. above the market, while continuing to have Adj. EBITDA margins of > 20% Leadership in our primary focus segments and #1 in BioStimulants Achieve +15% of the total gross
Slide 106: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) H3 From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer Sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure By setting our primary focus on high growth, high value
Slide 107: H3 Primary Focus on H3 Segments
H3 PRIMARY FOCUS ON H3 SEGMENTS PRIORITY FOCUS GROWTH GOAL VS. GROWTH SEGMENTS MARKET(1){2) DRIVERS KEY CROPS High Growth (driven by robust megatrends) Growing demand for Soybean higher value GMO Cereal High Value (driven by specialty focus) seeds & the need of Corn 2-3x farmers to prote
Slide 108: H3 Long-Term Growth Objectives in H3 Segments
H3 LONG-TERM GROWTH OBJECTIVES IN H3 SEGMENTS AG MARKET ARYSTA’S PRIMARY FOCUS MARKETS $91bn $54bn $13bn $18bn Total Crop Protection Primary Focus Primary Focus Agricultural Markets Addressable Markets Market(1) (2015) (2021) Market(1) Crop Protection Proprietary Off Patent Crop Establishment Plant
Slide 109: H3 Successful Cross Selling
H3 SUCCESSFUL CROSS SELLING EXPANSION TECHNOLOGY KEY SEGMENT REGIONS North Europe LatAm Asia Africa America Ipconazole Fluoxastrobin Flucarbazone Seaweed Biostim. Plant Extract Biostim. Portfolio Crop Establishment Resistant Weed Management Crop Residue Management Primary region Plant Stress & Stimu
Slide 110: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure By migrating from product to solution focus, Arysta intend
Slide 111: Crop Establishment
CROP ESTABLISHMENT EXAMPLE OF ARYSTA’S SOLUTION OFFERING IN AN H3 SEGMENT Biological In-Furrow Stimulation Products Early Post Em. Colours Fungicide & Coatings action from ST Early Post Em. ST Biological Insecticide Control action from ST ST Application Customer Technical Technology Service & Suppor
Slide 112: Biostimulation Is the Expected Next Wave
BIOSTMULATION IS THE EXPECTED NEXT WAVE All dates are approximate only New technology 9 BioStimulants 8 7 GMO Seeds 6 World population Increasing farmer professionalization(1) 5 Billions 4 Chemical crop protection 3 Wide scale mechanization of farm equipment 2 1 NPK Fertilizers 0 1920 1930 1940 1950
Slide 113: Plant Stress & Stimulation
PLANT STRESS & STIMULATION EXAMPLE OF ARYSTA’S SOLUTION OFFERING IN AN H3 SEGMENT PHYSIOLOGICAL GROWTH STAGE… Roots/ Stems & Leaves/ Flowering/ Fruit sizing emergence branches chlorophyll fruit set Root mass & Root architecture Leaf area Flowering Movement of architecture Thicker stems s
Slide 114: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer Sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure Aim to be more of a partner than a competitor to discovery
Slide 115: Key Product Acquisitions & Licensing Deals
KEY PRODUCT ACQUISITIONS & LICENSING DEALS = BioSolutions Selected Portfolio Acquisitions Selected Licensing Deals SOURCE YEAR KEY AI SOURCE YEAR KEY AI Various 2 x BioStimulants (in progress) 2016 Physio Activator & Natural 2 x Insecticides 2014 Protect portfolios 2 x Fungicides 3 x Herbicides Volc
Slide 116: Strong Pipeline with ~$700M Peak Sales Potential
STRONG PIPELINE WITH ~$700M PEAK SALES POTENTIAL(1) WE ARE ALIGNING OUR PIPELINE OF NEW FORMULATIONS AND MIXTURES TO OUR PRIMARY FOCUS SEGMENTS Products in launch Planned launches 2014–2016 2017+ Cereal Seed Treatment Seaweed Portfolio In-furrow Dual-purpose Bio-insecticide for Fruits & for Europe E
Slide 117: Case Study: Noctovi – A New Insecticide Delivery Mechanism
CASE STUDY: NOCTOVI – A NEW INSECTICIDE DELIVERY MECHANISM Type: High Growth High Value H3 High Differentiation Segment: Crop Residue Mgmt. Tech Partner: ISCA Country Focus: Brazil + AME (Initial) Novel attractant formulation to control moths Dead Moths collected from a treated strip (lepido
Slide 118: Case Study: Unique Total Solution for Early Season Protection
CASE STUDY: UNIQUE TOTAL SOLUTION FOR EARLY SEASON PROTECTION Type: High Growth Control: Tepera Plus: High Value H3 8 roots High Differentiation 12 roots Segment: Crop Establishment Partner: Vive Crop Protection Country Focus: North America (Initially) Seminal/Primary Roots in Corn Tepera Pl
Slide 119: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer Sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure In times of industry consolidation, Arysta intends to be a
Slide 120: Farmer Need Driven vs Product Driven Approach
FARMER NEED DRIVEN VS PRODUCT DRIVEN APPROACH AI DISCOVERY & MANUFACTURING ARYSTA LIFESCIENCE Product-driven, supply-pushed Customer-driven, demand-pulled, low risk “Develop what you discover” “Agility to develop what the farmer needs” Markets Markets Development & Registrations Registration AI Manu
Slide 121: Our Organization Will Be Fully Focused on Farmer Needs
OUR ORGANIZATION WILL BE FULLY FOCUSED ON FARMER NEEDS INTERNAL ORGANIZATIONAL ALINGMENT TOWARDS KEY SEGMENTS ( MARKETING + KAM + TECHNOLOGY) FUNGICIDES + BIO HERBICIDES BIO CONTROL Technology Teams INSECTICIDES STIMULANTS Excellence Centers EVESHAM, UK PEREIRAS, BR TBD, USA PEREIRAS, BR EVESHAM, UK
Slide 122: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer Sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure 121
Slide 123: Experienced Management
EXPERIENCED MANAGEMENT Diego Lopez Casanello President Ex-BASF BUSINESS UNIT LEADERS FUNCTIONAL LEADERS Hisaya Kobayashi José Nobre Tom B. Smith Flavio Prezzi Asia Europe, Middle East CFO SVP Strategy & Africa Rico Christensen Raphaele Gilles Cerutti Paula Pinto North America, Australia Massard Supp
Slide 124: Top Behaviors We Are Driving in Arysta
TOP 5 BEHAVIORS WE ARE DRIVING IN ARYSTA 1. Move our primary focus towards our key segments 2. Foster a mind-set change from product to solution orientation 3. Establish an even stronger customer centric culture 4. Develop best-in-class depth of know-how on primary segments & BioSolutions 5. Lean ma
Slide 125: Our Plan to Win
OUR PLAN TO WIN Leader in H3 segments (high growth, high value, high differentiation) From Strong Unmatched Our Team Asset-Lite and Products Technology & Customer Sets the Nimble Cost to Solutions Partnerships Orientation Benchmark Structure Arysta’s business model must be Asset-Lite / High-Touch an
Slide 126: Highly Variable Cost Structure
HIGHLY VARIABLE COST STRUCTURE DIRECT COST STRUCTURE 2015(1) Most direct spend (~$1bn) is product specific Fixed (e.g. raws, inerts, packaging, etc.) 10% Other direct expenses include plant cost & manufacturing-related labor (fixed) and tolling agreements (variable) Total Direct Costs: $1.1bn
Slide 127: Supply Chain Flexibility and Working Capital Management
SUPPLY CHAIN FLEXIBILITY AND WORKING CAPITAL MANAGEMENT Target and incentivize continuous COGS and margin improvement Multidisciplinary category teams are in regular contact to define competitive sourcing and pricing strategies We develop and keep multiple suppliers for the majority of Als to
Slide 128: Meaningful Cost Synergy Potential (Non-GAAP)
MEANINGFUL COST SYNERGY POTENTIAL (NON-GAAP) REALIZED AND RUN-RATE COST SYNERGIES 100 $52 million in synergies realized through 1H 2016 90 ─ Including $38 million achieved in 2015 80 80 69 $80 million run-rate expected by 2017 year-end 70 60 52 Additional 2016 synergies expected in regulatory
Slide 129: Improving Cash Flow
IMPROVING CASH FLOW Improve our product mix by increasing the share of higher margin H3 segments on our total sales Retain a high share of variable vs. fixed operating costs - drive COGS savings by leveraging Arysta’s strength on strategic sourcing Further reduce G&A costs, beyond integration
Slide 130: Arysta Video
2 o ra < i o a o ° u w ray u a a o > 5 = u Ww a n = a {o) E x oa a Ima ARYSTA VIDEO
Slide 131: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 130
Slide 132: Platform's Integration Principles
PLATFORM’S INTEGRATION PRINCIPLES First step is to ensure a stable organization Stability − Thorough communication − Organizational design as a priority Integration should not impact customers Customer-First Over time, doing business with us should be easier One brand and one face to custome
Slide 133: Integration Framework: Roles Defined
INTEGRATION FRAMEWORK : ROLES DEFINED Focus on driving integration results by establishing goals by functional area, assigning accountability, timing and economic impact Evaluation & Diligence Execute & Realize Synergies Optimization Led by Corporate Team Integration Management Office led CEO,
Slide 134: Integration Highlights
INTEGRATION HIGHLIGHTS AGRICULTURAL SOLUTIONS PERFORMANCE SOLUTIONS Integrated 3 global organizations Integrated 3 global organizations Collaboration across diverse business units to Strong cohesive team orientation - “best of both” establish and then accomplish short and long- term objectiv
Slide 135: Integration – Current Priorities
INTEGRATION – CURRENT PRIORITIES PERFORMANCE SOLUTIONS AGRICULTURAL SOLUTIONS Physical footprint Distribution synergies & supply chain One face to the customer Revenue synergies Back office integration and shared service development Benchmarking and best practice sharing Product ration
Slide 136: Arysta Integration Case Study
ARYSTA INTEGRATION CASE STUDY SUPPLY CHAIN AND PROCUREMENT Overview Opportunity − Arysta, Agriphar and CAS spent over $1bn on procurement of raw materials, tolling, and other indirects Process − The Arysta supply chain team identified $30m of potential synergies from supply chain and procurement
Slide 137: MacDermid Performance Solutions Integration Case Study
MACDERMID PERFORMANCE SOLUTIONS INTEGRATION CASE STUDY FOOTPRINT CONSOLIDATION Facility footprint rationalization and exploring consolidation opportunities is a key focus area of integration efforts − Manufacturing locations − Warehouse (internal and external) locations − Sales offices − Other bac
Slide 138: Footprint Consolidation Case Study - Continued
FOOTPRINT CONSOLIDATION CASE STUDY - CONTINUED MPS U.S. Manufacturing Ferndale Maple Plain Bridgeview Total Footprint Volume (m kgs) ~21 ~5 ~5 ~31 Ferndale (MacDermid) Total Conv Cost $0.27 $0.61 $0.99 $0.43 Plant focus: Industrial products, performance ($/kg) coatings, lubricants and PET products
Slide 139: Review of Realized and Estimated Synergies (Non-GAAP)
REVIEW OF REALIZED AND ESTIMATED SYNERGIES (NON-GAAP) PERFORMANCE SOLUTIONS ESTIMATED SYNERGIES $150m General & Administrative Corporate and G&A overhead Public company costs $59m Cost of Goods Sold $70m Overlapping production capabilities Economies of scale On Track to Supply chain overla
Slide 140: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Finance Update – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 139
Slide 141: Balance Sheet Considerations
BALANCE SHEET CONSIDERATIONS LEVERAGE CONSIDERATIONS MATURITY PROFILE Platform can support significant level of leverage versus a more ($ in millions) conventional commodity chemical company 3,500 − Diversified end-markets and geographies 3,000 − Highly variable cost structure 2,500 − High margin
Slide 142: Working Capital Dynamics
WORKING CAPITAL DYNAMICS Working capital seasonality driven largely by different growing seasons across regions − Peak working capital use typically occurs in Q1 / early Q2 − Releases throughout the second half but most dramatically in Q4 Latin America is most intensive working capital region; l
Slide 143: Foreign Exchange Management
FOREIGN EXCHANGE MANAGEMENT TRANSLATIONAL FX EXPOSURES TRANSLATIONAL FX MANAGEMENT % of Translation FX exposures not explicitly hedged Currency Revenue USD ~30 Euro denominated debt (~20% of debt) provides some natural EUR ~25 hedge against EUR movements BRL ~12 Plan to increase use of non-USD
Slide 144: Uses of Free Cash Flow
USES OF FREE CASH FLOW Debt Pay Deleveraging remains the top priority for excess cash flow Down Long-term net leverage target remains 4.5x − Goal to return in less than 3 years Working Working capital balance at 6/30 nearly $1.4B(1) – even modest improvements can yield significant cash Capital
Slide 145: Tax Environment
TAX ENVIRONMENT Current tax environment Current tax structure complexity and inefficiency a result of legacy business structures Minimal tax benefit from interest given losses in the U.S. Profitable in many high tax jurisdictions around the world (China, Brazil, Mexico) resulting in significan
Slide 146: Enterprise Development
ENTERPRISE DEVELOPMENT SHARED SERVICES FINANCE & CONTROLS TAX & TREASURY Current Focus Centralizing core support Strengthening internal controls Investing in personnel and functions (legal, IT, systems needed to manage accounting, treasury) global footprint Institutionalizing processes and r
Slide 147: Agenda
AGENDA Introduction – Martin E. Franklin State of the Company – Rakesh Sachdev Performance Solutions – Scot Benson Agricultural Solutions – Diego Lopez Casanello Integration Overview – Benjamin Gliklich Financial Overview – Sanjiv Khattri Conclusion – Rakesh Sachdev Appendices 146
Slide 148: Guiding Principles
GUIDING PRINCIPLES TODAY IN CONTEXT Achieve 2016 financial commitments – EBITDA & CF On track to realize $150M of acquisition synergies Platform Path to Value Over the plan period, organically grow revenues above our Achieve Creation end markets - in the mid-single-digit range Financial Achi
Slide 149: MacDermid & Arysta Performance Solutions
yal ho PRODUCTS CORPORATI p p ON LATFORM SPECIALTY DUCTS CORPORATION MacDermid & Arysta PERFORMANCE SOLUTIONS
Slide 150: Appendices
APPENDICES Da Proaucr Cowmonenon RPORATION 149
Slide 151: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, tha
Slide 152: Non-GAAP Definitions
NON-GAAP DEFINITIONS Adjusted EBITDA: Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as further adjusted for additional items included in earnings that are not representative or indicative of our ongoing business as described in the footnotes to the non
Slide 153: Net (Loss) Income Reconciliation to Comparable Adjusted EBITDA
NET (LOSS) INCOME RECONCILIATION TO COMPARABLE ADJUSTED EBITDA Platform Arysta Alent OM OM Comparable Malaysia (amounts in millions) 1/1 - 1/1 – 1/1 – 2/12/2015 11/30/2015 10/31/2015 Net (loss) income available to common stockholders $(309) $(65) $55 $2 $10 $(307) Adjustments to reconcile net (loss)
Slide 154: MacDermid Reconciliation of Net Income (Loss) to Adjusted EBITDA
MACDERMID RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA PREDECESSOR/SUCCESSOR COMBINED December 31, (amounts in millions) 2012 2013 2014 Net income (loss) available to common stockholders $46 $(181) $(7) Adjustments to reconcile net income (loss) to Adjusted EBITDA: Interest expense $50 $52
Slide 155: Arysta Reconciliation of Net Loss to Adjusted EBITDA
ARYSTA RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA December 31, (amounts in millions) 2012 2013 2014 Net loss available to common stockholders $(157) $(102) $(26) Adjustments to reconcile net income (loss) to Adjusted EBITDA: Interest expense $136 $135 $116 Income tax expense 45 48 50 Depreciation
Slide 156: Chemtura AgroSolutions Reconciliation of Net Income to Adjusted EBITDA
CHEMTURA AGROSOLUTIONS RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA December 31, (amounts in millions) 2012 2013 2014 Net income available to common stockholders $39 $47 $25 Adjustments to reconcile net income to Adjusted EBITDA: Interest expense $1 – $2 Income tax expense 18 29 40 (1) Depreciati
Slide 157: Agriphar Reconciliation of Net Income to Adjusted EBITDA
AGRIPHAR RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA December 31, (amounts in millions) 2012 2013 2014 Net income available to common stockholders $19 $24 $13 Adjustments to reconcile net income to Adjusted EBITDA: Interest expense $2 $2 $1 Income tax expense 9 11 7 (1) Depreciation and amortiza
Slide 158: Alent Reconciliation of Net Income to Adjusted EBITDA
ALENT RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA December 31, (amounts in millions) 2012 2013 2014 Net income available to shareholders £45 £62 £47 Adjustments to reconcile net income to Adjusted EBITDA: Pro forma adjustment to operating profit before JVs and exceptionals (6) – – Depreciation 9
Slide 159: Reconciliation of Reported Sales to Comparable Sales
RECONCILIATION OF REPORTED SALES TO COMPARABLE SALES Predecessor Successor Combined Successor (amounts in millions) 2012 2013 2013 2013 2014 2015 Performance Solutions $731 $628 $118 $746 $755 $801 Acquisitions: Alent 1,131 – – 1,071 1,063 848 OM 175 – – 174 172 142 Performance Solutions Comparable
Slide 160: Reconciliation of Reported Adj. EBITDA to Comparable Adj. EBITDA
RECONCILIATION OF REPORTED ADJ. EBITDA TO COMPARABLE ADJ. EBITDA Predecessor Successor Combined Successor (amounts in millions) 2012 2013 2013 2013 2014 2015 Performance Solutions $162 $153 $27 $180 $196 $224 Acquisitions: Alent 168 – – 161 175 143 OM 32 – – 33 30 28 Corporate cost allocation – – –
Slide 161: Reconciliation of Capital Expenditures + Product Registrations to Comparable Capex
RECONCILIATION OF CAPITAL EXPENDITURES + PRODUCT REGISTRATIONS TO COMPARABLE CAPITAL EXPENDITURES Predecessor Successor Combined Successor (amounts in millions) 2012 2013 2013 2013 2014 2015 Reported: Capex $13 $9 $2 $11 $19 $48 Investment in product 34 registrations (1) Add Capex in AP – – – – 2 3
Platform Specialty Products — Investor Day (September 2016) on 6ix