Valvoline Inc. · NYSE:VVV
Valvoline — Q4 2018 Earnings Presentation
25 slides from Valvoline's earnings presentation, Nov 6, 2018
Slide 1: Fourth-Quarter Fiscal 2018 Earnings
Fourth-Quarter Fiscal 2018 Earnings Sam Mitchell, CEO Mary Meixelsperger, CFO Sean Cornett, Director of Investor Relations November 6, 2018 http://investors.valvoline.com
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements related to Valvoline’s business plans and operating results are forward-looking statements within the meaning of the Private Securities Litigatio
Slide 3: Fourth-Quarter & FY18 Reported Results
Fourth-Quarter & FY18 Reported Results Notes on reporting and year-over-year (YoY) impacts Pension-related items (in millions, except per-share data) Q4 FY18 - Non-service pension and OPEB income reclassified as non-operating; Operating income $105 $395 excluded from adjusted1 results as a Key Item
Slide 4: Fourth-Quarter & FY18 Adjusted Results Overview
Fourth-Quarter & FY18 Adjusted1 Results Overview Adjusted1 EBITDA growth of 9% in Q4 (in millions, except per-share data) Q4 FY18 Full-year adjusted1 EBITDA growth of 4%, to a record $466 million Adjusted1 operating $106 $412 income Adjusted1 EBITDA $121 $466 Adjusted1 EPS growth of 21% in Q4
Slide 5: Fourth-Quarter & FY18 Financials
Fourth-Quarter & FY18 Financials ($ in millions, except per-share data) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, P&L Results and Ratios 2018 2017 Change 2018 2017 Change Lubricant gallons (in millions) 46.6 45.6 2 % 181.9
Slide 6: Corporate Items
Corporate Items • Net interest and other financing expense of $18 million in Q4, up $4 million YoY • Full-year net interest and other financing expense of $63 million, up $21 million YoY • Effective tax rate of 21.1% in Q4, adjusted1 effective tax rate of 26.1% • Full-year effective tax rate of 50.0
Slide 7: Fiscal 2019 Guidance
Fiscal 2019 Guidance Highlights 2019 Outlook Operating Segments • SSS growth expected to continue • Lubricant Gallons 2.5-3.5% • Adjusted1 EBITDA anticipated to • Revenues 7-9% grow low-single to mid-single digits • New Quick Lube stores (excluding acquired stores) • Adjusted1 EPS expected to grow m
Slide 8: Segment Results Summary
Segment Results Summary Core North America Quick Lubes International Q4 FY18 Q4 FY18 Q4 FY18 (YoY change) (YoY change) (YoY change) Total Volume flat -1% SSS (system-wide) 7.6% 8.3% Volume +3% +2% Sales +2% +3% Sales +23% +22% Volume with JVs +4% +4% 49.5%, 49.2%, Net new stores 88 115 Sales +5% +9%
Slide 9: Resilient Business Model
Resilient Business Model VVV Base Oil GP/GAL1 Historical GP/gallon vs. Base Oil Price Price/GAL2 $4.50 /GAL $2.70 /GAL $4.30 /GAL $2.50 /GAL TTM Total Valvoline GP/Gallon $4.10 /GAL $2.30 /GAL TTM Average Base Oil Price/Gallon $3.90 /GAL $2.10 /GAL $3.70 /GAL $1.90 /GAL Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 20
Slide 10: Core North America - Performance
Core North America - Performance FY18 Volume by Channel FY18 – Results below expectations - Retail – DIY volume impacted by increased competitive promotional activity - Installer – unfavorable account mix and competitive pricing Installer Lower unit margin outlook, ~$3.60 - $3.70/gallon Retail Key f
Slide 11: Core North America – Outlook
Core North America – Outlook FY19 – Taking actions 1. Adjusting marketing tactics in DIY 2. Driving value-added services, penetration of broader product portfolio in Installer channel 3. Pursuing share gain opportunity with low investment needed in Heavy Duty 4. Focusing on cost efficiencies 11
Slide 12: Quick Lubes - Outlook
Quick Lubes - Outlook Average System-wide SSS1 per Store ($k) FY18 results exceeded expectations - 12 straight years of SSS growth; system-wide strength - Digital marketing programs & store-level execution - Added 115 stores, including first international $1,022 expansion with Great Canadian Oil Cha
Slide 13: International - Outlook
International - Outlook FY18 Sales by Region FY18 Adjusted1 EBITDA growth of 12% - Adjusted1 EBITDA up 9% at constant currency - Softer volume growth EMEA - Emerging markets volume up 7% including unconsolidated JVs FY19 improving volume trend expected Asia Pacific - High-single digit volume growth;
Slide 14: International - Opportunity
International - Opportunity Large Markets Share Gains Volume Growth Formula for Success Emerging Markets Volume2 (lubricant gallons, MM) LatAm Asia Middle Pacific - East & Other Channel development 80 Africa Superior products and brand 60 building Europe 40 China OEM partnerships 20 North Indi
Slide 15: Driving Shareholder Value
Driving Shareholder Value
Slide 16: Capital Allocation Priorities
Capital Allocation Priorities % of Operating Cash Flow1 Spend2 FY16 – FY18 Sustain Core North America’s strong cash 1 12% generation Invest organically and inorganically to 2 46% expand Quick Lubes and grow International Return excess capital to shareholders via Target 45-60% of operating cash 3 53%
Slide 17: Core North America Funds Growth Opportunities
Core North America Funds Growth Opportunities Core North America Generated Strong EBITDA Margins over $500MM Quick Lubes & in EBITDA-less- Other High- Low Capital Intensity CapEx in the last return projects three fiscal years 17
Slide 18: Capital Allocation in Action – Quick Lubes
Capital Allocation in Action – Quick Lubes Same Store Sales Growth1 New Unit Economics Quick Lube Market Opportunity (%) Store count9 Avg. capital investment of $1.5M Jiffy Lube 8.3 Store EBITDA Ramp Valvoline including 7.5 7.4 ~$350k U.S. Express Care Express Oil Change Non-national brands ~3 ~2 ~2
Slide 19: Creating Value by Driving Quick Lube Growth
Creating Value by Driving Quick Lube Growth Trend in Adjusted EBITDA1 Mix FY16 FY18 FY23E2 Int’l Int’l Int’l Core NA Core NA Core NA Quick Quick Lubes Quick Lubes Lubes FY2018 Segment Adjusted EBITDA1 % of Sales Quick Lubes 28% Core NA 18% International 15% Our most profitable business is the fastes
Slide 20: Appendix
Click to edit Master title style Appendix 20
Slide 21: Key Items Affecting Income
Key Items1 Affecting Income ($ in millions, except per-share data) Fourth Quarter Impact Preliminary and unaudited Total Operating Earnings 2018 Income Pre-tax After-tax per Share Net pension & OPEB expense $ - $ (30) $ (20) $ (0.11) Legacy and separation-related costs, net $ - $ - $ 3 $ 0.02 Acquis
Slide 22: Core North America
Core North America ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary an unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 2018 2017 Change 2018 2017 Change Lubricant gallons (in millions) 24.9 24.9 - % 98.8 99.4 (1) % Sales $ 262 $ 256 2 % $ 1,035 $ 1,004 3 % Operating
Slide 23: Quick Lubes
Quick Lubes ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 2018 2017 Change 2018 2017 Change Lubricant gallons (in millions) 6.6 6.1 8 % 24.4 22.5 8 % Sales $ 181 $ 147 23 % $ 660 $ 541 22 % 1 Adjusted Operating
Slide 24: International
International ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 2018 2017 Change 2018 2017 Change Lubricant gallons (in millions) 15.1 14.6 3 % 58.7 57.8 2 % Sales $ 151 $ 144 5 % $ 590 $ 539 9 % 1 Adjusted Operatin
Slide 25: Accelerating Into the Future
ACCELERATING INTO THE FUTURE VALVOLINE 15M-30 za = FULL SYNTHETIC | eae | Valvoline. 25