Ingevity Corporation · NYSE:NGVT
Ingevity — Investor Day (April 2016)
70 slides from Ingevity's investor day presentation, Apr 26, 2016
Slide 1: Analyst Meeting
Analyst Meeting New York City April 26, 2016
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements,” including, but not limited to, statements that give guidance or estimates for future periods. “Forward-looking statements” include information related to future, not past, events. Such statements generally include the words “may,” “
Slide 3: Form 10 Pro Forma vs. Carve Out EBITDA
Form 10 Pro Forma vs. Carve Out EBITDA 1 ($M) Carve Out Pro Forma V ariance 2015 2015 fav/(unfav) Net Income (GAAP) 85 93 Interest Expense 21 19 Income Tax Provision 53 53 Depreciation and Amortization 35 35 Separation Costs 17 - Restructuring and other (income) charges (8) (8) Combi ned Adjus ted E
Slide 4: Transaction Overview
Transaction Overview Exchange / NYSE: NGVT Ticker When Issued Trading Dates: May 2nd to May 13th Record Date: May 4th Key Dates¹ Distribution Date: May 15th Regular Way Trading Date: May 16th Intended to be a tax-free spin-off to WestRock Tax Impact shareholders for U.S. federal income t
Slide 5: Today's Presenters from Ingevity
Today’s Presenters from Ingevity Michael Wilson – President and Chief Executive Officer Mr. Wilson joined Ingevity in September 2015 from Albemarle Corporation, where he was executive vice president and president of their Performance Chemicals business. Michael served as president of Albemarle’s Cat
Slide 6: Agenda
Agenda Section Speaker Time Welcome & Lunch All 11:30 am Introducing Ingevity Michael Wilson 12:00 pm Performance Materials Ed Woodcock 12:30 pm Performance Chemicals Ed Rose 1:00 pm Business Wrap-Up Michael Wilson 1:30 pm Financial Overview John Fortson 1:35 pm Q&A Session All 2:00 pm 6
Slide 7: Introducing Ingevity
Introducing Ingevity Michael Wilson President and CEO 7
Slide 8: Investment Highlights
Investment Highlights Well-established, specialty chemicals business with a 100-year history of innovation Collaborative customer relationships and end-market technical expertise drive the creation of high-value products and technologies that account for approximately 85 percent of revenues Hi
Slide 9: Purify, Protect and Enhance
Purify, Protect and Enhance 9
Slide 10: Who We Are
Who We Are 2015 Revenues by Segment A leading global manufacturer of specialty chemicals and high Performance Materials 27% performance carbon materials Performance 73% Chemicals Create high-value added products from renewable raw materials 2015 Segment EBITDA as % of Meet highly specialized,
Slide 11: Our History
Our History 1846 1888 1900s 1934 1954 1964 1977 Carbon Tall oil production Pine chemicals Formal DeRidder, La. Ellis, Chaflin Piedmont distillation begins at production incorporation plant added & Co. founded, Pulp & Paper Co. and lignin Tyrone, Pa. moved to of SCD to operations later Mead founded,
Slide 12: Our Core Strengths
Our Core Strengths 1 Leading Global #1 in automotive carbon End-Market Positions Leader in Performance Chemicals markets 2 Participate in end-markets expected to outpace Flexible and Strategically specialty chemicals sector Located Manufacturing Network ~$100 million new carbon facility 3 De
Slide 13: Leading Global End-Market Positions
Leading Global End-Market Positions Performance Performance Chemicals Materials Pavement Carbon Technologies Oilfield Technologies Industrial Specialties Technologies 2015 Sales $257 million $711 million 2015 Segment $92 million $111 million EBITDA (1) Est. Market $3B $800M - $1B $2B $3 - 5B Size Ma
Slide 14: Flexible and Strategically Located Manufacturing Network
Flexible and Strategically Located Manufacturing Network Charleston, S.C. Lille, France Covington, Va. Wujiang, China Shanghai, China Wickliffe, Ky. DeRidder, La. Zhuhai, China Waynesboro, Ga. Charleston, S.C. Palmeira, Santa Catarina, Brazil Manufacturing Technical Administration and Sales Performa
Slide 15: Collaborative Customer Relationships and Technical Expertise Drive Innovation
Collaborative Customer Relationships and Technical Expertise Drive Innovation Warm Mix Asphalt Gasoline Vapor Emission Control NucharTM Flint Hills Resources • Extend the paving season • Engineered to nanoscale porosity • Enable service to distant jobsites • Life-of-vehicle performance • Accelerate
Slide 16: Strategic Focus on High-Value Added Products and Markets
Strategic Focus on High-Value Added Products and Markets Ingevity Business Models Across the Value Chain Basic Materials Essential Ingredients Technology Partner Tall Oil Fatty Acid Oil well Lubricants Activated Carbon (Automotive Ingevity’s Tall Oil Rosin service Adhesives Gasoline Emis
Slide 17: Strong Track Record of Delivering Profitable Growth and High Margins
Strong Track Record of Delivering Profitable Growth and High Margins ($M) 1,041 40% 980 968 1,000 939 811 26% 30% 750 676 25% 23% 24% 23% 21% 20% 500 233 227 247 250 214 203 10% 156 0 0% 2010 2011 2012 2013 2014 2015 Revenues Combined Adj. EBITDA (1) Combined Adj. EBITDA Margin % (1) Averaged greate
Slide 18: Strong Track Record of Delivering Profitable Growth and Leading Returns
Strong Track Record of Delivering Profitable Growth and Leading Returns % EBITDA Margin 2015 40.0% 30.0% 26.3% 23.7% 22.9% 22.4% 19.7% 18.7% 18.7% 18.6% 17.4% 20.0% 16.5% 13.9% 12.9% 12.0% 11.9% 10.0% 0.0% (1) (6) (2) (3) % ROA 2015 (5) 40.0% 29.8% 30.0% 21.9% 20.0% 16.7% 12.9% 11.2% 10.8% 10.7% 8.9
Slide 19: Experienced Management Team
Experienced Management Team Years of Name Title Prior Firms Experience Michael Wilson President and CEO 30 John Fortson EVP, CFO and Treasurer 26 EVP, President, Ed Rose Performance Chemicals 30 SVP, President, Ed Woodcock Performance Materials 27 Alex Zalesky SVP, Global Markets 32 Marty Heyne SVP,
Slide 20: Multiple Avenues to Growth
Multiple Avenues to Growth Basic Essential Technology Materials Ingredients Partner Organic Growth in Attractive End Markets Geographic Expansion New Applications Broadened Technology Platform Strategic M&A Disciplined, return-based approach to investing for growth 20 Source: Company information
Slide 21: The Meaning Behind Ingevity
The Meaning Behind Ingevity 21
Slide 22: Performance Materials
Performance Materials Ed Woodcock SVP and President, Performance Materials 22
Slide 23: Investment Highlights – Performance Materials
Investment Highlights – Performance Materials Market and technology leadership position provides significant competitive advantage Increasingly stringent gasoline vapor emission regulations could double the market over the next five to seven years Growth will also be accelerated by gasoline ve
Slide 24: The Leading Manufacturer of Activated Carbon for Automotive Applications
The Leading Manufacturer of Activated Carbon for Automotive Applications Global manufacturer of activated 2015 Revenue:$257M carbon, focused on automotive 2015 Revenues by Geography EMEA ⁃ Gasoline emissions control for cars, 1% South America 12% trucks, motorcycles and boats ⁃ Minor participation
Slide 25: Collaborative Process and Deep Technical Skills Drive Innovation
Collaborative Process and Deep Technical Skills Drive Innovation OEMs / End-Users OEMs / End-Users • Risk avoidance, trust, 30 years in business, 750 million canisters • Quality, consistency = life- of-vehicle performance • Security of supply • Viewed as experts Government / Regulators • Future vehi
Slide 26: Products That Enable Regulatory Compliance
Products That Enable Regulatory Compliance Emission Sources and Impact Control Technology Parking 25-35 1970–80s technology / 0.5-1.0L grams /day One Day Parking India - China - Europe Japan - Brazil - S. Korea + 13 grams/ Running loss 1990s technology / 2.0-3.0L • multi-day parking & running loss h
Slide 27: Advanced Technology With Increasingly Stringent U.S. Regulations Over 30 Years
Advanced Technology With Increasingly Stringent U.S. Regulations Over 30 Years EPA Tier 0 EPA Tier 1 EPA ORVR EPA Tier 2 EPA Tier 3 1970s / 80s 1990s 1990s 2000s 2010s Multiday Parking; Multiday Parking; Multiday Parking; One Day Parking Running Losses Running Losses; Running Losses; Near Zero Refue
Slide 28: Technical Expertise Helping to Inform Regulation Development
Technical Expertise Helping to Inform Regulation Development Evaporative Emission Regulations 2014 Vehicle Region Status Sales (M) One Day Two Day Multi-Day Running Loss / Near Zero Parking Parking Refueling US & Completed 17.7 Canada (2016 start) Completed S. Korea 1.4 (2014 start) Finalizing Europ
Slide 29: Growth Accelerated by Global Vehicle Sales
Growth Accelerated by Global Vehicle Sales Gasoline-fueled Light Duty Vehicles Sales Volume (M) US and Canada: 100 • Even with a flat 10-year CAGR, will see significant 75 growth from regulatory- 3.2% driven content increase CAGR China: 50 • Strong CAGR and likelihood 3.2% of regulatory actions that
Slide 30: Strategically Located Manufacturing Facilities
Strategically Located Manufacturing Facilities Facility Site Regulation ~ # of Employees Covington, U.S. ORVR 190 United States Virginia Wickliffe, Kentucky U.S. ORVR 110 Waynesboro, California Regulations Georgia (LEV II and PZEV) 80 Wujiang, China ORVR 50 China China Zhuhai, China China ORVR 110 A
Slide 31: Recent Investment in New Chinese Manufacturing Facility
Recent Investment in New Chinese Manufacturing Facility Invested ~$100M in construction of a new manufacturing facility in Zhuhai, China Construction was completed in fourth quarter 2015 Facility is focused on the global automotive emissions control market Facility location strategically cho
Slide 32: Financial Results – Performance Materials
Financial Results – Performance Materials Revenue ($M) Segment EBITDA ($M & %) (1) 300 260 40.2% 35.8% 35.3% 40.0% 257 249 100 95 30.0% 200 221 100 92 20.0% 100 50 78 10.0% 0 0 0.0% 2013 2014 2015 2013 2014 2015 Excluding impact of FX Strong 2014 and 2015 revenue results driven by volume growth in
Slide 33: Investment Highlights – Performance Materials
Investment Highlights – Performance Materials Market and technology leadership position provides significant competitive advantage Increasingly stringent gasoline vapor emission regulations could double the market over the next five to seven years Growth will also be accelerated by gasoline ve
Slide 34: Performance Chemicals
Performance Chemicals Ed Rose EVP and President, Performance Chemicals 34
Slide 35: Investment Highlights – Performance Chemicals
Investment Highlights – Performance Chemicals Market-driven strategy focused on segments poised for strong growth Deep customer collaboration supported by technical expertise Long-term customer relationships; often more than 20 years High degree of customer diversity; top 10 make up approxim
Slide 36: Critical Inputs in High-Performance Applications
Critical Inputs in High-Performance Applications 2015 Revenue: $711M A leading manufacturer of pine- 2015 Revenues by Geography based performance chemicals EMEA Converts Crude Tall Oil (CTO) into 18% higher value derivative products 4% South America Stable, yet diversified and flexible North 1
Slide 37: Strategic Focus on Value-Added Derivative Products and Technologies
Strategic Focus on Value-Added Derivative Products and Technologies Intermediate Derivative Products Products Pavement preservation Evotherm (warm Renewable Forests Tall Oil mix asphalt) Fatty Acid Asphalt recycling Oil well service additives Oil production & downstream Biorefinery chemica
Slide 38: The Markets We Serve
The Markets We Serve Pavement Technologies Oilfield Technologies Industrial Specialties Est. Market Size: $800M – 1B Est. Market Size: $2B Est. Market Size: $3-5B Pavement preservation products, Well service additives, production Adhesives, Agrochemicals, Ingevity warm mix additives and downstream p
Slide 39: Global Leader in Asphalt Additive Technology
Global Leader in Asphalt Additive Technology Business Highlights Product Applications Supplies a broad line of innovative additives, systems and technologies for road construction, resurfacing, preservation, maintenance and recycling globally • Ralumac Micro Surfacing Over 100 asphalt additive p
Slide 40: Pavement Technologies
Pavement Technologies Capitalizing on Growing Global Infrastructure Spending Ingevity Asphalt Plant Paving Contractor Government Additives Agencies Liquid Aggregate Asphalt Supplier Supplier 40
Slide 41: Oilfield Chemicals Provide Productivity Benefits
Oilfield Chemicals Provide Productivity Benefits Business Highlights Product Applications • Horizontal drilling is ~80% of the NAFTA market Well Service Additives: • Over 60 global customers Formulate performance solutions World class application expertise Scale and flexibility to deliver Gl
Slide 42: Industrial Specialties Are Essential Ingredients that Enhance Customers' Products
Industrial Specialties Are Essential Ingredients that Enhance Customers’ Products Business Highlights Product Applications Adhesives: Leading global supplier of tackifier resins which provide superior adhesion Agrochemicals: Dispersants for crop protection products as well as other naturally der
Slide 43: Flexible Manufacturing Facilities Adapt to Market Demand Changes
Flexible Manufacturing Facilities Adapt to Market Demand Changes ~ # of Facility Site Products Applications Employees • Asphalt • Emulsifiers • Oilfield Charleston, • Rosin • Inks 210 S. C. • TOFA • Dispersants • Lignin • Specialties • Asphalt • Emulsifiers • Oilfield DeRidder, • Rosin • Inks 230 Lo
Slide 44: Long-Term, Secure CTO Supply
Long-Term, Secure CTO Supply Industry Landscape Crude Tall Oil (CTO) is primary raw material for Performance Chemicals Most CTO supply is under contract Ingevity will source ~50%1 from WestRock and ~50% from other providers WestRock Supply Agreement Attractive 10+ year supply agreement Mar
Slide 45: Financial Results - Performance Chemicals
Financial Results - Performance Chemicals Revenue ($M) Segment EBITDA ($M & %) (1) 200 19.6% 18.6% 20.0% 739 750 15.6% 792 150 15.0% 759 711 120 149 147 500 100 10.0% 111 250 50 5.0% 0 0 0.0% 2013 2014 2015 2013 2014 2015 Excluding impact of FX Strong 2014 revenue results driven by volume growth p
Slide 46: Investment Highlights – Performance Chemicals
Investment Highlights – Performance Chemicals Market-driven strategy focused on segments poised for strong growth Deep customer collaboration supported by technical expertise Long-term customer relationships; often more than 20 years High degree of customer diversity; top 10 make up approxim
Slide 47: Business Wrap-Up
| ire mee Business Wrap-Up
Slide 48: Investment Highlights
Investment Highlights Well-established, specialty chemicals business with a 100-year history of innovation Collaborative customer relationships and end-market technical expertise drive the creation of high-value products and technologies that account for approximately 85 percent of revenues Hi
Slide 49: Financial Overview
Financial Overview John Fortson EVP, Chief Financial Officer 49
Slide 50: Key Financials
Key Financials Sales ($M) Gross Profit ($M) CAGR ‘10 – ’14: 11.4% % Change YOY Margin % CAGR ‘10 – ’15: 7.4% 31.6% 30.1% 31.0% 29.0% +4.4% +6.2% +15.8% (7.1%) 32.1% 323 297 295 281 +20.0% 980 1,041 260 939 968 26.9% 811 676 182 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Combined Adj
Slide 51: Historical Sales & Adjusted EBITDA Bridges
Historical Sales & Adjusted EBITDA Bridges ’13vsvs'14’14 '13 Revenue Revenue Bridge ($M)($M) Bridge ’13'13 vsvs’14 '14Combined Adj.EBITDA Combined Adj. EBITDABridge Bridge ($M) (1) ($M) 19 5 247 60 6 1,041 227 (2) (2) (5) 980 2013 Actual Volume Price / Mix FX 2014 Actual 2013 Actual Volume Price / M
Slide 52: Capital Investments
Capital Investments ($M) 120 101 102 90 41 48 63 60 17 16 14 40 9 29 10 30 33 22 23 28 11 5 20 13 14 14 12 10 11 4 4 0 2010 2011 2012 2013 2014 2015 % of Sales 3% 3% 4% 6% 10% 10% D&A $M 30 29 32 33 33 35 Capex/D&A 0.8 1.0 1.2 1.9 3.0 2.9 Source: Company information 52
Slide 53: Working Capital
Working Capital ($M) 2013 2014 2015 Sales 980 1,041 968 Accounts Receivable 107 108 96 Inventory 103 130 151 Accounts Payable 81 105 65 Net (AR+ Inventory - AP) 129 133 182 Accounts Receivable / Sales % 11% 10% 10% Inventory / Sales % 11% 12% 16% Accounts Payable / Sales % 8% 10% 7% Net (AR + Invent
Slide 54: Historical Condensed Cashflow Statement
Historical Condensed Cashflow Statement 2013 Actual 2014 Actual 2015 Actual ($M) Income before income taxes 184 203 138 Provision for income taxes 66 70 53 Net Income 118 133 85 DD&A 33 33 35 Deferred income taxes 2 2 10 Gain on sale of assets 11 1 4 Changes in inventory (20) (29) (25) Changes in AR
Slide 55: Financial Objectives
Financial Objectives Conservative capital structure to maintain financial and strategic flexibility Initial leverage ratio of 2.5x (1) Termed debt to broaden maturity profile Working capital efficiency Capital Structure Allows Flexibility for Focused, Returns Driven Growth Leverage ratio per
Slide 56: Debt Capitalization – Pro Forma
Debt Capitalization – Pro Forma Source and Uses Pro Forma Capitalization ($M) ($M) Initial Capitalization Form 10 Pro Forma Sources of Funds Cash and Equivalents 15 (2) Restricted Cash 80 New $400mm Revolver 205 New $400mm Revolver 205 New Term Loan A 300 New Term Loan A 300 Cash on Hand 17 Capital
Slide 57: 2016 Business Outlook
2016 Business Outlook Near-Term Headwinds Near and Long-Term Tailwinds Continued strength of the U.S. dollar vs. Expansion capacity in place to supply foreign currencies demand growth On-going price weakness for crude oil Low oil drives auto sales Growth in vehicle sales volume due to unde
Slide 58: Oil Sensitivity
Oil Sensitivity Sensitivity Assessment Mitigants Oilfield Technologies Reduced drilling activity Flex production impact demand for products utilizing capacity High Less impact on production for industrial Demand for efficiency specialties Industrial Specialties Competition from Continue
Slide 59: Ingevity 2016 Profitability Improvement
Ingevity 2016 Profitability Improvement Plan includes reduced SG&A, manufacturing & supply chain productivity, and reduced public company cost Focus Areas • Executed reduction in force in February • Identified and executing SG&A cost reduction initiatives • Control public company costs • Supply chai
Slide 60: Modeling Guidance
Modeling Guidance Item FY16 Long Term Revenue $870M to $910M Mid single digit growth Combined Adjusted $175M to $195M High single digit growth EBITDA (1) Tax 38% < 38% $40M to $50M continuity (excludes Capex $60M to $70M growth / cost improvement) >$100MM within 3 years Free Cash Flow (1) $40M to $5
Slide 61: Q&A
Q&A 61
Slide 62: Q&A
Q&A Michael Wilson – President and Chief Executive Officer Mr. Wilson joined Ingevity in September 2015 from Albemarle Corporation, where he was executive vice president and president of their Performance Chemicals business. Michael served as president of Albemarle’s Catalyst Solutions business from
Slide 63: Appendix
Appendix 63
Slide 64: Non-GAAP Financial Measures
Non-GAAP Financial Measures Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to the most directly comparable financial measure calculated in accor
Slide 65: Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non-GAAP)
Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non-GAAP) to Combined Adjusted EBITDA Margin (Non- GAAP) (Year Ended December 31, 2015) Pro Forma Unaudited In millions Adjustments Pro Forma Net income (GAAP) $ 85 $ 7 (A) $ 93 Provision for income taxes 53 1 (D) 53 Interest expense 2
Slide 66: Notes to the Unaudited Pro Forma Adjustments
Notes to the Unaudited Pro Forma Adjustments For more information regarding the Ingevity’s unaudited pro forma combined statements of operations for the year ended December 31, 2015, see “Unaudited Pro Forma Combined Financial Statements” in Ingevity’s registration statement on Form 10 and amendment
Slide 67: Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non-GAAP)
Reconciliation of Net Income (GAAP) to Combined Adjusted EBITDA (Non-GAAP) to Combined Adjusted EBITDA Margin (Non- GAAP) In millions 2015 2014 2013 2012 2011 2010 Net income (GAAP) $ 85 $ 133 $ 118 $ 122 $ 114 $ 76 Provision for income taxes 53 70 66 67 59 38 Interest expense 21 16 13 12 12 12 Sepa
Slide 68: Reconciliation of Segment Operating Profit (GAAP) to Segment EBITDA (Non-GAAP)
Reconciliation of Segment Operating Profit (GAAP) to Segment EBITDA (Non-GAAP) Performance Chemicals In millions 2015 2014 2013 Segment operating profit (GAAP) $ 87 $ 124 $ 126 Depreciation and amortization 24 23 23 Segment EBITDA (Non-GAAP) $ 111 $ 147 $ 149 Combined Adjusted EBITDA (Non-GAAP) 203
Slide 69: Historical Income Statement
Historical Income Statement ($M) 2013 Actual 2014 Actual 2015 Actual Sales 980 1,041 968 COGS 685 718 687 Gro ss P ro fit 295 323 281 SG&A 103 112 114 Other (income) expense, net (5) (8) (9) Separation Costs 0 0 17 Interest Expense 13 16 21 Inco me b e f o re T ax 184 203 138 Tax Provision 66 70 53
Slide 70: Historical Balance Sheet
Historical Balance Sheet ($M) As s ets D ec . 31, 2014 Dec . 31, 2015 Cash 20 32 Accounts Receivable, net 108 96 Inventory, net 130 151 Prepaids & other current assets 13 20 0 0 Current Assets 271 299 PP&E 410 438 Goodwill 13 12 Other intangibles, net 13 10 Other assets 11 23 Total As s ets 718 782