Lsb Industries, Inc. · NYSE:LXU
Lsb Industries — 10th Annual Farm to Market Conference 2015
40 slides from Lsb Industries's conference presentation, May 2015
Slide 1: Investor Presentation
Lou INDUSTRIES Investor Presentation 10" Annual Farm to Market Conference May 20-21, 2015 | New York City Isbindustries.com
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information contained in the presentation materials contain certain forward-looking statements. All these statements, other than statements of historical fact, are forward-looking statements. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,
Slide 3: Why LSB? Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value
Why LSB? Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value 1 Operates well-diversified business with differentiated market positions across two distinct business segments 2 Well-positioned in end markets with attractive industry fundamentals Implementing operating and capital
Slide 4: Business Overview
Business Overview Business overview Net sales by business segment (LTM 3/31/15) • Diversified industrial manufacturer of chemicals and HVAC products sold into a wide range of Engineering and other 2% end markets • Founded in 1968 and headquartered in Oklahoma City, OK; publicly traded (NYSE: LXU) Cl
Slide 5: One of LSB's Two Core Businesses – Chemical
One of LSB’s Two Core Businesses – Chemical Business overview Sales mix • Provides nitrogen based agricultural, mining and Natural gas A key strategy Mining industrial chemicals to North American market products 2% is to optimize 15% sales mix: • Leading merchant marketer of nitric acid in the U.S.
Slide 6: Agricultural Chemical Facilities
Chemical Facilities El Dorado Cherokee Pryor Baytown Facility Location El Dorado, AR Cherokee, AL Pryor, OK Baytown, TX Year Acquired/Built 1983 1999 2000 2000 Ammonia Design Kellogg Kellogg Pritchard - Plant Area (acres) 150 160 47 2 Site Area (acres) 1,400 1,300 104 Bayer Material Science’s site F
Slide 7: Annual Production Capacity of Products Available for Sale
Annual Production Capacity of Products Available for Sale (Tons in thousands) Facility: El Dorado Cherokee Pryor Baytown Total Ammonia / Feedstock Natural gas Natural gas Ammonia Natural gas Ammonia Production 220(1)/375 175 215 – 610 / 765 Capacity Products Available for Sale UAN 215 300 515 Agricu
Slide 8: One of LSB's Two Core Businesses – Climate Control
One of LSB’s Two Core Businesses – Climate Control Business overview Sales mix • Provides specialty HVAC products to commercial, By product type By end market Other institutional and residential new construction, Other HVAC products 13% Education 15% renovation and replacement markets, emphasis on I
Slide 9: Market Overview
Market Overview LSB is well-positioned in end markets with attractive industry fundamentals
Slide 10: Chemical Business
Chemical Business Diverse products with broad application Products Uses Competitors • CF Industries, PCS, Koch Agro- • Urea ammonium nitrate • Fertilizer for corn and other crops Industries, Rentec, CVR Chemicals solutions (UAN) Partners, imports 48% • Ammonium nitrate • Primary nitrogen component •
Slide 11: Agro Chemicals – Attractive Industry Fundamentals
Agro Chemicals – Attractive Industry Fundamentals World situation North American situation • World grain shortages positively impact grain requirements in the U.S. • Growing populations • Despite lower grain prices, the USDA is projecting less than • Developing economies a 2% drop in corn acres plan
Slide 12: Climate Control – Serving the Commercial, Institutional, Residential and Industrial Sectors
Climate Control – Serving the Commercial, Institutional, Residential and Industrial Sectors Products Uses Notes • Heating and cooling • Leading share in water source and Water Source geothermal heat pumps Water Source Heat Pumps − Commercial / Institutional & Geothermal • − Single family residential
Slide 13: Climate Control – Industry Fundamentals
Climate Control – Industry Fundamentals Continued improvement in commercial and institutional new construction over the next two to three years Trend towards higher energy efficiency products in commercial/institutional sector Residential market increasingly aware of the impact their HVAC systems ha
Slide 14: LSB's Strategic Plan
LSB’s Strategic Plan LSB is implementing operating and capital improvement plan that is expected to drive shareholder returns
Slide 15: Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value
Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value • Improve plant on-stream rates Comprehensive upgrade of • Reduce risks of unplanned downtime Chemical facilities • Improving safety and plant reliability • New senior management • Additional engineering support Pryor facility
Slide 16: Significant Progress Has Been Made to Improve Reliability at Pryor
Significant Progress Has Been Made to Improve Reliability at Pryor Key initiatives undertaken to-date Use of industry Extensive monitoring New senior expert consultants and control management team equipment installed Remanufacture or Additional replacement of certain engineering staffing key pieces
Slide 17: El Dorado expansion expected to significantly improve margins beginning in 2016
El Dorado expansion expected to significantly improve margins beginning in 2016 Ammonia: Produce vs. Purchase Spread at El Dorado (avg. cost in $ per ton) 546 545 527 506 Completion of Spread: Spread: Spread: Spread: ammonia plant $367 $325 $261 $297 allows El Dorado to capitalize on spread differen
Slide 18: El Dorado Expansion Expected to Improve Operations/reliability and Capacity
El Dorado Expansion Expected to Improve Operations/reliability and Capacity Overview and benefits Progress to date 2015 outlook • Capital investments of $285– • $172 million spent through 3/31/15 • $113-$128 million to be spent to $300 million • Front-end engineering design complete project • Reduce
Slide 19: El Dorado Ammonia Plant Project on Time and on Budget
El Dorado Ammonia Plant Project on Time and on Budget Spent $172 mm Rotating Equipment Purchase / Installation To Be Spent $113–$128 mm File and Receive Environment Permit (Air) On Budget Yes Front-end and Ongoing Engineering Design Base Equipment Purchase/Installation Foundations & Concrete Base Un
Slide 20: Nitric Acid Plant & Concentrator Project Timeline
Nitric Acid Plant & Concentrator Project Timeline Contract with Weatherly for Work & Equipment Spent $105 mm File and Receive Environment Permit (Air) To Be Spent $20–$25 mm Basic Engineering Package On Budget Yes Detailed Engineering Package Foundations & Concrete Base Underground Piping Installati
Slide 21: Climate Control Continues to Rebound From End-Market Recovery and Internal Initiatives
Climate Control Continues to Rebound From End-Market Recovery and Internal Initiatives Construction markets are poised for a …and Climate Control has further continued recovery to pre-recession levels… benefited from internal initiatives • Significant upside as industry drivers return LEAN Operation
Slide 22: Financial Overview
Financial Overview LSB has a solid financial position
Slide 23: The Company Has Delivered Value to Shareholders, Having Outperformed Its Peer Group
The Company Has Delivered Value to Shareholders, Having Outperformed Its Peer Group Coming Out of the Financial Crisis Indexed share price performance – last 6 years 222.8% 159.4% 153.6% (3.5% ) M ay'09 M ay'10 M ay'11 M ay'12 M ay'13 M ay'14 M ay'15 LSB Nitrogen M LP HVAC LSB’s Board and management
Slide 24: Segment Summary Statement of Income
Segment Summary Statement of Income Chemical Business Calendar Year Ended Dec. 31 3 Months Ended March 31, ($ in millions) 2010 2011 2012 2013 2014 2014 2015 Sales $351.1 $511.9 $477.8 $380.7 $454.9 $115.2 $126.8 Gross Profit 49.3 130.7 97.7 46.2 66.6 28.4 21.8 Gross Profit % 14.0% 25.5% 20.4% 12.1%
Slide 25: Capital Structure
Capital Structure ($ in millions except ratios) As of March 31, 2015 Overview of Outstanding Debt Cash and Investments $211.1 Senior Secured Notes • $425 million Senior Secured Notes 425.0 • 7.75% • Due August 2019 Other Debt 30.7 Working Capital Revolver Total Net Debt $244.6 • $100 million (L + 15
Slide 26: 2017 Chemical Targets
2017 Chemical Targets Chemical Business Financial Metrics EBITDA Target 2014–2017 Revenue Growth 12%+ CAGR ($ in millions) $250 2017 EBITDA Margin 30%+ $45+ $11+ $200+ $200 $90+ 2017 Operating Margin 20%+ $150 $100 $54 Annual Production (tons) $50 $0 Gross Ammonia 750,000–800,000 2014 Actual (1) El
Slide 27: Chemical EBITDA – Sensitivity Analysis for 2017
Chemical EBITDA – Sensitivity Analysis for 2017 (EBITDA - $ in millions) Natural Gas per Mmbtu $5.00 $4.50 $4.00 $3.50 $3.00 $600 $265 $273 $282 $290 $299 Ammonia per Ton $550 $238 $246 $255 $263 $272 $500 $211 $219 $228 $236 $245 $450 $184 $192 $201 $209 $218 $400 $157 $165 $174 $182 $191 Key facto
Slide 28: 2017 Climate Control Targets
2017 Climate Control Targets Climate Control Business Financial Metrics EBITDA Target 2014–2017 Revenue Growth 10%+ CAGR ($ in millions) $80 2017 EBITDA Margin 15%+ $5+ $60+ $60 $8+ $20+ 2017 Operating Margin 14%+ $40 $27 $20 • Operating leverage on incremental sales of 20%+ $0 • Lean/OpEx initiativ
Slide 29: Appendix
Lou INDUSTRIES Appendix Isbindustries.com
Slide 30: EBITDA Reconciliations
EBITDA Reconciliations Reconciliation of Consolidated Net Income and Segment Operating Income to Non-GAAP measurement EBITDA. Management uses operating income by business segment for purposes of making decisions that include resource allocations and performance evaluations. Operating income by busin
Slide 31: Other Non-GAAP Reconciliations
Other Non-GAAP Reconciliations Reconciliation of Chemical EBITDA. We believe that the inclusion of supplementary adjustments to EBITDA are appropriate to provide additional information to investors about certain unusual items. The following tables provide reconciliations of EBITDA excluding the impa
Slide 32: What Our Chemical Products Are Used For
What Our Chemical Products Are Used For: Agrochemical Products Uses Urea Ammonium Nitrate Solutions (UAN) 28-32% N High nitrogen content fertilizer for corn and other crops with high nitrogen demand (wheat, milo, cotton) Manufactured nitrogen content fertilizer E2 Ammonium Nitrate Prill (solid) 34%
Slide 33: Chemical Business – LSB's Agricultural Distribution
Chemical Business – LSB’s Agricultural Distribution Southern Pryor, Plains & Corn UAN Koch OK Belt Transammonia, Cherokee, Eastern UAN The Andersons, Corn Belt AL CHS, Koch, et.al. Ag Centers - 35% Southern Plains, El Dorado, South Central, AN Distributors & AR Midwest & West Dealers - 65% Multiple
Slide 34: Typical Facility Process Flow (Pryor)
Typical Facility Process Flow (Pryor) NH3 (storage, trucks, rail) Nitric AN Acid Solution Ammonia UAN Plant UAN (storage, trucks, rail) Natural CO2 Gas (pipeline) Urea CO2 CO2 Liquification (storage, trucks) • Products are marketable at every intermediate and final stage of production. • Pryor facil
Slide 35: Climate Control Sales & Marketing Data
Climate Control Sales & Marketing Data LTM 3/31/15 Sales Mix Data By end market Distribution channels (as of March 2015) 125% Retail Commercial: 100% Single Family • 220 Commercial representative firms with 347 locations 75% Education • 1,900+ Sales Engineers Healthcare 50% Multi Family Residential
Slide 36: Focus on Geothermal Heat Pumps
Focus on Geothermal Heat pumps How does a GHP system work? • The Earth absorbs approximately 50% of all solar energy and remains at nearly a constant temperature year round (below a few feet deep). • A GHP system uses a (1) sealed in-ground heat exchanger (loop) filled with fluid and a (2) GHP unit
Slide 37: Typical GHP Costs and Savings
Typical GHP Costs and Savings For a GHP System in a 2,500 sq. ft. new house in St. Louis, MO (typical middle America) Installed Cost of a 4 ton GHP System = $6,000 per ton (12,000 Btu/ton). System Operating Cost Comparison Payback (GHP vs. Hi-Eff Gas Furn+AC) GHP vs. Conventional Systems Installed c
Slide 38: Notes
Notes Loe INDUSTRIES 38 Isbindustries.com
Slide 39: Notes
Notes Loe INDUSTRIES 39 Isbindustries.com
Slide 40: Website: www.lsbindustries.com
LSB Industries, Inc. is headquartered in Oklahoma City and does business through its subsidiaries, with seven HVAC manufacturing and distribution facilities in Oklahoma City, chemical plants in Texas, Arkansas, Alabama and Oklahoma and an engineered products distribution center in Oklahoma City. App
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