Rayonier Advanced Materials Inc. · NYSE:RYAM

Rayonier Advanced Materials — Investor Day (March 2017)

105 slides from Rayonier Advanced Materials's investor day presentation, Mar 16, 2017

1. Slide 1: Investor Day 2017

   | stor Da RAYONIER nve y Advanced Materials. 2017

2. Slide 2: Safe Harbor

   Safe Harbor Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Rayonier Advanced Materials’ future events, developments or financial or operational performan

3. Slide 3: Non-GAAP Financial Measures

   Non-GAAP Financial Measures These presentation materials contain certain non-GAAP financial measures, including EBITDA, adjusted free cash flows, pro forma operating income, pro forma net income and adjusted net debt. These non-GAAP measures are reconciled to each of their respective most directly c

4. Slide 4: Agenda

   Agenda  Vision, Values & Strategy Paul Boynton  Financials John Carr  Market Optimization Erin Byers  Cost Transformation Bill Manzer  New Products Matt Nightingale  Acquisitions Frank Ruperto  Closing Remarks Paul Boynton 4

5. Slide 5: If you put fences around people, you get sheep

   “If you put fences around people, you get sheep.” William McKnight 3M Chairman of the Board 1949-1966 5

6. Slide 6: Topics

   Topics  Who we are  Vision, Values and Culture  Challenges We Face  Strategic Growth Plan 6

7. Slide 7: Company Profile

   Company Profile Business Global leader in highly-purified cellulose specialties (CS) products Revenue1 $869 million Operating $138 million / 16% Income/Margin1 Locations  Corporate Headquarters: Jacksonville, FL  Manufacturing Facilities: – Jesup, GA – Fernandina Beach, FL  Sales Offices: – Jesup

8. Slide 8: Market Pulp Industry Value Chain

   Market Pulp Industry Value Chain* Market pulp industry : 65 MMT Cellulose Specialties segment: 1.4 MMT Cellulose High Strength Viscose and Specialties Specialty High Value Dissolving Pulp Commodity 5 MMT Viscose Fluff Acetate 5 MMT Commodity Ethers Market Pulp 54 MMT Increasing Specialization & Sale

9. Slide 9: We're NOT Your Traditional Pulp and Paper Company

   We’re NOT Your Traditional Pulp and Paper Company Standard Market Pulp Applications 9

10. Slide 10: We're Closer to You Than You Think

    We're Closer to You Than You Think 10 10

11. Slide 11: We're Closer to You Than You Think

    We're Closer to You Than You Think 11 11

12. Slide 12: We're Closer to You Than You Think

    We're Closer to You Than You Think 12

13. Slide 13: We're Closer to You Than You Think

    We're Closer to You Than You Think 13

14. Slide 14: We're Closer to You Than You Think

    We're Closer to You Than You Think 14

15. Slide 15: Knowledge and Investment Make the Difference

    Knowledge and Investment Make the Difference $2,500 $$$$ Incremental Mfg Capital Investment $2,000 per Annual Ton $1,500 $$$ $1,000 $500 $0 $ 85% 100% % Alpha Cellulose (Purity) 15

16. Slide 16: Spinning Cellulose Acetate Fibers Demonstrates Importance of Purity

    Spinning Cellulose Acetate Fibers Demonstrates the Importance of Consistency and High Purity Customers process our pulp through a spinnerette like the one above, where the holes are smaller than a human hair. Purity is crucial. Acetate Filament Hair Potential for molecular buildup of impurities 16

17. Slide 17: 90 Years of Creating Value

    RAYONIER Advanced Materials... 90 Years of Creating Value mn ruuenrer BP AVYONIER_ Rayonier RAYONIER Rs ee Soeaero MW TINT RAYONIER. Rayonier

18. Slide 18: History Built on Customers, Continuous Improvement and Innovation

    History Built on Customers, Continuous Improvement and Innovation  1926 – Rainier Pulp and Paper Company founded  1930s – Teamed up with DuPont to produce purified hemlock cellulose for rayon fibers 18

19. Slide 19: Late 1930s | Rayonier Expands to US South

    Late 1930s | Rayonier Expands to US South  Rayonier develops a novelty process to make dissolving pulps from Southern Pine 19

20. Slide 20: 1939-45 | Rayonier Contributes to War Effort

    1939-45 | Rayonier Contributes to War Effort  Rayon tire cord developed to withstand hot temperatures of war zones  Smokeless explosive powder developed using high purity cellulose  War Board takes over Rayonier Fernandina plant 20

21. Slide 21: 1945 | Environmental Innovation

    1945 | Environmental Innovation  Rayonier researchers identify alternative waste disposal  Shelton, Washington plant becomes the first in the world to burn its spent liquor, which is now the common practice 21

22. Slide 22: Early 1950s | Prehydrolyzed Kraft

    Early 1950s | Prehydrolyzed Kraft  Rayonier scientists perfect kraft processes for dissolving wood pulps  1952 – Jesup, Georgia plant started 22

23. Slide 23: 1960s | Improved Fluff Pulp

    1960s | Improved Fluff Pulp  Working with Johnson & Johnson, Rayonier scientists design high quality absorbent fluff pulp for J&J’s entry into the emerging disposable diaper market 23

24. Slide 24: 1960s | High Tenacity Viscose

    1960s | High Tenacity Viscose  Further development in high tenacity viscose leads to improvements in high performance tires and a new application for sausage/hot dog casings 24

25. Slide 25: 1960-70s | Acetate Growth

    1960-70s | Acetate Growth  Acetate product development is fueled by exceptional growth in the acetate market driven by cigarette filters and photographic film 25

26. Slide 26: 1990s | Acetate for LCD Applications

    1990s | Acetate for LCD Applications  Perfected ultra high purity acetate for use in LCD screens 26

27. Slide 27: 2000s | Absorbent Materials

    2000s | Absorbent Materials  Rayonier scientists develop NovaThinTM ultrathin absorbent core material for hygiene products 27

28. Slide 28: 2016 | Innovation Continues

    2016 | Innovation Continues Hydrogel Biodegradable super absorbent polymer for agricultural applications Eight Flags Energy Combined Heat and Power Plant Highly Efficient Power Plant 28

29. Slide 29: Vision, Values and Culture

    RAYONIER ) Advanced Materials. Vision, Values and Culture

30. Slide 30: Our Vision

    Our Vision Applying Science to Nature 30

31. Slide 31: Our Values

    Our Values Integrity first… Accountability always… Quality in everything we do… The Separation People are the foundation for success… 31

32. Slide 32: Rayonier Advanced Materials Cultural Cornerstones

    = Rayonier Advanced Materials Cultural Cornerstones Customer Centric Continuous improvement RAYONIER), Advanced Materials.

33. Slide 33: The Challenges We Face

    RAYONIER ) Advanced Materials. The Challenges We Face

34. Slide 34: Our Challenge

    Our Challenge  Flat Demand for Acetate Products  Supply/Demand Imbalance  Strong Dollar Effectively Lowering Competitors’ Costs 34

35. Slide 35: Strategic Growth Plan

    RAYONIER ) Advanced Materials. Strategic Growth Plan

36. Slide 36: Transforming our Business

    Transforming our Business Title Date/Name 36

37. Slide 37: RYAM 2020

    RYAM )2020 YESTERDAY TOMORROW Customer Focus Continuous Improvement : : Financials PILLARS OF GROWTH New Products Acquisitions

38. Slide 38: Pillars of Growth Objectives

    Rapidly create Optimize market Create a pipeline Create a diversified, a more cost to mix to of customer faster growing competitive capabilities valued new business structure products and services 38

39. Slide 39: What does Rayonier Advanced Materials look like after 2020?

    What does Rayonier Advanced Materials look like after 2020?  Much larger and diversified business  #1 or #2 in each strategic segment we serve  New product pipeline fueled by internal and external ideas  New pathways for continued growth  More efficient and integrated processes and systems 39

40. Slide 40: Questions

    RAYONIER Advanced Materials...

41. Slide 41: Financials

    RAYONIER Advanced Materials...

42. Slide 42: 2016 Financial Highlights

    2016 Financial Highlights Full Year Ended  Revenue Drivers Fourth Quarter Ended ($ Millions) 2016 2015 2016 2015 • Pricing down reflecting annual price negotiations; Cellulose Specialties prices Sales $ 231 $ 242 $ 869 $ 941 down 7% from 2015 • Cellulose Specialties volumes Operating Income 26 29 1

43. Slide 43: Capital Resources & Liquidity

    Capital Resources & Liquidity Twelve Months Ended ($ Millions) December 31, 2016 December 31, 2015 Cash Provided by Operating Activities $ 232 $ 202 Cash Used for Investing Activities (87) (78) Cash Provided by (Used for) Financing Activities 80 (89) Adjusted Free Cash Flows* 147 124 Debt Principal

44. Slide 44: Attractive Capital Structure with Low-Cost, Long-Term Debt

    Attractive Capital Structure with Low-Cost, Long-Term Debt $ millions Interest Q4 2016 Cumulative Debt Rate (1) Balance Leverage Maturity Revolving Credit Facility (2) 2.26% 0.0x 2019 Term Loan A 2.26% 31 0.1x 2019 Farm Credit Term Loan (3) 1.84% 251 1.2x 2021 Senior Notes 5.50% 506 3.5x 2024 Capita

45. Slide 45: 2017 Full Year Guidance

    2017 Full Year Guidance  Cellulose specialties ("CS") prices 3 to 4% below 2016 average price primarily due to lower acetate pricing and mix  CS volumes flat to slightly down compared to 2016 due to the timing of revenue recognition  Commodity sales volumes approximately 10% higher, assuming a ba

46. Slide 46: EBITDA Bridge

    EBITDA Bridge 2016 Pro Forma to 2017 Guidance 226 (35) 4 (25 - 30) 25 - 30 190 - 200 2016 CS Commodity Inflation Cost 2017 Pro Forma Price / Mix / Costs Price / Mix / Costs & Costs Improvements Guidance 46 The statements on this page should be considered “forward-looking statements.” See the caution

47. Slide 47: Capital Allocation

    Capital Allocation Generate $80 to $90 million of Adjusted Free Cash Flows*  Increase financial flexibility  Invest in strategic pillars of Reduce Increase growth Costs Cash – Cost Transformation – Market Optimization Invest in Growth – New Products – Acquisitions * Non-GAAP measures (see Appendix

48. Slide 48: Questions

    RAYONIER Advanced Materials...

49. Slide 49: Market Optimization

    RAYONIER ) Advanced Materials. Market Optimization

50. Slide 50: Market Optimization Vision and Mission

    Market Optimization VISION Maximum earnings from optimum product and market mix MISSION Identify and achieve optimum sustainable sales mix based on RYAM production capabilities, end markets and customer attractiveness 50

51. Slide 51: Market Optimization Begins with a Strong Asset Base

    Market Optimization Begins with a Strong Asset Base Low Cost, Flexible Manufacturing Facilities produce more than 25 different grades of cellulose specialties Jesup, GA Fernandina Beach, FL  Kraft plant  Sulfite plant  Three production lines  One production line — Two lines with CS capability —

52. Slide 52: Technical Leadership in Cellulose Specialties

    Technical Leadership in Cellulose Specialties The “Rayonier Advanced Materials’ Recipe” Process Flexibility Customized for each customer application RAW juvenile, exterior fiber, center fiber, region Hardwood Softwood hardness Caustic (high pH) Ammonia (low pH) Kraft Sulfite Process sequence, bleach

53. Slide 53: Revenue & Primary End Uses

    Revenue & Primary End Uses RYAM 2016 Revenue End Uses & Growth Rate* Acetate Ethers Other CS Commodity  Small producer 20% Cellulose Significant producer and industry leader with flexibility Specialties in fluff and viscose Commodity 80%  Relatively Flat  At or Above  Modest  Solid Growth; GDP

54. Slide 54: Products Overview

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55. Slide 55: Cellulose Specialties Market Dynamics

    Cellulose Specialties Market Dynamics  Acetate – Driven by global cigarette demand – Tow inventory destocking in China settling out – Tow producers under price and margin pressure  Ethers – Demand growing at or above GDP levels – Prices at bottom of the market – Some signs of price improvement – R

56. Slide 56: Market Dynamics

    Market Dynamics  Supply and demand imbalance  FX currently benefiting foreign competitors  Recent currency stabilization Foreign Currency Index to USD Jan 2014* 1.10 1.00 0.90 Canada – Tembec Euro – Tembec 0.80 Brazil – Bracel Norway - Borregaard 0.70 0.60 0.50 Canadian $ Norway Kroner Brazilian

57. Slide 57: Ability to Capture Value

    Market Optimization Position our ~730,000 MT of capacity to maximize value within our ~11 million MT* Markets Cellulose Specialty End Markets Commodity Acetate Film End Markets Acetate Specialty Ability to Capture Value Fluff Acetate Plastics Viscose Staple Acetate Tow Viscose Filament Acetate Yarn

58. Slide 58: What are we doing?

    What are we doing?  Understand market situation with evaluation of dynamic end market segments  Remain customer centric – Quality – Innovation – Value – Commercial Engagement – Technical Support  Expand sales force  Focus on underserved markets  Match changing capabilities to market conditions

59. Slide 59: Questions

    RAYONIER Advanced Materials...

60. Slide 60: Cost Transformation

    RAYONIER ) Advanced Materials. Cost Transformation

61. Slide 61: Cost Transformation Vision and Mission

    Cost Transformation VISION Rapidly reshape the company Achieve a sustainable globally competitive cost MISSION position in any market environment through continuous improvement and creativity that enables our customers, company and employees to pursue growth opportunities 61

62. Slide 62: Cost Trends and Exposure

    Cost Trends and Exposure  Raw Materials & Energy – Wood Fiber • 1.6 million tons hardwood and 2.5 million tons pine chips per year – Chemicals • Caustic Soda, Sulfuric Acid, Ammonia, Sodium Chlorate, Specialty Chemicals – Energy • Natural Gas, Fuel Oil, Electricity  Labor  Maintenance  Transport

63. Slide 63: Historical Cash Cost per Ton

    Historical Cash Cost per Ton* Historical inflation was offset by rising sales prices 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 * (Cost of goods sold – Depreciation & amortization) / Tons sold 63

64. Slide 64: Cost Transformation Shifts Cost Trend

    Cost Transformation Shifts Cost Trend Every Person, Everyday, Driving Continuous Improvement Where we have been Where we are going 2019 and beyond 2015 2016 2017 2018 2019 and after Reinvigorated Brand: Cost Process Drives Final Stage of Culture of focus on cost Transformation Results Three Year con

65. Slide 65: Cost Transformation Shifts Cost Trend

    Cost Transformation Shifts Cost Trend Costs per Ton* decreased dramatically since Cost Transformation 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 * (Cost of goods sold – Depreciation & amortization) / Tons sold 65

66. Slide 66: 4 Year Total Cost Improvement

    Cost Transformation ($ Millions) 25 4 Year Total Cost Improvement 30 $125M - $140M 50 35 * $85 million in Cost Improvements achieved through 2016 * Breakdown of expected future cost savings on a run-rate basis included for illustrative purposes. To be refined in future periods to reflect actual resu

67. Slide 67: Success Through 2016

    Success Through 2016  SGA costs decreased 20% in 2016 – Process improvements – Streamlining roles and responsibilities – Rationalize services with internal capabilities  Cost per ton* down 9% since 2014 – Optimize wood sourcing program – Energy cost management – Improve raw material use efficiency

68. Slide 68: Cost Transformation - Wood

    Cost Transformation - Wood 68

69. Slide 69: Cost Transformation - Maintenance

    Cost Transformation - Maintenance 69

70. Slide 70: Cost Transformation - Energy

    Cost Transformation - Energy 70

71. Slide 71: Sustainable Process of Continuous Improvement

    Sustainable Process of Continuous Improvement Drives Cost Transformation after 2018 Ideas for Continuous Training & Improvement Education Vetting & Recognition of Prioritizing Communication Results Activities Standard Processes Changing Processes for Sustainable Executing Initiatives Results 71

72. Slide 72: Questions

    RAYONIER Advanced Materials...

73. Slide 73: New Products

    RAYONIER ) Advanced Materials. New Products

74. Slide 74: New Products Vision and Mission

    New Products VISION A pipeline of customer-valued, new product and service offerings MISSION Improve profitability by generating 20% of sales from new products developed in the prior ten years 74

75. Slide 75: Scope

    Scope New Valuable Market Existing Market Market Optimization Existing Product New Product New products in existing markets, existing products in new markets and new products in new markets with differentiation 75

76. Slide 76: The Challenge

    The Challenge Current markets and products are mature with modest growth prospects  New Products to achieve margin growth and product diversification – 20% revenue from new products equates to ~$200 million – Annual basis the new products revenue target is $20 million – Each new product must be add

77. Slide 77: New Products Platform

    a Otis New Products Platform @ Next generation cellulose y fibers | N wu @ from cellulose ,) \ conoucs RAYONIER ), ne Advanced Materials.

78. Slide 78: Process

    Process Target 20% of Revenue from new products from prior 10 years Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Ideas Idea development Proof of concept Lab Pilot Industrial Commercial 1 2 3 4 5 Requirement Requirement Requirement Requirement Requirement  Market  Business  Customer  C

79. Slide 79: New Products Pipeline

    New Products Pipeline Priority 1 Priority 2 Priority 3 = Relative EBITDA Opportunity Stage O Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Ideas Idea development Proof of concept Lab Pilot/Mill Trials Industrial Commercial Sapphire Tire Cord & Casings 1 2 3 4 5 79 Illustrative Pipeline for Discuss

80. Slide 80: Ether/Sapphire Demonstration

    Ether/Sapphire Demonstration 80

81. Slide 81: Marketing & Research Center

    Jim Posa (jimposa@seguegroupllc.com), Shah, Ali, Treur, Peter* Marketing & Research Center  90 years of cellulose chemistry leadership – World’s most comprehensive cellulose research database  Capability to replicate all of Fernandina and Jesup processes at pilot scale Customer Centric  Ability t

82. Slide 82: Questions

    RAYONIER Advanced Materials...

83. Slide 83: Acquisitions

    RAYONIER ) Advanced Materials. Acquisitions

84. Slide 84: Acquisitions Vision and Mission

    Acquisitions VISION Create a diversified, faster growing business targeting complementary combinations MISSION Identify, execute and integrate external business opportunities through mergers, acquisitions and partnerships to enhance the growth prospects of the company and drive shareholder returns 8

85. Slide 85: Key Acquisition Objectives

    Key Acquisition Objectives Broaden portfolio into attractive end-markets driving enhanced returns  Leverage RYAM's leadership, technical expertise and assets where possible  Identify external opportunities that broaden and diversify offering  Drive business into areas that have long-term attracti

86. Slide 86: Logical Paths

    Logical Paths Cellulose Track Specialty Chemical Track Scale Market Growth Synergies # of Opportunities Product Diversity ROIC Near-Term Leverage Purchase Multiple Least Attractive Most Attractive 86

87. Slide 87: Cellulose Track Pathways

    Cellulose Track Pathways Cellulose opportunities exist allowing for enhanced scale and diversity Absorbents Water & Air Treatment Disposable Hygiene Air-laid Absorbents Personal Care Construction Cellophane Clothing Casings CS Fluff / DWP Nonwoven / Filtration RYAM NBSK / Specialty Paperboard Paper

88. Slide 88: Cellulose Track Examples

    Cellulose Track Examples Filtration/Nonwoven Downstream Selected Disposable Hygene, Filters, House Emulsifiers in Food & Pharma (Ethers Products Wraps, Household & Personal Wipes, & MCC), Disposable Diapers (fluff), Insulation Air Filters , Nitrocellulose Technical Specialties, Building & Key End Fo

89. Slide 89: Specialty Chemical Pathways

    Specialty Chemical Pathways A focus on attractive end-markets can expand RYAM’s opportunity set allowing path for future growth Water Treatment Performance Additives Paint Colorants Preservatives Construction Hydrocolloids Adhesives Texturizers Filtration Flavors Coatings Oilfield Industrial Food &

90. Slide 90: Specialty Chemical Track Examples

    Specialty Chemical Track Examples Separation and Purification Wood Based Chemicals Selected Filters, as well as hardware and other Aroma chemicals, flavors, fragrances, analytical equipment, breathing binders, emulsifiers, paints and Products circuit filters, fluid monitoring coatings, bio lubricant

91. Slide 91: Strategic Acquisitions

    Strategic Acquisitions  Acquisitions are a core pillar to our growth strategy  Acquisitions will be focused in areas that are complementary in nature in the cellulosic and specialty chemicals sectors  Opportunities will leverage our core capabilities and assets to drive maximum value  Diversifyi

92. Slide 92: LignoTech Florida

    LignoTech Florida Lignin Venture  Partner with Borregaard for the manufacturing, marketing and sale of natural lignin-based products at Fernandina facility  Utilizing co-product of manufacturing process, currently used for energy value  Target completion in 2 phases over 5 years  Aggregate ~$135

93. Slide 93: LignoTech Florida

    LignoTech Florida • Lignin Conversion • Raw Materials from Technology 55% 45% Sulfite Pulping Process • Marketing & Sales • Utilities & Services ~50% Financing 93

94. Slide 94: Global Applications & Growth Rates

    Global Applications & Growth Rates  Global growth expected to be driven by: Global Application by Volume – Construction in Americas – Agro and Auto in Asia Pacific Miscellaneous Construction – Feed Globally 36% 54%  LignoTech Florida to primarily service 10% Americas in Construction and Feed marke

95. Slide 95: Questions

    RAYONIER Advanced Materials...

96. Slide 96: Closing Remarks

    RAYONIER ) Advanced Materials. Closing Remarks

97. Slide 97: Persistence

    Persistence "Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone

98. Slide 98: Questions

    RAYONIER Advanced Materials...

99. Slide 99: Thank you for joining Investor Day 2017

    Thank your for joining Investor Day 2017 For follow up questions, please contact Mickey Walsh at (904) 357-9162 or email InvestorRelations@RayoinerAM.com

100. Slide 100: Appendix

     RAYONIER Advanced Materials... Appendix

101. Slide 101: Definitions of Non-GAAP Measures

     Definitions of Non-GAAP Measures EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing stockholders and potential stockholders to measure how the Company is performing relative to the ass

102. Slide 102: Reconciliation of Non-GAAP Measures

     Reconciliation of Non-GAAP Measures ($ Millions) Three Months Ended Twelve Months Ended December 31, December 31, 2016 2015 2016 2015 EBITDA Reconciliation Net Income $ 11 $ 13 $ 73 $ 55 Depreciation and amortization 24 24 88 89 Interest expense, net 9 9 35 37 Income tax expense 6 7 39 28 EBITDA $ 5

103. Slide 103: Reconciliation of Non-GAAP Measures

     Reconciliation of Non-GAAP Measures ($ Millions) December 31, 2016 December 31, 2015 Adjusted Net Debt Reconciliation Current maturities of long-term debt $ 9 $ 8 Long-term debt & capital lease obligation 774 850 Total debt $ 783 $ 858 Original issue discount and debt issuance costs 9 11 Cash and ca

104. Slide 104: Reconciliation of Reported to Pro Forma Earnings

     Reconciliation of Reported to Pro Forma Earnings ($ Millions, except per share amounts) Three Months Ended Twelve Months Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Per Per Per Per Diluted Diluted Diluted Diluted Pro Forma Operating Income and Net Income: $ Share $

105. Slide 105: Reconciliation of Guided Non-GAAP Measures

     Reconciliation of Guided Non-GAAP Measures ($ Millions, except per share amounts) Minimum Maximum 2017 Net Income Guidance $ 41 $ 48 Income tax expense 27 30 Interest expense, net 37 37 Depreciation and amortization 85 85 2017 EBITDA Guidance $ 190 $ 200 Minimum Maximum 2017 Operating Cash Flows Gui

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