Slide 1: FY 2017 Results
FY 2017 Results Enhanced Performance Through Applied Innovation
Slide 2: Cautionary statement
Cautionary statement FEBRUARY 2018 This presentation, the presentation materials and discussion may contain certain forecasts, projections and forward looking statements – that is, statements related to future, not past events - in relation to, or in respect of the financial condition, operations or
Slide 3: Results agenda
Results agenda 2017 HIGHLIGHTS Paul Waterman 2017 FINANCIALS Ralph Hewins SUPPLY CHAIN TRANSFORMATION Rob Mangold 2018 PRIORITIES & OUTLOOK Paul Waterman QUESTIONS Paul Waterman, Ralph Hewins & Rob Mangold Enhanced Performance Through Applied Innovation 3
Slide 4: 2017 Highlights
2017 Highlights PAUL WATERMAN | CEO Enhanced Performance Through Applied Innovation
Slide 5: Safety performance
Safety performance PURSUING CONTINUOUS IMPROVEMENT RECORDABLE INCIDENT RATE HIGHLIGHTS 3 Performance – Good underlying performance US chemicals – SummitReheis new to portfolio – upgrading to Elementis 2 standards – Only two recordable incidents resulted in Lost Time Elementis Accidents requiring mor
Slide 6: 2017 results
2017 results A YEAR OF IMPROVED FINANCIAL PERFORMANCE $m 2016 2017 % Change Sales 660 830 + 26% Operating profit* 97 128 + 32% Operating margin* 14.7% 15.4% + 70bps Profit before tax* 93 115 + 25% Net cash / (debt) 78 (291) - Diluted EPS* 17.4c 19.5c + 12% Dividends per share 8.45c 8.80c + 4% *After
Slide 7: Key messages
Key messages REIGNITE GROWTH PERSONAL PORTFOLIO CASH S T R AT E G Y CARE T R A N S F O R M AT I O N G E N E R AT I O N S E G M E N TA L Implementation Fast growth, now the Surfactants & US Capital efficiency Move to new segments. at pace largest profit Colourants sales, driving cash Reporting at int
Slide 8: How we will reignite growth
How we will reignite growth STRATEGIC PRIORITIES IN ACTION Pursue Pursue Innovate Create Best Growth Supply Chain for High Margins a Culture of Opportunities Transformation & Distinctiveness High Performance PERST O RN AA TL E C G AY R E PER PSOO RNTA FLO LCI A OR E PORTFOLIO CASH GENERATION SEGMENT
Slide 9: Personal care
Personal care A BUSINESS OF SCALE THAT IS GROWING FAST PERSONAL CARE SALES $M GROWTH DRIVERS – LEGACY BUSINESS 200 180 EMERGING MARKETS +46% 160 ELEMENTIS 2017 140 SUMMIT ASIA SALES GROWTH* REHEIS: 120 102 100 80 PRODUCT PENETRATION 60 40 20 LEGACY: 77 +23%* 2017 NEW PRODUCT LAUNCHES WITH BENTONE ®
Slide 10: Colour cosmetics
Colour cosmetics THE MOST DYNAMIC, HIGH GROWTH PERSONAL CARE SECTOR CASE STUDY: FENTY WHERE DOES ELEMENTIS COME IN? Fenty Beauty ® makeup line launched Fenty Beauty ® requires the precise dispersion by Rihanna in September 2017 and suspension of pigment blends Brand launched with unprecedented Eleme
Slide 11: SummitReheis integration
SummitReheis integration ACQUIRED FOR $362M IN MARCH, INTEGRATION COMPLETE WHAT WE PROMISED WHAT WE DID DEAL COMPLETION Completion Q2 17 Integration by end 2017 Key account access I N T E G R AT I O N One Personal Care team Global manufacturing process VA L U E C R E AT I O N Up to $3 million cost s
Slide 12: SummitReheis
SummitReheis RESILIENT PERFORMANCE A HIGH QUALITY ASSET RESILIENT MARGINS DESPITE RAW MATERIAL INFLATION 140 AP ACTIVES 120 High quality business with resilient margins 100 Contribution Margin % Raw materials PHARMA 80 Exciting growth opportunities DENTAL Exploring strategic options for this small b
Slide 13: SummitReheis performance
SummitReheis performance MARGIN RECOVERY & SYNERGIES DRIVING OPERATING PROFIT GROWTH SUMMITREHEIS OPERATING PROFIT BRIDGE 3 28 4 23 (4) 2 21 Enhanced Performance Through Applied Innovation 13
Slide 14: Personal Care opportunities
Personal Care opportunities THREE PILLARS FOR FUTURE GROWTH AP ACTIVES - EMERGING MARKETS LEGACY - ASIA EXPANSION LEGACY - SKIN CARE PENETRATION APDO* PENETRATION SALES, SHARE OF TOTAL SALES, SHARE OF TOTAL 33% 37% 20% 30% 60% 60% 18% 80% 70% 40% 40% 3% Elementis Industry Elementis Industry North Am
Slide 15: Surfactants and Colourants sales
Surfactants and Colourants sales HIGH GRADING THE PORTFOLIO US COLOURANTS – JERSEY CITY SITE SURFACTANTS Assessment Assessment § Non-core business § Disadvantaged asset, material ongoing capital requirements Actions Actions § Sale to Chromaflo Technologies Corp completed March 2017 § Sale to Kolb Di
Slide 16: Portfolio transformation
Portfolio transformation A NEW ELEMENTIS TAKING SHAPE ELEMENTIS SALES Surfactants 8% Chromium 22% Chromium 25% Energy 7% Surfactants business disposal Energy 5% Coatings 43% Step change in Personal Care materiality Coatings 53% Personal Care 28% Higher quality portfolio Personal Care 9% 2016 2017* *
Slide 17: Cash flow focus
Cash flow focus CAPITAL EFFICIENCY TO SUPPORT CASH GENERATION CASH GENERATED BY OPERATIONS $m CAPITAL EFFICIENCY ASSET 132 DISPOSALS Proceeds of over $50m in 2018 122 103 WORKING CAPITAL Underlying $18m reduction IMPROVEMENT by end of 2020 CAPEX Shift to growth and productivity 2015 2016 2017 PERST
Slide 18: Capital allocation discipline
Capital allocation discipline CLEAR CAPITAL ALLOCATION PRIORITIES USE OF OPERATING CASH FLOW Reinvest to grow Capex $40 – 45m per annum Dividends, debt Dividends, Dividend Progressive - maximum 50% payout ratio debt repayment, M&A repayment, M&A M&A Disciplined approach Capex Capex Additional return
Slide 19: New business segmentation
New business segmentation STARTING 2018 – FIRST REPORTING AT INTERIMS PERSONAL CARE COATINGS CHROMIUM ENERGY MATERIALITY HIGH HIGH MEDIUM LOW GROWTH 7 - 10% GDP+ GDP OIL PRICE DEPENDENT PROFITABILITY HIGH MEDIUM MED / HIGH MEDIUM CYCLICALITY NO SOME - GDP LINKED YES YES PERST ORN AA TL E C G AY R E
Slide 20: 2017 Financials
2017 Financials RALPH HEWINS | CFO Enhanced Performance Through Applied Innovation
Slide 21: 2017 group results
2017 group results A YEAR OF IMPROVED FINANCIAL PERFORMANCE $m 2016 2017 % Change Sales 660 830 + 26% Operating profit* 97 128 + 32% Operating margin* 14.7% 15.4% + 70bps Profit before tax* 93 115 + 25% Net cash / (debt) 78 (291) - Diluted EPS* 17.4c 19.5c + 12% Dividends per share 8.45c 8.80c + 4%
Slide 22: Specialty Products
Specialty Products PERSONAL CARE, COATINGS & ENERGY Full Year % Change Strong performance in Personal Constant $m 2016 2017 Reported Currency Care and Energy Sales 460 611 + 33% + 33% Steady growth in Coatings – strong H2 Operating profit* 82 109 + 34% + 28% Pricing responses implemented in response
Slide 23: Personal Care
Personal Care STRONG ORGANIC GROWTH PERSONAL CARE SALES $M PERFORMANCE 200 180 § Sales up 186%* to $179m 160 140 § Legacy business +23%* SUMMIT REHEIS: 120 § Growth driven by both volume and price/mix 102 100 – Global accounts 80 60 – Asia 63 LEGACY: 40 55 77 § SummitReheis – resilient performance 2
Slide 24: Coatings
Coatings SALES GROWTH OF 4%* COATINGS SALES $m PERFORMANCE § Stronger H2 performance +7%* growth vs +2%* H1 400 § Steady growth across all regions 373 361 348 Region vs 16* 300 EMEA +2% 200 AMERICAS +7% ASIA +4% 100 § Pricing actions taken – portfolio rationalisation in progress 0 2015 2016 2017 * C
Slide 25: Global key account management
Global key account management REIGNITE GROWTH - IMPLEMENTATION AT PACE PERFORMANCE BUSINESS MODEL ORGANISATION TOOLKIT & PLAN MANAGEMENT Global model rolled out to Global key account managers Online toolkit, multiyear business plan, new Quarterly and annual review meetings, all key accounts to overs
Slide 26: Energy
Energy SALES UP 65%* - DEMAND RECOVERY ENERGY SALES $m PERFORMANCE SHALE WELLHEAD BREAKEVEN PRICES § Global demand recovery $81/bbl 75 § Growth in new geographic areas and key accounts 59 -57% § Strong onshore US 43 36 $35/bbl 2014 2015 2016 2017 2013 2016 Note: Breakevens are an average across key
Slide 27: Chromium
Chromium HIGH QUALITY, RESILIENT PERFORMANCE CHROME ORE AND PRICING Chrome ore ($/t) Contribution Margin (%) Full Year % Change Constant $m 2016 2017 Reported 350 Currency 300 Sales 169 187 + 11% + 11% 250 Operating profit* 27 30 + 11% + 11% 200 150 Operating margin* 16.1% 16.1% - - 100 50 § Demand
Slide 28: Chromium
Chromium ANOTHER YEAR OF GOOD CASH FLOW GENERATION Operating 30% margin (%) 20% 10% 0% 150% Cash conversion (%) 100% 50% 0% 2011 2012 2013 2014 2015 2016 2017 Cash conversion: operating cash flow / adjusted operating profit Enhanced Performance Through Applied Innovation 28
Slide 29: Surfactants
Surfactants MARGIN OPTIMISATION Full Year %Change Constant $m 2016 2017 Reported Currency Sales 43 48 + 11% + 9% Margin optimisation in H1 17 – did not continue in H2 Operating profit* (1) 5 - - Sale of Surfactants business agreed Long term supply agreement for limited Operating margin* (1)% 11% - -
Slide 30: Group revenue
Group revenue GROWTH ACROSS ALL BUSINESSES REVENUE $m 102 830 4 (1) 18 729 48 660 2016 SPECIALTY CHROMIUM SURFACTANTS FX / OTHER SUMMITREHEIS 2017 PRODUCTS ACQUISITION Enhanced Performance Through Applied Innovation 30
Slide 31: Group operating profit
Group operating profit UNDERLYING PROFIT GROWTH ADJUSTED OPERATING PROFIT $m 17 128 6 112 4 101 5 97 2016 FX 2016 UNDERLYING SURFACTANTS SUMMITREHEIS 2017 @ 2017FX PERFORMANCE ACQUISITION Enhanced Performance Through Applied Innovation 31
Slide 32: Cash flow
Cash flow STRONG OPERATING CASH FLOW $m 2016 2017 EBITDA 122 156 Change in working capital 13 1 Capital expenditure (35) (42) Other (4) (8) Operating Cash Flow 96 107 Pension deficit payments (5) (6) Dividends (76) (78) Acquisitions and disposals - (362) Interest (1) (8) Tax and other (11) (21) Net
Slide 33: Capital spending
Capital spending INCREASED GROWTH CAPEX CAPITAL SPENDING MIX 2015-17 2018-20 23% 42% Maintenance & HSE 58% Growth & productivity 77% Enhanced Performance Through Applied Innovation 33
Slide 34: Pensions
Pensions UK PENSION SCHEME IN FAVOURABLE POSITION UK SCHEME CONTRIBUTIONS $m PENSION UPDATE 45 § Latest planned contribution to UK scheme 40 42 (£5.2m) not required at present due to favourable 35 position 30 25 § UK scheme plan assets include significant interest rate protection 20 21 15 § Triennia
Slide 35: Tax charge
Tax charge LIMITED UNDERLYING IMPACT FROM US TAX REFORM $m 2016 2017 Underlying FY 17 tax rate of 21% Underlying tax charge 11 23 $51m non cash credit from revaluation of Tax charge: adjusting items (4) (57) US deferred tax liabilities Reported tax charge/(credit) 7 (34) Ongoing P&L tax rate of arou
Slide 36: Dividend policy
Dividend policy NEW POLICY ANNOUNCED BEFORE AFTER PROGRESSIVE Approximately 33% PAY OUT RATIO Normally up to 50% Special dividend - up to 50% of ADDITIONAL RETURNS Seek when net debt / EBITDA < 1 year end net cash balance Enhanced Performance Through Applied Innovation 36
Slide 37: Supply chain transformation
Supply chain transformation Rob Mangold VP Global Supply Chain Enhanced Performance Through Applied Innovation 37
Slide 38: Supply chain overview
Supply chain overview ROB MANGOLD - BIO Joined as VP Global Supply Chain in June 2016 Over 30 years of operations experience Previous leadership positions at Stepan Chemical Company and General Electric SPECIALTY CHEMICALS CHROMIUM Enhanced Performance Through Applied Innovation 38
Slide 39: How we will reignite growth
How we will reignite growth PURSUE SUPPLY CHAIN TRANSFORMATION Pursue Pursue Innovate Create Best Growth Supply Chain for High Margins a Culture of Opportunities Transformation & Distinctiveness High Performance ADDRESS DISADVANTAGED ASSETS MANUFACTURING PRODUCTIVITY PURSUE PROCUREMENT SAVINGS § Sol
Slide 40: Addressing disadvantaged assets
Addressing disadvantaged assets 2016 A D VA N TA G E D NEUTRAL D I S A D VA N TA G E D C A S T L E H AY N E CHARLESTON ANJI CORPUS CHRISTI ST LOUIS DELDEN HSINCHU CHANGXING L E AT H E R TA N N I N G P L A N T x 3 JERSEY CITY LIVINGSTON PA L M I TA L M I LWA U K E E NEWBERRY NEW MARTINSVILLE SONGJIAN
Slide 41: Addressing disadvantaged assets
Addressing disadvantaged assets 2018 A D VA N TA G E D NEUTRAL D I S A D VA N TA G E D C A S T L E H AY N E ANJI CHANGXING CORPUS CHRISTI CHARLESTON HSINCHU PA L M I TA L L E AT H E R TA N N I N G P L A N T x 3 LIVINGSTON ST LOUIS M I LWA U K E E LUDWIGSHAFEN NEWBERRY NEW MARTINSVILLE SONGJIANG HUGU
Slide 42: Manufacturing productivity
Manufacturing productivity PRODUCTIVITY GAINS MANUFACTURING COSTS AS PERCENTAGE OF SALES* SUPPLY CHAIN INITIATIVES Jersey City closure/sale – 2017/18 Delden site – 2018 ASSETS 100 Asia organoclay consolidation – 2018/19 US organoclay optimisation – 2019 Automisation across operations PROCESS Driving
Slide 43: Working capital
Working capital INCREMENTAL REDUCTION OF $18M BY END OF 2020 WORKING CAPITAL – OPPORTUNITY TO IMPROVE WORK STREAM DETAIL 40% COMPLEXITY Streamline product portfolio REDUCTION 30% SERVICE LEVEL Implement SLA consistency AGREEMENTS ELEMENTIS 20% INVENTORY Reduce slow moving inventory MANAGEMENT 10% DE
Slide 44: Procurement strategy
Procurement strategy ACTIONS TAKEN IN 2017 RAW MATERIALS SUMMITREHEIS LOGISTICS Right sized supplier base Strengthened strategic suppliers Improved third party logistics Enhanced make/buy strategies Risk management Optimised warehouse network Enhanced Performance Through Applied Innovation 44
Slide 45: 2018 Priorities and Outlook
2018 Priorities and Outlook PAUL WATERMAN | CEO Enhanced Performance Through Applied Innovation
Slide 46: 2018 priorities
2018 priorities MAINTAIN MOMENTUM Pursue Pursue Innovate Create Best Growth Supply Chain for High Margins a Culture of Opportunities Transformation & Distinctiveness High Performance Personal Care growth Complete Surfactants & Expand Personal Care Global Coatings team Jersey City site sales portfoli
Slide 47: 2018 outlook
2018 outlook PERSONAL CARE C O AT I N G S CHROMIUM ENERGY Strong growth Steady growth Resilient performance Good growth PORTFOLIO CASH Continued transformation Strong cash generation Enhanced Performance Through Applied Innovation 47
Slide 48: Enhanced Performance Through Applied Innovation
Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation 48