Advansix Inc. · NYSE:ASIX
Advansix — Investor Day (September 2016)
49 slides from Advansix's investor day presentation, Sep 15, 2016
Slide 1: Analyst Meeting
ANALYST MEETING September 15, 2016 New York City
Slide 2: Forward Looking Statements
2 Forward Looking Statements Statements in this presentation that are not strictly historical, including the expected separation date, statements regarding the Company's business and acquisition opportunities, anticipated revenue growth, anticipated operating margin expansion, anticipated cash flow,
Slide 3: Today's Presenters And Agenda
3 Today’s Presenters And Agenda Today’s Presenters Today’s Agenda Erin Kane – Chief Executive Officer Welcome & Breakfast • Vice President and General Manager, Honeywell Resins and Chemicals • Joined Honeywell in 2002 Introducing AdvanSix • Previously led Chemical Intermediates business, among other
Slide 4: Transaction Overview
4 Transaction Overview Tax-free pro rata distribution to Honeywell shareholders of AdvanSix, a new publicly-traded company Exchange • NYSE Ticker • ASIX (ASIX.WI) Distribution Ratio • 1 share of ASIX for every 25 shares of HON When-Issued Trading Commenced • September 14th, 2016 Record Date • Septem
Slide 5: Introducing AdvanSix
5 Introducing AdvanSix AdvanSix Analyst Presentation – September 15, 2016
Slide 6: Highlights
6 Highlights • Leading integrated Nylon 6 business with 60+ year history • Vertical integration and cost-advantaged position, enabling 90%+ plant utilization over the cycle • Strong heritage of operational discipline and proven ability to transform business • Reallocation of technology investment in
Slide 7: AdvanSix At A Glance
7 AdvanSix At A Glance AdvanSix is a leading global producer of Nylon 6 2015A Revenue Breakdown Facilities and Employees By Product By Region 1 2 3 Asia EMEA Frankford, PA Hopewell, VA Chesterfield, VA Intermediates Nylon (1) 12% Product Phenol, Caprolactam, Nylon Latin 30% America & Intermediates A
Slide 8: Company History
8 Company History 1884-1896 1916-1920 1925 1928-1947 1954 1955 1958 First synthetic Hopewell site Ammonia plant built at Production of Caprolactam plant built at Chesterfield plant H.W. Jayne Company sulfonation phenol purchased by Hopewell – world’s largest at synthetic phenol by Hopewell via Rasch
Slide 9: AdvanSix Leadership Team
9 AdvanSix Leadership Team Erin Kane Michael Preston, CFA CEO CFO Hans Jonathan Kumud Goyal Charles Paul Sanders Matthew Capeci Mike Hamilton Ann Schoeb Dorene Quitmeyer Bellamy Marketing Whitehead Business Business Business Technology Billingsley General Human Director Senior Sales Director Directo
Slide 10: Portfolio Overview
10 Portfolio Overview Leading North American position across industries served Nylon Ammonium Sulfate Chemical Intermediates 2015A Revenue $598M $338M $393M % of Total ~45% ~25% ~30% • Resin used to manufacture many products, including • Co-product of Caprolactam used for crop and • Co-products of C
Slide 11: Vertically Integrated Manufacturing Sites
11 Vertically Integrated Manufacturing Sites Competitive advantage derived from significant scale, integration and diverse revenue streams Frankford Plant Hopewell Plant Chesterfield Plant Sulfur Cumene Phenol CPL Nylon • Third largest producer of Phenol • One of world’s largest single-site • Second
Slide 12: AdvanSix Chemistry
12 AdvanSix Chemistry Nylon 6, a downstream petrochemical value chain Frankford Facility Hopewell Facility Chesterfield Facility CH 3 CH 3 OH O O H N O H N CH2 CH2 C CH2 CH2 CH2 1 n Benzene 1 1 1 1 +O2 +H2 Cumene Phenol Cyclohexanone Caprolactam Nylon 6 2 Propylene 3 CH 3 CH 2 Acetone -Methyl styre
Slide 13: Rigorous Commitment To Operational Excellence
13 Rigorous Commitment To Operational Excellence • Drive HSE Performance By Reducing • Strategic High Return Investments To Upgrade Our Risk Acceptance Production Capability • Improve Operational Discipline Through • Improve Process Stability Through Buffer Strong Accountability Process Capacity HSE
Slide 14: Strategic Initiatives To Drive Value
14 Strategic Initiatives To Drive Value Technology driven growth complements strong productivity and operating culture Key Initiatives • Improved yield, rate and quality Operational Excellence • New copolymer applications / products Drive High Value Product And • Sales and marketing excellence Regio
Slide 15: Investment Highlights
15 Investment Highlights AdvanSix Analyst Presentation – September 15, 2016
Slide 16: Investment Highlights
16 Investment Highlights 1 Leading Vertically Integrated Nylon 6 Producer 2 Sustainable Lowest Cost Position 3 Strong Relationships Driven By Dedicated Sales Teams 4 Global Reach 5 Diverse Revenue Sources 6 Continuous Investment In R&D And Technology AdvanSix Analyst Presentation – September 15, 201
Slide 17: Leading Vertically Integrated Nylon 6 Producer
17 1 Leading Vertically Integrated Nylon 6 Producer Vertical integration provides operating leverage and long-term sustainability Frankford Hopewell Chesterfield At Frankford, Cumene is ~80% of Phenol produced at ~60% of the Caprolactam produced converted into Phenol, Frankford transported to Hopewe
Slide 18: Sustainable Lowest Cost Position
18 2 Sustainable Lowest Cost Position Vertical • Fully backward integrated into several key Integration feedstock materials Global Caprolactam Supply / Cost Landscape • One of world’s largest single-site producers Global Demand Overcapacity Industry- of Caprolactam Leading • Significant operating le
Slide 19: Strong Relationships Driven By Dedicated Sales Teams
19 3 Strong Relationships Driven By Dedicated Sales Teams Significant, longstanding relationships with key …driven and supported by experienced and customers across every product line… dedicated sales teams 2015A Top 15 Customers Relationship Customer Product Length (yrs.) Ammonium Chemical Customer
Slide 20: Global Reach
20 4 Global Reach AdvanSix's global reach enables it to compete everywhere its products are consumed • Dedicated, global sales team reaches 500+ customers in 40+ countries • Supported by marketing and technical staff in 8 countries and global R&D facilities • Freight / logistics capabilities and ter
Slide 21: Diverse Revenue Sources
21 5 Diverse Revenue Sources Provides diversification and mitigates exposure to any single end-use application or product cycle 2015A Revenue By End Market • Serving multiple end markets with attractive long- Industrial term growth rates Other Derivatives Ag / • Seasonality limited to Ammonium Sulfa
Slide 22: Continuous Investment In R&D And Technology
22 6 Continuous Investment In R&D And Technology Increased focus on growth-oriented R&D while maintaining manufacturing technology excellence R&D Spend By Category Focus Areas 2013A 2015A • Customer and plant support 2% Long-Term Manufacturing Growth Long-Term • Improved yield, rate and quality Tech
Slide 23: Product Line Overviews
23 Product Line Overviews AdvanSix Analyst Presentation – September 15, 2016
Slide 24: Nylon Overview
24 Nylon Overview Highlights Business Characteristics 1. Vertically Integrated With Industry-Leading Cost Position % of Total Revenue ~45% • Caprolactam (Flake and Molten) 2. Flexible Assets Enabling Mix Upgrade To High Value Applications Products • Nylon 6 Resin – Capacity across multiple polymer t
Slide 25: Nylon 6 Demand Outlook
25 Nylon 6 Demand Outlook Continued focus on fast-growing, attractive markets 2015 Global Demand Industry CAGR (1) Market Drivers Indicators • Consumer Preference Between Soft And Hard Flooring • U.S. Housing Starts 520 • Durability, Stain Resistance, Recyclability/Environmental • Existing Home Sale
Slide 26: Global Caprolactam Dynamics
26 Global Caprolactam Dynamics Market re-structure coupled with global macro-economic trends are expected to rebalance supply and demand leading to improved pricing dynamics Caprolactam Capacity (KMT) Current Dynamics ~3% • Capacity increases since 2012 have been largely in China Demand CAGR Over Pe
Slide 27: Ammonium Sulfate Overview
27 Ammonium Sulfate Overview Highlights Business Characteristics 1. Recognized Industry Leading Technology – 4:1 Raschig technology; High granular conversion (>60%) % of Total Revenue ~25% • Ammonium Sulfate Fertilizer 2. Unique Expertise, Dedicated Regional Agronomists Products / End-Use ̶ Granular
Slide 28: Monetizing Ammonium Sulfate
28 Monetizing Ammonium Sulfate Value proposition of quality and increased crop yields effectively delivered to key customer channels Key Decision Maker Sales / Marketing Tools Fertilizer Key Decision Driving Pull Through Down The Value Chain Distribution Grower Producer Maker/Retailer ROSI™ Mobile A
Slide 29: Fertilizer Market Dynamics
29 Fertilizer Market Dynamics∣AdvanSix AS Value 1 Urea is the most 2 Grain is key Nitrogen 3 Ammonium Sulfate is both a 4 Ammonium Sulfate consumed N fertilizer consumer Sulfur and Nitrogen Source quality is paramount • Urea contains solely nitrogen and sets • N consumption growth has slowed with •
Slide 30: Chemical Intermediates Overview
30 Chemical Intermediates Overview Highlights Business Characteristics 1. Integration Enables Full Asset Utilization and Product Mix % of Total Revenue ~30% Optimization • Acetone • Alpha-Methylstyrene – Vertical integration allows AdvanSix to fully utilize each element of Products • Phenol • Sulfur
Slide 31: Financial Overview
31 Financial Overview AdvanSix Analyst Presentation – September 15, 2016
Slide 32: Key Takeaways
32 Key Takeaways • Signs of supply/demand re-balancing for Caprolactam after capacity increases over past several years • AdvanSix lowest cost producer due to scale, vertical integration and high value co-products • Manufacturing utilization rates remain high through the cycle and demand continues t
Slide 33: Key Financials
33 Key Financials Reported Revenue ($M) EBITDA ($M) Volume 3.7% (2.5%) ~2% Margin % 12.6% 9.3% 10.3% 12.8% Price (2.4%) (23.2%) (~21%) 2,000 1,767 1,790 300 222 1,500 1,329 1,260 166 161 200 137 1,000 100 500 0 0 2013 2014 2015 LTM 2016 2013 2014 2015 LTM 2016 % Change YoY 1.3% (25.7%) (~19%) % Chan
Slide 34: Debt Capitalization – Pro Forma
34 Debt Capitalization – Pro Forma Capital structure allows flexibility to support growth Sources & Uses Pro Forma Capitalization ($ in millions) Pro Form a Sources Am ount Maturity 6/30/2016 New Revolver ($155) $40.0 Cash -- $40.0 (1) New Term Loan A 270.0 Total Sources $310.0 New Revolver ($155) 2
Slide 35: Capital Deployment Framework
35 Capital Deployment Framework Balanced and disciplined approach to capital allocation Business • R&D investments supporting growth programs Key Focus Areas Reinvestment • Sales and marketing excellence • Complying with environmental / safety regulations Base Capex • Driving world-class mechanical
Slide 36: Capital Investments
36 Capital Investments Capital intensity anticipated in the near-term $101M $97M ~$90M Near-Term Capex $74M 14% 32% 11% ~$100M per year 8% 25% 32% 22% 23% 62% 57% • Project prioritization based on compliance 70% 45% requirements, risk assessments and ROI in context of cash capacity 2013 2014 2015 20
Slide 37: AdvanSix Outlook
37 AdvanSix Outlook Mitigating near-term headwinds, positioned to outperform • Stabilization of pricing with some uptick in Nylon • Weak Agriculture fundamentals ahead of 2016/2017 season What We’re Seeing • Oil-related raw materials pass-through pricing impact moderating • Large planned 4Q plant tu
Slide 38: Investment Highlights
38 Investment Highlights 1 Leading Vertically Integrated Nylon 6 Producer 2 Sustainable Lowest Cost Position 3 Strong Relationships Driven By Dedicated Sales Teams 4 Global Reach 5 Diverse Revenue Sources 6 Continuous Investment In R&D And Technology AdvanSix Analyst Presentation – September 15, 201
Slide 39: Q&A
39 Q&A AdvanSix Analyst Presentation – September 15, 2016
Slide 40: Appendix
40 Appendix AdvanSix Analyst Presentation – September 15, 2016
Slide 41: Historical Income Statement ($ Thousands)
41 Historical Income Statement ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 42: Historical Income Statement ($ Thousands)
42 Historical Income Statement ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 43: Historical Balance Sheet ($ Thousands)
43 Historical Balance Sheet ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 44: Historical Balance Sheet ($ Thousands)
44 Historical Balance Sheet ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 45: Historical Cash Flow Statement ($ Thousands)
45 Historical Cash Flow Statement ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 46: Historical Cash Flow Statement ($ Thousands)
46 Historical Cash Flow Statement ($ Thousands) AdvanSix Analyst Presentation – September 15, 2016
Slide 47: Reconciliation Of EBITDA To Net Income
47 Reconciliation Of EBITDA To Net Income ($ Thousands) 2015 2014 2013 LTM 2016 EBITDA $136,647 $165,655 $221,527 $160,622 Income Taxes 36,461 48,189 65,547 45,793 Depreciation and Amortization 36,410 33,608 37,234 36,678 Net Income $63,776 $83,858 $118,746 $78,151 Source: Form 10; LTM 2016 as of Ju
Slide 48: Reconciliation Of Cash Provided By Operating Activities To Free Cash Flow
Reconciliation Of Cash Provided By Operating 48 Activities To Free Cash Flow ($ Thousands) 2015 2014 2013 LTM 2016 Cash Provided by Operating Activities $101,536 $188,424 $119,995 $96,962 Expenditures for Property, Plant and Equipment (97,144) (101,382) (73,912) (91,184) Free Cash Flow $4,392 $87,04
Slide 49: Thank You
Thank You AdvanSix