Venator Materials Plc · OTC:VNTRF
Venator Materials — Investor Presentation (May 2023)
55 slides from Venator Materials's investor presentation, May 15, 2023
Slide 1: Investor Presentation
Investor Presentation May 15, 2023
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) is provided for information purposes only. No liability is accepted by any party whatsoever in connection with the contents of this Presentation, including (without limitation) Venator Materials PLC (the “Parent”) and any direct or indirect subsidiar
Slide 3: Agenda
Agenda Situation Overview Venator Business Overview − Titanium Dioxide − Performance Additives 2023 Budget and 5 Year Plan − Business Over the Bridge − Financial Performance and Liquidity 3
Slide 4: Situation Overview
VENATOF Situation Overview
Slide 5: Overview
Overview Venator Materials plc (“Venator” or the “Company”) is a leading global producer of TiO2, and also manufactures and sells higher value- added functional additives, color pigments and timber treatment chemicals #1 market position in TiO2 in Europe and #1 or #2 position in certain key perf
Slide 6: Situation Summary
Situation Summary Significant European presence impacted Venator more than competitors 1 TiO2 Revenue ($m) Rapid and Functional TiO2 (“CPI”) volume decreased ~40% YoY in 2H 996 dramatic TiO2 2022 with modest recovery expected in H2 2023 601 industry downturn Inventory de-stocking intensified imp
Slide 7: Rapid and Dramatic TiO2 Industry Downturn
1 Rapid and Dramatic TiO2 Industry Downturn TiO2 CPI Volumes (Rebased)(1) Deteriorating macro environment led to 150% decreased demand Demand Continued de-stocking of high inventory levels 125% contributing to challenging start into 2023 100% 75% On the back of strong demand in 2018/19, TiO2 p
Slide 8: Unprecedented Energy and Cost Dynamics in Europe
2 Unprecedented Energy and Cost Dynamics in Europe Mild winter and government subsidies have helped moderate energy costs Gas (€/MWh) Electricity (€/MWh) Venator Direct Costs(1) Peak European gas increase: Peak European electricity increase: Energy 200 • 3Q22 vs 3Q21 > 4x 400 • 3Q22 vs 3Q21 > 3x Oth
Slide 9: Weak Current Operating Performance
3 Weak Current Operating Performance Leading to negative EBITDA in Q3 and Q4 2022 Quarterly EBITDA ($m) 57 57 61 49 43 48 40 37 46 25 40 49 49 35 17 36 54 35 25 22 21 23 19 9 13 5 15 18 5 19 20 (11) (11) (9) (11) (11) (12) (7) (5) 5 (15) (14) (14) (12) (8) (50) (12) (57) TiO2 Performance Additives C
Slide 10: Weak Current Operating Performance
3 Weak Current Operating Performance Current EBITDA at historical lows Annual Adj. EBITDA ($m) 778 Total (excl. Pori) Pori 127 498 436 100 395 41 369 75 63 651 194 180 175 185 398 395 136 306 33 50 320 77 199 8 186 53 142 135 144 49 2 50 28 51 (42) (5) (5) (9) 2010 2011 2012 2013 2014 2015 2016 2017
Slide 11: Tightening Liquidity and Unsustainable Balance Sheet
4 Tightening Liquidity and Unsustainable Balance Sheet Cash Flow and Liquidity ($m) CFADS(1) Liquidity(2) 471 230 424 500 357 180 307 276 400 300 130 200 33 80 30 7 9 21 100 -- (20) (100) (70) (35) (200) (120) (76) (300) 2018 2019 2020 2021 2022 Current (3) Debt and Credit Metrics 9.5x 4.7x 3.5x 2.9
Slide 12: Venator Business Overview
Venator Business Overview 12
Slide 13: Venator Snapshot
Venator Snapshot A leading chemicals company Key Business Segments Leading global supplier of specialty chemical products that enhance the ► Primarily manufactures and sells TiO2 Titanium Dioxide quality of life for end customers ► Operates seven TiO2 manufacturing facilities across the globe Br
Slide 14: Venator's Geographic Footprint
Venator’s Geographic Footprint Global manufacturing footprint with European focus Titanium Dioxide Everberg Duisburg Birtley Duisburg Greatham Wynyard Huelva Harrisburg Greatham Uerdingen Lake Charles Scarlino Comines Scarlino Teluk Kalong Huelva Uerdingen Houston Shanghai Freeport Functional Additi
Slide 15: Sustainability
Sustainability Driving sustainability in all aspects of ESG ► Governance - established structure to steer all sustainability activities >50% GHG Reduction(1) − Board oversight, dedicated executive team, sustainability council ► Environment – actively improving environmental footprint for >20 years >
Slide 16: Venator Business Overview – Titanium Dioxide
Venator Business Overview – Titanium Dioxide 16
Slide 17: TiO2 Industry Overview
TiO2 Industry Overview Strong long-term trends – global demand tracks GDP What is TiO2 ► TiO2 is an important material used as a pigment in a vast range of consumer and industrial applications ► Used for more than 90 years as an efficient opacifier, with no commercially viable substitutes ► TiO2 has
Slide 18: Titanium Dioxide
Titanium Dioxide European market leadership With c.602,000 metric tons nameplate capacity, Venator serves over 1,200 customers in most major industries Significant Specialty & Differentiated Focus Diversified End Markets FY22 2022 Revenue 2022 Revenue Source: Management Estimates Venator, Other Spec
Slide 19: A market leader in high-value specialty and differentiated TiO2
Titanium Dioxide A market leader in high-value specialty and differentiated TiO2 Venator has more than half of its sales in high value TiO2 categories Venator Focus Price Specialties Differentiated Functional Legend: Low Quality % Total global TiO2 17% 46% 32% 5% industry demand % Venator TiO2 sales
Slide 20: Innovation Drives High Value Growth
Innovation Drives High Value Growth Targeting specialty and differentiated applications Innovation Highlights For Cosmetics, For Controlled Cement For Premium Pharma & Food Curing Packaging Focused on applications with demanding technical HOMBITAN® AFDC101 HOMBICURE ® TIOXIDE® TR48 requirements, f
Slide 21: Broad and Growing End Uses for TiO2
Broad and Growing End Uses for TiO2 Attractive end-use applications driven by aesthetic and performance characteristics imparted by TiO2 Coatings Plastics Paper Other • Decorative coatings • Masterbatch • Paper laminate • High-end specialty applications ‒ Mainly for architectural ‒ Creation of consi
Slide 22: TiO2 Industry Evolution
TiO2 Industry Evolution Creation of leading independent TiO2 players New Attributes of Leaders Larger players Greater transparency Accountable to public company shareholders Independently Millennium managed and focused on TiO2 Chinese consolidation 22
Slide 23: Venator is a Leading TiO2 Producer
Venator is a Leading TiO2 Producer (1) (1) (2) (2) FY22 Revenue $1.6bn $3.5bn $3.4bn $3.3bn $2.1bn Adj. EBITDA $43m $875m $601m $922m $215m Adj. EBITDA margin 3% 25% 18% 28% 12% % Global TiO2 US, Brazil, UK, UK, Germany, Spain, Germany, Belgium, Manufacturing Netherlands, France, US, Mexico, Taiwan
Slide 24: TiO2 Industry Dynamics
TiO2 Industry Dynamics Improved industry structure has resulted in less dramatic cycles Global TiO2 Volume and Price Price ($ / tonne) Volume (‘000 tonnes) 3,500 9,000 1 8,000 2 3,000 7,000 6,000 2,500 5,000 4,000 2,000 3,000 1,500 2,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20
Slide 25: Long-term Fundamentals Remain Positive
Long-term Fundamentals Remain Positive Positive Long-Term Trends, with Short-Term Challenges TiO2 is an important material used in a vast range of applications, with no commercially available substitutes While global demand generally tracks GDP, the industry has been impacted in the short-term b
Slide 26: Demand Dynamics
Demand Dynamics Near term cyclical challenges but positive long-term trends Demand Outlook ► Overall long-term demand growth highly correlated to GDP – TiO2 is a “quality of life” product with no real substitutes ► In the short-term, demand can by cyclical and impacted by broader macro issues ► Dete
Slide 27: Supply Dynamics
Supply Dynamics Near term cyclical challenges but positive long-term trends Supply Outlook ► Globally traded commodity with China being the largest exporter especially to Asian and Rest of World markets ► Oversupply peaked in mid-2020 as the supply response lagged the demand hit from global lockdown
Slide 28: China TiO2 Overview
China TiO2 Overview Shakeout underway, producers under more pressure China Demand Chinese Exports of TiO2 >30% of global demand in China (~2 MMt) Exports to Europe are limited Chinese demand growth at 5-8% over last 10 years Higher cost of Chinese production coupled with increased freight co
Slide 29: Outlook on Feedstock
Outlook on Feedstock Global supply/demand outlook to 2026 Sulfate vs Chloride annual deficit position ‘000 TiO2 Units ‘000 TiO2 Units 10,000 800 Sulfate Chloride 614 8,000 439 400 6,000 Note: 120 ► Supply for a given year does not take into account stock build from 12 4,000 previous years, nor allow
Slide 30: Venator Business Overview – Performance Additives
Venator Business Overview – Performance Additives 30
Slide 31: Performance Additives
Performance Additives Global provider, with market leading positions in attractive products Venator serves over 1,800 customers through the Performance Additives segment Focus on Specialty Products Diversified End Markets FY22 2022 Revenue 2022 Revenue Source: Management Estimates Personal Care, Fib
Slide 32: Performance Additives
Performance Additives Leading market position in key products Average EBITDA % split (1) Product Characteristics & Uses Competition Key Highlights Unique blue-shade pigments Ultramarines Violet and pink variants High cash conversion margins Color Good geographic balance Pigments(2) Similar
Slide 33: Color Pigments Competitive Landscape
Color Pigments Competitive Landscape Only player with a wide range of product offerings across all sectors Ultramarines Driers Venator Strong Presence Presence 33 Note: Smaller players not shown.
Slide 34: Performance Additives
Performance Additives More stable historical performance Pro Forma Annual Revenue ($m) 599 576 547 516 507 238 245 209 194 240 24 142 22 22 10 117 150 118 127 140 118 111 132 129 56 49 54 48 53 2018 2019 2020 2021 2022 Color Pigments (excl. Iron Oxide) FAD Timber Treatment Water Treatment Iron Oxide
Slide 35: 2023 Budget and 5 Year Plan (2023-27)
2023 Budget and 5 Year Plan (2023-27) 35
Slide 36: Business over the Bridge
VENATOF Business over the Bridge
Slide 37: Business over the Bridge
Business over the Bridge Venator will emerge as a leaner and stronger business, capable of generating ~$235m of EBITDA and ~$175m of operating cash flow(1) by 2027 We have undertaken a comprehensive strategic review of our business The result of which is an action plan aimed at optimising our op
Slide 38: Germany – Operational Restructuring
Germany – Operational Restructuring Mini Duisburg to result in c.$41m annual operating cash flow(1) by 2027E Illustrative 2023-27E Cumulative Financial Impact ($m) 1 Status Quo: ► Continue operating Duisburg FAD and loss-making TiO2 business 1 2 Status Mini ► Continue operating Uerdingen Adj. Quo Du
Slide 39: Cost Savings Initiatives
Cost Savings Initiatives Actively taking strong actions to reduce cost structure Cost Reduction Program(1) ($m) ~11 ~50 ~7 ~5 ~32 ~2 ~25 2023E SG&A 2024E Incremental Run-rate Total SG&A Manufacturing Manufacturing Total 2025E Savings Savings Incremental Savings Fixed Costs Direct Costs Cost Savings
Slide 40: 2022A – Run-Rate SG&A Bridge
2022A – Run-Rate SG&A Bridge SG&A Bridge ($m) TiO2 Performance Additives Corporate(1) 141 (22) 49 (7) (4) 105 (2) (1) 45 46 25 47 35 2022 Iron Oxide Sale Sales / IT Leadership Other Run-Rate Marketing Note: FY22 SG&A excludes $3m of depreciation and $2m special items 40 (1) Does not include FX, OOIE
Slide 41: Key Drivers and Assumptions of the Business Plan
Key Drivers and Assumptions of the Business Plan 41
Slide 42: 5 Year Current Outlook
5 Year Current Outlook Key Drivers & Assumptions Summary Key Drivers & Assumptions Market Demand recovers in Europe and Asia through 2023 and sales volumes are constrained by production capacity thereafter Reduction in TiO2 sites from 7 to 5 by closing Duisburg TiO2 and Scarlino Production Inc
Slide 43: TiO2 CPI Sales Volumes
TiO2 CPI Sales Volumes Volume recovery back to historical levels in 3Q23 TiO2 CPI Volumes (Rebased) 150% 125% 100% 75% 50% 2017 - 2021 High / Low 2022 2023 OL 25% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 43 Note: Rebased to Jan-22 TiO2 CPI volume
Slide 44: TiO2 Production and Sales Volume by Region
TiO2 Production and Sales Volume by Region Attractive global footprint 2022 TiO2 Production Nameplate Capacity TiO2 Nameplate Capacity Greatham Uerdingen Huelva Scarlino Duisburg LPC TK EMEA 150,000 107,000 80,000 80,000 50,000 Americas 75,000 APAC 60,000 Total Capacity 150,000 107,000 80,000 80,000
Slide 45: TiO2 Direct Cost Trends
TiO2 Direct Cost Trends Significant increase and expected to remain elevated Direct Costs(1) Commentary Energy 1.60 1.60 ► Unprecedented cost inflation during 1.57 1.58 1.56 2022 was the main driver for the large Other 1.53 increase in direct costs Feedstock ► Significant increase in direct costs 0.
Slide 46: TiO2 Global Average Sales Price
TiO2 Global Average Sales Price Pricing increases to recover margins to historical levels TiO2 Global Average Selling Price(1) TiO2 Price (Rebased) 210 CPI 190 Specialty 170 150 130 110 90 70 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 46 (1) Reb
Slide 47: TiO2 Regional Sales Price
TiO2 Regional Sales Price Pricing increases to recover margins to historical levels with APAC price lagging due to slower demand recovery and regional supply base TiO2 CPI Selling Price by Region(1) TiO2 Price (Rebased) 140 130 120 110 100 90 80 EMEA - Price Americas - Price APAC - Price 70 2018 201
Slide 48: Financial Performance and Liquidity
Financial Performance and Liquidity 48
Slide 49: Historical EBITDA and 5Y Current Outlook
Historical EBITDA and 5Y Current Outlook EBITDA expected to recover to $175m by 2025 2014 – 2027E Annual Adj. EBITDA(1) ($m) 436 TiO2 395 5Y Current Outlook 41 Performance Additives 75 Corporate Costs Pori 237 194 219 376 180 185 312 175 136 ‘24-’27E Avg.: $184m 50 ‘14-’22 Avg.: $157m(2) 104 77 231
Slide 50: 2022A – 2023E EBITDA Bridge
2022A – 2023E EBITDA Bridge Elevated pricing and costs pressure EBITDA Bridge ($m) 53 1 (66) (68) 2 (41) (120) 2022A TiO2 TiO TiO2 TiO Price/ TiO2 Fixed Costs and Performance PA 2023E 2 2 Price TiO 2 EBITDA Volume Volume / Mix Mix Direct Costs Direct Costs Others Additives EBITDA EBITDA EBITDA EBITD
Slide 51: 2023E – 2027E EBITDA Bridge
2023E – 2027E EBITDA Bridge Recovery driven by pricing pass through of costs and improved manufacturing efficiency EBITDA Bridge ($m) 9 237 116 190 5 36 (120) 2023E TiO2 TiO TiO2 TiO Price/ TiO2 Fixed Costs and Performance PA 2027E 2 2 Price TiO2 2027E EBITDA Volume Volume /Mix Mix Direct Direct Cos
Slide 52: 2022A – 2027E CFADS Build-up
2022A – 2027E CFADS Build-up Cash Flow ($m) 2022 2023E 2024E 2025E 2026E 2027E Total Revenue 2,173 1,901 2,083 2,066 2,182 2,262 1 Total EBITDA 53 (120) 104 175 219 237 2 Normal Course Capex (69) (55) (68) (62) (62) (60) Change in Working Capital (135) 18 28 (11) (11) (7) 3 Other 152 115 (45) (18) (
Slide 53: 2023 – 2027E Germany Cash Flow
2023 – 2027E Germany Cash Flow 2023-27E Germany Cash Flow H1'23E H2'23E 2023E 2024E 2025E 2026E 2027E 1 EBITDA (49) (1) (50) (0) 38 52 56 2 Capex (9) (10) (19) (32) (20) (20) (20) Change in Working Capital (32) 34 2 9 (22) (0) 1 3 Operational Restructuring – – – (25) (33) (15) (27) Total Cash Flow (
Slide 54: Appendix
VENATOF Appendix
Slide 55: Additional Financial Information (as of 31-Mar-23)
Additional Financial Information (as of 31-Mar-23) ABL Borrowing Base and Amount Outstanding ($m) Loans from TreasuryCo to Material Subsidiaries ($m) Eligible AR 111 Entity Lending Entity Balance (x) Advance Rate 85% TiO2 (with intercompany loans) TreasuryCo (59) Available AR (Pre-Addbacks) 94 (+) A