Element Solutions Inc. · NYSE:ESI
Element Solutions — Platform Specialty Products — Bank of America Merrill Lynch 2017 Global Agriculture Conference
32 slides from Element Solutions's conference presentation, Mar 1, 2017
Slide 1: Bank of America Merrill Lynch 2017 Global Agriculture Conference
Bank of America Merrill Lynch 2017 Global Agriculture Conference March 1, 2017
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
Slide 3: Non-GAAP Information
Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company uses the following non-GAAP financial measures: adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA guidance, comparable net
Slide 4: Platform Business Segments
Platform Business Segments $1.8bn 2016 Net Sales $434m 2016 Adj. EBITDA * INDUSTRIAL SOLUTIONS ELECTRONIC SOLUTIONS GRAPHIC SOLUTIONS OFFSHORE SOLUTIONS Corrosion resistance Circuit board metallization Solder paste Flexographic Temperature and PRODUCTS Decorative finishes Through-hole
Slide 5: Platform Comparable Financial Overview (Non-GAAP)
Platform Comparable Financial Overview (Non-GAAP) 2015 Net Sales: $3.6bn Adj. EBITDA: $742m Employees: ~8,500 $741 m $955 m $948 m Agricultural Performance Solutions Solutions Net Sales: $1.8bn Net Sales: $1.8 bn Adj. EBITDA: Adj. EBITDA: $382m 1 $289 m $407m1 $687 m Employees: ~4,000 Employees: ~4,
Slide 6: FY 2016 Preliminary Highlights
FY 2016 Preliminary Highlights Comparable Constant Results Comparable1* Currency2* Organic3* ($ in millions) 2016 2015 YoY% 2016 2015 YoY% 2016 2015 YoY% YoY% Net Sales $3,586 $2,542 41% $3,586 $3,620 (1)% $3,669 $3,620 1% 2% GAAP Diluted EPS $(0.63) $(1.52) Adj. EBITDA* 769 568 36% 769 742 4% 785 7
Slide 7: 2016 Priorities in Review
2016 Priorities in Review Integration and Synergy Realization • Completion of Agricultural Solutions integration • $85 million of run-rate cost synergies already actioned against an $80 million target • Continuous improvement process expected to yield incremental savings opportunities • $44 mill
Slide 8: 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 COGS Reduction: Growth CAGR Five Year Adj. EBITDA Margin ~200 bps Operating Expansion: Goal to achieve Leverage Mid-Single Digits SG&A
Slide 9: 2017 Outlook
2017 Outlook Performance Solutions Agricultural Solutions Market • Modest global GDP expectations with • Modest recovery expected in global Commentary slower growth in Europe commodity prices • Western automotive leveling off and further • Ag chemical markets expected to be flat to growth in Asia sl
Slide 10: 2017 Adj. EBITDA Guidance
2017 Adj. EBITDA* Guidance1 $ in millions 840 830 820 ~40 815 800 800 780 ~20 769 760 ~(15) 740 Organic Improvement 720 of ~$60 million2 ~8% at midpoint 700 2016 Adj. EBITDA FX Translation Organic Growth Cost Synergies 2017 Adj. EBITDA Guidance Focus Areas 2017 Outlook Opportunities Cash Interest ~$
Slide 11: Conclusion – 2017 Priorities
Conclusion – 2017 Priorities Execution: Build on Operating Momentum Focus Commercial Efforts on Fast Growing Niches Synergy Realization and Continuous Cost Improvement Generate Free Cash Flow and Reduce Leverage 11
Slide 12: Appendix
PLATFORM SPECIALTY PR UCTS CORPORATION rl Appendix 12
Slide 13: Comparable FY 2015 to FY 2016 Net Sales Bridge (Non-GAAP)
Comparable FY 2015 to FY 2016 Net Sales Bridge (Non-GAAP) 2% Organic Sales Growth $ in millions 3,700 3,620 71 3,586 3,600 (35) 13 3,515 3,500 (83) 3,400 Organic Sales 3,300 growth of 2% 3,200 3,100 3,000 Comparable FY15 Acquisitions / FX Headwind Metals FY15 Adjusted Pricing / Volume / FY16 Sales D
Slide 14: Comparable FY 2015 to FY 2016 Adj. EBITDA Bridge (Non-GAAP)
Comparable FY 2015 to FY 2016 Adj. EBITDA Bridge (Non-GAAP) 6% Comparable Constant Currency Adjusted EBITDA Growth $ in millions Comparable Constant Currency Adjusted EBITDA Growth of 6% 790 60 769 770 750 742 730 (16) 28 710 690 (27) (18) 670 650 FY15 Comparable FX Translation Ag FX Transaction Cor
Slide 15: Performance Solutions 2016 Preliminary Highlights
Performance Solutions 2016 Preliminary Highlights Results Comparable* Comparable Constant Currency* Organic* ($ in millions) 2016 2015 YoY% 2016 2015 YoY% YoY% Net Sales $1,770 $1,791 (1)% $1,818 $1,791 2% 1% Adj. EBITDA 401 384 5% 417 384 9% Adj. EBITDA Margin 23% 21% 23% 21% Adj. EBITDA ex-corp co
Slide 16: Agricultural Solutions 2016 Preliminary Highlights
Agricultural Solutions 2016 Preliminary Highlights Results Comparable* Comparable Constant Currency* Organic* ($ in millions) 2016 2015 YoY% 2016 2015 YoY% YoY% Net Sales $1,816 $1,829 (1)% $1,851 $1,829 1% 3% Adj. EBITDA 368 358 3% 369 358 3% Adj. EBITDA Margin 20% 20% 20% 20% Adj. EBITDA ex-corp c
Slide 17: Agricultural Solutions Integration
Agricultural Solutions Integration • Nearing completion of planned acquisition integration initiatives and shifting to continuous improvement • Actioned $85 million of run-rate cost synergies through 2016 against a 3-year (2017) target of $80 million • Realized incremental benefit of ~$14+ million o
Slide 18: Performance Solutions Integration
Performance Solutions Integration • Meaningful commercial, supply chain and back-office integration achieved in first year of integration • Approximately $44 million of run-rate cost synergies actioned through 2016 • Primarily G&A, commercial management and facilities (sales offices / warehouses) an
Slide 19: 2016 Cash Flow Bridge (Non-GAAP)
2016 Cash Flow Bridge (Non-GAAP) ~$105 million of Free Cash Flow* in 2016 $ in millions 1,000 392 800 Free Cash Flow 185 600 432 (80) 423 11 400 (460) (39) $105 (18) 200 0 2015 YE Operating Net Capex + Net Equity Series-B Repayments FX Impact on Other 2016 YE Balance Cash Flow Investment in Proceeds
Slide 20: 2016 Foreign Exchange
2016 Foreign Exchange • FX rates are significant variable to our financial results • Movements from the BRL, CNY, GBP and MXN were most material to the net sales and adj. EBITDA results of the business • Agricultural solutions experienced minimal net translational impacts on adj. EBITDA but meaningf
Slide 21: Seasonality of Performance
Seasonality of Performance • 2016 seasonality driven primarily by various selling seasons in Ag and the ramp-up of synergy realization throughout the year • 2017 is expected to be similar to 2016, with 2H being a larger contributor than the 1H and Q2 being a larger contributor than Q1 • Q1 2017 is e
Slide 22: Capital Structure Activity
Capital Structure Activity $ in millions • Raised $392 million of equity in Sept 2016 for general corporate purposes, including the funding of the Series-B 3,500 settlement 3,000 • Repriced all existing term loans in Q4 2016 and extended nearly $2bn in principal to 20231 2,500 Extended • Shifted ~ $
Slide 23: Capital Structure
Capital Structure $ millions Instrument Maturity Coupon 12/31/2016 Corporate Revolver ($500M) 6/7/2019 $— Term Loan B4 - USD 1,2 6/7/2023 L + 400 1,471 Term Loan B5 - USD 2 6/7/2020 L + 350 609 Term Loan C3 - EUR 1,2 6/7/2023 E + 375 454 Term Loan C4 - EUR 2 6/7/2020 E + 325 734 Other Secured Debt 1
Slide 24: Walk to Adjusted Share Counts
Walk to Adjusted Share Counts (Amounts in millions) 1Q 2016 2Q 2016 3Q2016 4Q 2016 FY Average Basic outstanding shares 230 230 278 284 255 Number of shares issuable upon conversion of 22 22 22 — 17 Series B Convertible Preferred Stock Number of shares issuable upon conversion of 8 8 8 8 8 PDH Common
Slide 25: Covenant Overview
Covenant Overview Our capital structure is subject to only one quarterly maintenance test - 6.25x First Lien Net Debt to Covenant EBITDA Covenant EBITDA LTM adj. EBITDA $769 Covenant EBITDA is defined as LTM comparable adj. EBITDA plus synergies expected to be realized based (+) Announced Synerg
Slide 26: Net Income Attributable to Common Stockholders Reconciliation to Adjusted EBITDA
Net Income (Loss) Attributable to Common Stockholders Reconciliation to Adjusted EBITDA (Amounts in millions) Q4 2016 Q4 2015 FY 2016 FY 2015 Net Income (loss) attributable to common stockholders $4 $(130) $(35) $(309) Gain on amendment of Series B Convertible Preferred Stock — — (33) — Net income (
Slide 27: GAAP EPS Reconciliation to Comparable Adj. Diluted EPS
GAAP EPS Reconciliation to Comparable Adj. Diluted EPS (amounts in millions, except per share amounts) Q4 2016 Q4 2015 FY 2016 FY 2015 GAAP diluted income (loss) per share $0.01 $(0.60) $(0.63) $(1.52) Weighted average shares outstanding 290 217 272 203 Net income (loss) attributable to common stock
Slide 28: FY 2015 Net (Loss) Income Reconciliation to Comparable Adjusted EBITDA
FY 2015 Net (Loss) Income Reconciliation to Comparable Adjusted EBITDA Arysta Alent OM (Amounts in millions) Platform (1/1/15 - (1/1/15 - (1/1/15 - Comparable 2/12/15) 11/30/15) 10/27/15) Net (loss) income attributable to common stockholders $(309) $(65) $55 $12 $(307) Net income attributable to the
Slide 29: Reported Segment Results Reconciliation to Comparable Segment Results - FY 2016
Reported Segment Results Reconciliation to Comparable Segment Results - FY 2016 Performance Solutions Agricultural Solutions Total ($ in millions) 2016 2015 Change YoY% 2016 2015 Change YoY% 2016 2015 Change YoY% Net Sales $1,770 $801 $969 121% $1,816 $1,742 $74 4% $3,586 $2,542 $1,044 41% Acquisiti
Slide 30: Comparable Quarterly Results Overview
Comparable Quarterly Results Overview 2015 2016 (Amount in millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net Sales Performance Solutions $455 $458 $448 $430 $420 $438 $455 $457 Agricultural Solutions 442 494 418 476 404 484 436 493 Total Net Sales $897 $951 $866 $906 $824 $922 $891 $950 Adjusted EBITDA 1 Perfor
Slide 31: 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 32: 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