Slide 1: KeyBanc Analyst Day: Formula for growth
KeyBanc Analyst Day August 14, 2009 Formula for growth. James J. O'Brien, Chairman and Chief Executive Officer Lamar M. Chambers, Senior Vice President and Chief Financial Officer John E. Panichella, President, Ashland Aqualon Functional Ingredients Paul C. Raymond III, President, Ashland Hercules W
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon a number of assumptions, including those mentioned
Slide 3: Agenda
Agenda • Ashland Overview and Strategy • Ashland Hercules Water Technologies • Ashland Aqualon Functional Ingredients List of Abbreviations Used in This Presentation 3
Slide 4: Ashland Vision for the Future
Ashland Vision for the Future To be a leading, global specialty chemicals company that is a market leader in all major businesses •Built on three growth •Sharing three common platforms – Ashland Aqualon Functional capabilities – Application expertise Ingredients – Formulation expertise – Ashland Her
Slide 5: Strong Leadership Positions in the Markets We Serve
Strong Leadership Positions in the Markets We Serve Ashland Ashland Ashland Ashland Ashland Ashland Aqualon Hercules Performance Consumer Distribution Functional Water Materials Markets Ingredients Technologies (Valvoline) #2 global #1 global #1 global leader #3 passenger- #2 plastics producer produ
Slide 6: Corporate Profile
Corporate Profile Pro Forma Ongoing EBITDA1 by Commercial Ashland HerculesUnit NYSE Ticker Symbol: ASH Ashland Water Technologies Distribution 21% Employees: ~15,000 11% Number of countries in which Ashland More than Ashland 100 Ashland Consumer has sales: Markets Aqualon 29% Ingredients Functional
Slide 7: Sales and Operating Revenue
Trailing 12 Months' Pro Forma1 Sales and Operating Revenue By Commercial Unit Ashland Distribution 20% North Europe 37% America 21% 68% Ashland Consumer Markets Latin 18% America/ Other - 4% • 32 percent of total revenue comes from outside North America 1 For the 12 months ended June 30, 2009, inclu
Slide 8: Ashland Aqualon Functional Ingredients
For the 12 Months Ended June 30, 2009 Coatings Pro Forma Revenue: $1.0 billion Construction 26% 21% Pro Forma Ongoing EBITDA: $216 Energy & Regulated Spec. million Pro Forma Ongoing EBITDA Margin: Industries Solutions 21.6% Business Overview 28% 25% Revenue Customers • Diversified, global customer b
Slide 9: Strategy: Ashland Aqualon Functional Ingredients
Ashland Aqualon Functional Ingredients Strategy • Use leadership position in cellulose ethers to drive growth through product innovation and geographic expansion • Invest in additional water-soluble polymers that can be • leveraged across Leverage deep multiplerelationships customer growth platforms
Slide 10: Ashland Hercules Water Technologies
Ashland Hercules Water Technologies A major global supplier of process and functional chemicals For the 12 Months Ended June 30, Business Overview 2009 $1.9 billion Pro Forma Revenue: Pro Forma Ongoing EBITDA: $165 • Pulp and paper processing million Pro Forma Ongoing EBITDA Margin: • Industrial and
Slide 11: Strategy: Ashland Hercules Water Technologies
Ashland Hercules Water Technologies Strategy • Build on leadership position in specialty papermaking chemicals through product-line extension and geographic expansion • Extend best-in-class, market-focused business model to additional water-intensive verticals, leveraging core process chemical techn
Slide 12: Ashland Performance Materials
Ashland Performance Materials A global leader in specialty chemicals For the 12 Months Ended June 30, Business Overview 2009 $1.3 billion Pro Forma Revenue: • Auto manufacturers; foundries; Pro Forma Ongoing EBITDA: $81 pipe million Pro Forma Ongoing EBITDA Margin: Customers and tank fabricators; pa
Slide 13: Strategy: Ashland Performance Materials
Ashland Performance Materials Strategy • Use market insight and thermoset chemistry expertise to create innovative substitutes that are stronger, lighter and more resistant than traditional materials for core transportation, construction and infrastructure markets • Use leadership position in unsatu
Slide 14: Ashland Consumer Markets
Ashland Consumer Markets: A leading worldwide marketer of premium-branded automotive lubricants and For the 12 Months Ended June 30, 2009 chemicals Pro Forma Revenue: $1.7 billion Business Overview Pro Forma Ongoing EBITDA: $227 • Retail auto parts stores and mass merchandisers who sell million Pro
Slide 15: Strategy: Ashland Consumer Markets
Ashland Consumer Markets Strategy • Use superior consumer insight to create channel- focused • solutions thatloyalty Build brand leverage the Valvoline in key brand(DIY) growth Do-It-Yourself segments, such as youth and Hispanics, through highly targeted advertising, promotions and programs • Contin
Slide 16: Ashland Distribution
Ashland Distribution A leading North American chemicals and plastics distributor For the 12 Months Ended June 30, 2009 Business Overview Pro Forma Revenue: $3.4 billion • Diversified customer base Pro Forma Ongoing EBITDA: $88 Customers in North America and Europe million Pro Forma Ongoing EBITDA Ma
Slide 17: Strategy: Ashland Distribution
Ashland Distribution Strategy • Continue focus on efficiency to create highest-value channel for customers and suppliers • Build best-in-class product offering by aligning with globally leading suppliers that: – have low-cost production – can ensure continuity of supply – are investing in their busi
Slide 18: Ashland Recent Performance and Near-Term Outlook
Ashland Recent Performance and Near-Term Outlook • Repayment of debt through cash flow is a priority to achieve investment-grade credit statistics – Reduced gross debt to under $2 billion at June 30 • Focus on generating and growing cash flow – Generated cash flows from operating activities of $649
Slide 19: Ashland's Strategy
Ashland's Strategy • Focus on specialty chemicals supported by Hercules acquisition • Generate cash flow for paying down debt • Manage cost structure and leverage new scale • Reduce volatility of earnings and cash flow and retain conservative financial position • Invest in sustainable technologies t
Slide 20: Ashland Hercules Water Technologies: Formula for growth
Ashland Hercules Water Technologies Formula for growth. Paul C. Raymond III, President 20
Slide 21: How Our Products Are Used
How Our Products Are Used Process Additives Microbial Contaminant Foam Retention Control Control Control Aids Water Treatment Chemicals Boiler Cooling Wastewater Influent Water Water Water Functional Additives Softness Strength Printability Sizing 21
Slide 22: Core of the Business … How We Make Money
Core of the Business … How We Make Money Technology Expertise - Process, Water Treatment, Functional Customer Intimacy - Sales and Market Alignment Application Expertise - Understanding Customers’ Unique Applications 22
Slide 23: Platform Launch
Platform Launch 20 30 AHWT Platform 18 Launch 25 16 • Reflects strategic 14 20 • Emphasizes high-margin priorities 12 products 10 15 • Showcases platforms that build competitive 8 advantage 10 6 4 5 2 Organizational Alignment 0 0 2004 2005 2006 2007 2008 • Dedicated team in each region • Specific ac
Slide 24: Incubator Businesses
Incubator Businesses Hybrid Technology SONOXIDE + chemical treatment New Growth Curve SONOXIDE® ultrasonic Growth Step water treatment Change system Traditional Cooling Water Chemistries Corrosion Inhibitors Scale Control Biocides Bus Incubator Value Incubator Identification Dev. Plan Commercializat
Slide 25: Sonoxide Ultrasonic Water Treatment System
Sonoxide Ultrasonic Water Treatment System • Nonchemical, microbiological control for cooling water systems • Market: $800 million in cooling water • Improved environmental profile • Energy optimization • Reduced chemical use • Improved worker safety 25
Slide 26: Global Technology Footprint
Global Technology Footprint • Research & Development – Wilmington, Delaware, U.S.A. – Krefeld, Germany • Customer Applications Laboratories – Wilmington, Delaware, U.S.A. – Krefeld, Germany – Shanghai, P.R. China – Paulinia, Brazil (2010) 26
Slide 27: Global Manufacturing Footprint
Global Manufacturing Footprint 1. Burlington, Ontario, Canada 2. Chicopee, Massachusetts 3. Franklin, Virginia 4. Greensboro, North Carolina 5. Hattiesburg, Mississippi* 17. Beringen, Belgium 6. Houston, Texas 7. Kearny, New Jersey* 18. Busnago, Italy 28. Beijing, P.R. China 8. Louisiana, Missouri 1
Slide 28: Business Strategy
Business Strategy • Follow Responsible Care* principles to ensure that safety and environmental excellence are core values • Achieve leadership positions in all of our growth and base markets • Improve sales mix through new product introduction • Grow top line in adjacent markets and emerging geogra
Slide 29: Defining AHWT's Markets
Defining AHWT’s Markets Global Water/Pulp & Paper Market $400 Billon Non-Focus AHWT Target Water Market Water Segments Markets ~$365 B $28.5 B Water · Equipment and Residential $18 B Deinking $1 B hardware Test Other Water-Related $20 B $4 B Process Chem $2 B · Infrastructure · Residential Pumps $25
Slide 30: AHWT Business Overview
AHWT Business Overview Target Market AHWT $28.5 B $2.0 B AHWT Position Process • Defoamers • Pulp $1.1 B Chemicals • Microbiocides (MB)• Other • Leading position in size, Pulp & Paper • Contaminant control strength, retention aids, ~$450 MM $11.0 B MB • Complementary ultrasonic • Size technology to
Slide 31: AHWT Strategic Market Segmentation
AHWT Strategic Market Segmentation AHWT $2.0 B Vertical Segmentation Process Chemicals Markets Commercial & Growth Packaging ~$450 MM Institutional (C&I) • Pulp and paper segments Tissue/Towel Chemicals with high growth rates Pulp • High-margin water C&I Functional Food & Beverage segments Food & Be
Slide 32: Growth Market Segments
Growth Market Segments Focus on markets with inherently higher growth Customer Demand Profitability Key Drivers • Fiber types/recycle - Biocides/contaminant control Tissue • Emerging markets growing • Absorbency and strength • Machine productivity - Dry strength Packaging • China expansion • Urbaniz
Slide 33: 2009 Strategy for Growth Verticals
2009 Strategy for Growth Verticals Actions • Dedicated marketing leader for each growth vertical • Develop and staff R&D pipeline Align Resources • Align platform-launch teams and programs on high-margin, high-growth applications • Build knowledge and credibility in key verticals Seed Key for future
Slide 34: Base Market Segments
Base Market Segments Protect and maintain the business base Demand Customer Key Drivers Profitability • Reduce costs - Increase filler loading, reduce overall Printing & chemical costs Writing • Resume significant expansion in Asia, mainly China • Building larger machines and shutting the smaller on
Slide 35: Strategy for Base Verticals
Strategy for Base Verticals Actions • Maintain product differentiation in base printing & writing and Protect Profit • chemicals Rationalizevia healthy R&D assets manufacturing pipeline to lower unit costs Engine • Commercialize new technologies in emerging geographies • Expand geographical coverage
Slide 36: Alternate Business Model
Alternate Business Model Business Product Lines and Trends Verticals Impacted • Low/declining margins in sizing/wet strength • Municipal market • Lack of vertical integration in polyacrylamides (PAM) • PAM distributors/contract service companies drives uncompetitive cost position in municipal • Pape
Slide 37: Summary
Summary • AHWT Business Overview – $2.0 billion business – Provides process, water treatment and functional chemistries to paper, pulp, commercial and institutional, food and beverage, chemical, marine and – municipal industries Products are used to improve operational efficiencies, enhance product
Slide 38: Ashland Aqualon Functional Ingredients: Formula for growth
Ashland Aqualon Functional Ingredients Formula for growth. John E. Panichella, President 38
Slide 39: How Customers Use Our Products
How Customers Use Our Products Flow and Stabilizing Flow Conditioning Leveling Properties Drilling & Thickening Binding Suspending Fracturing Extrusion Protective Gel Water Coating Formation Retention 39
Slide 40: Core of the Business … How We Make Money
Core of the Business … How We Make Money Technology Expertise - Application Expertise - Understanding Customers’ Unique Applications 40
Slide 41: How We Make Our Products
How We Make Our Products Cellulose Cellulose Cutting • Cellulose is cut from sheets/rolls Caustic Caustic into fine particles Reactor • Cellulose is air-conveyed to reactor Distillation • and swollen Ethylene withpropylene oxide, caustic oxide or other reactants impart water-solubility • Solvent rec
Slide 42: Global Manufacturing Footprint
Global Manufacturing Footprint Aquarius® HEC CMC MC HEC MC MC HEC CMC Wilmington, Parlin, New Jersey Alizay, Doel, Zwijndrecht, Luzhou, Suzhou, Nanjing, Jiangmen, Delaware France Belgium Netherlands P.R. China P.R. China P.R. China P.R. China (Under construction.) Guar Aquaflow Kenedy, Texas Guar Da
Slide 43: Facilities and Processes
Facilities and Processes • Eleven world-class manufacturing facilities including one joint venture • New 10,000MT HEC facility under construction • Low-cost facilities • Combination of batch d continuous processes - • 24/7 operations All facilities ISO- tified, well-maintained and in compliance with
Slide 44: Global Technology Footprint
Global Technology Footprint Central R&D Construction Coatings Additives, Technical Service Technical Service North America Technical Service Personal Care China Wilmington, Düsseldorf, Zwijndrecht, Nanjing, Delaware Germany Netherlands P.R. China Technical Latin Service America Mexico City, Mexico O
Slide 45: Growth Strategy
Growth Strategy • Follow Responsible Care* principles to ensure that safety • and environmental Expand excellence Ashland Aqualon are coreIngredients' Functional values portfolio of water-soluble polymers while adding complementary adjacent technologies that enable us to provide broader solutions to
Slide 46: Strategies
Ashland Aqualon Functional Ingredients Strategies Core Adjacent Acquisition Organic Organic „Geographic expansion „Commercialize existing „Accelerate growth via bolt-on • China, Russia, India, programs … film acquisitions … good coatings, opportunities and consistent Japan and South America phosphat
Slide 47: Solutions Offering … How We Win!
Solutions Offering … How We Win! Voice of Customer Solutions Mode Broad portfolio of functional ingredients Current Specialty Blends Future State … Solutions Platform State A product customized to individual customer Core products needs Core products, plus additional functionality in a narrow Innova
Slide 48: Market Segmentation
Market Segmentation Industry Redefined Markets Targeted Markets (estimated market size) (estimated market size) Coatings Additives $2.3 billion $1.7 billion Construction $6.2 billion $2.1 billion Energy $1.0 billion $0.5 billion Specialties Solutions $3.0 billion $1.9 billion Regulated Industries Ph
Slide 49: Targeted Segments
Ashland Aqualon Functional Ingredients Targeted Segments Industry Targeted Markets Targeted (estimated market size) Segment Coatings Additives $1.7 billion Water-Based Architectural Construction $2.1 billion Dry Mortar and Gypsum Cementing and Energy $0.5 billion Stimulation Civil Engineering Specia
Slide 50: Targeted Segments
Targeted Segments Industry Primary Target Future Coatings Additives Water-Based Target Coatings Industrial (rheology, surfactants) Emulsion Polymerization Construction Dry Mortar and Concrete Gypsum Cementing and Energy Stimulation Civil Engineering Specialties Solutions and Ceramics Regulated Indus
Slide 51: Pharmaceutical
The $2.0 billion business of producing and marketing excipients (i.e., inactive Pharmaceutical ingredients) for pharmaceuticals and nutritional supplements. Major Competitors Key Chemistries Dow/Colorcon • EC Binders Immediate-release and controlled-release binders - FMC $400 MM AAFI’s • HEC Target
Slide 52: Coatings
The $2.3 billion business of producing and marketing specialty additives for water-based Coatings architectural coatings. Major Key Chemistries Competitors Dow/Rohm & Haas Rheology Chemicals used to improve flow, leveling, water • HEC Akzo Nobel $700 MM retention SE Tylose • Synthetic (Aquaflow) and
Slide 53: Personal Care
The $3.5 billion business of producing and marketing specialty additives for the Personal Care personal-care and cosmetics consumer markets. Major Competitors Key Chemistries Chemicals that are substantive to hair and skin and Rhodia • CMC Conditioning provide $300 MM BASF • HEC Target conditioning
Slide 54: Construction
The $6.2 billion business of producing and marketing additives for the tile cement, Construction gypsum and exterior insulation markets. Key Chemistries Major Competitors • MC Dow Wolff • Redispersible Cellulose SE Tylose MC, HEC and EHEC used for water retention and powders Ethers rheology Samsung
Slide 55: Energy
The $1.0 billion business of producing and marketing drilling, well-stimulation Energy and cementing additives for the production of oil and natural gas. Major Key Chemistries Competitors • CMC Drilling CP Kelco Cellulosic ethers (CMC) used for rheology and Lamberti • Guar Additives filtration $200
Slide 56: Grow the Core First ... Then Adjacencies
Grow the Core First ... Then Adjacencies Core One-Step Adjacencies (Water-Soluble Polymers) Film Coatings 6% Diluents 7% Synthetics Silicones Biocides EC Resins CMC 23% 5% 15% $80 MM One-Step $1,100 MM $800 MM Adjacencies Emulsifiers 41% 11% Surfactants Cellulose and Other Ethers HEC MC 22% and Enzy
Slide 57: Products by Industry Segment
Products by Industry Segment AAFI Personal Specialties Coatings Food Pharma Energy Construction (MT) 2008 Care Solutions Additives HEC 42,000 L L M L L H CMC 55,000 H M H M L MC 39,000 M L H M EC 900 L H HPC 1,900 H L Guar 53,900 M M H L Polyterpene Resin 31,500 L H Film Coatings 100 H Redispersible
Slide 58: Adjacent Products Selection Criteria
Adjacent Products Selection Criteria One-Step ü Market size and growth rate Adjacencies ü Channel strategy Film Coatings 6% Biocides ü Target existing customer base Diluents 7% 15% ü Competitive landscape Silicones 5% ü Intellectual-property landscape Emulsifiers Surfactants ü Technical capability r
Slide 59: Strategies
Ashland Aqualon Functional Ingredients Strategies Core Adjacent Acquisition Organic Organic „Geographic expansion „Commercialize existing „Accelerate growth via bolt-on • China, Russia, India, programs … film acquisitions … good coatings, opportunities and consistent Japan and South America phosphat
Slide 60: KeyBanc Analyst Day: Formula for growth
KeyBanc Analyst Day August 14, 2009 Formula for growth. 60
Slide 61: Investment Highlights
Investment Highlights • Among top 10 specialty chemicals companies worldwide – Diversified business portfolio serving wide range of end markets – Leading market positions across platform • Strong emphasis on cash flow generation and debt pay-down – Reduced debt by $616 million in eight months since
Slide 62: Abbreviations
Abbreviations AAFI = Ashland Aqualon Functional Ingredients AHWT = Ashland Hercules Water Technologies BWT = Boiler Water Treatment(s) C&I = Commercial & Institutional CMC = Carboxymethylcellulose CWT = Cooling Water Treatment(s) EC = Ethylcellulose EH&S = Environmental, Health & Safety EMEA = Europ
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