Avient Corporation · NYSE:AVNT
Avient — Q1 2022 Earnings Presentation
37 slides from Avient's earnings presentation, Apr 20, 2022
Slide 1: Specialty Portfolio Transformation Continues with Dyneema Acquisition
AVIE NT CORP ORAT ION S P E C I A LT Y P O R T F O L I O T R A N S F O R M AT I O N CONTINUES WITH DYNEEMA ACQUISITION 2 0 2 2 F I R S T Q U A R T E R R E S U LT S (NYSE: AVNT)
Slide 2: Disclaimer
DISCLAIMER Forward-Looking Statements In this presentation, statements that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectat
Slide 3: First Quarter 2022 Results
FIRST QUARTER 2022 R E S U LT S
Slide 4: Q1 2022 Performance
Q1 2022 PERFORMANCE ( T O TA L C O M PA N Y ) Sales Adjusted Operating Income Adjusted EPS + 11% + 11% + 11% (+ 14% excluding FX) (+ 15% excluding FX) (+ 16% excluding FX) $1,294 $136 $0.99 $1,162 $123 $0.89 2021 2022 2021 2022 2021 2022 (in millions) (in millions) 4
Slide 5: Q1 2022 Segment Performance
Q1 2022 SEGMENT PERFORMANCE CAI SEM Distribution ($ in millions) + 7% + 7% + 13% + 18% (+ 10% excluding FX) (+ 11% excluding FX) (+ 17% excluding FX) (+ 20% excluding FX) + 19% Flat $650 $95 $245 $40 $433 $89 $217 $609 $24 $24 $34 $363 Sales Operating Income Sales Operating Income Sales Operating In
Slide 6: Q1 2022 Sales and Operating Income
Q1 2022 SALES AND OPERATING INCOME ( T O TA L C O M PA N Y ) Adjusted Sales Growth Rate Operating $ millions Income Q1 2021 $1,162 $123 Sustainable Solutions 19 8% 7 Healthcare 32 21% 6 Composites (excl. Outdoor High Performance) 8 18% 3 Growth in Asia / LATAM 6 3% 2 Other 100 19% 5 Sub-total $1,327
Slide 7: Q1 EBITDA Bridge
Q1 EBITDA BRIDGE Adjusted $ millions EBITDA Q1 2021 $ 161 China Lockdowns / Russia Impact $ (7) Demand (23) Transportation (7) CAI: Outdoor High Performance (3) Price / Mix 77 Inflation (54) SEM: Price increases more than Price / Mix Inflation 41 (26) offset raw material and Distribution: supply
Slide 8: Q1 EPS Bridge
Q1 EPS BRIDGE Q1 2021 - Adjusted EPS $ 0.89 CAI 0.08 Specialty Engineered Materials 0.06 Distribution 0.00 Corporate Costs 0.02 F/X (0.04) Segment OI 0.12 Tax Rate (0.02) Q1 2022 - Adjusted EPS $ 0.99 8
Slide 9: Avient
YX AVIENT
Slide 10: Acquisition of Dyneema, the World's Strongest Fiber
• Purchase price of $1.48B represents 11.4x multiple of 2022 EBITDA 2022E Sales By Region ($M) • Acquisition will expand Avient’s composites and fiber portfolio with Dyneema®, the World’s Strongest Fiber™ $65M (16%) • $415M sales and 30%+ EBITDA margins; Immediately (1) (2) accretive to pro forma 20
Slide 11: Fit with Four Pillar Strategy
F I T W I T H F O U R P I L L A R S T R AT E G Y Specialization Globalization • Innovation-led organization with • Global customer base with an tremendous intellectual property value in established presence across all major trademarks, patents and “know-how” geographic regions • Deep history of appl
Slide 12: Dyneema Overview
DY N E E M A ® OV E RV I E W KEY INDUSTRIES PERSONAL PROTECTION MARINE & SUSTAINABLE CONSUMER INFRASTRUCTURE Military • Law Enforcement • First Consumer • Outdoor High Performance • Responders Body Armor • Helmets • Towing / Mooring • Aquaculture • Safety Equipment Vehicle Protection Floating Wind •
Slide 13: Technology
Value chain & Overview Competition Strategy Innovation Financials MIF TECHNOLOGY Go-to-market • True specialty business – the World’s Strongest Fiber™ Patents • Deep history of application development with customers, 2,500 strongest in the industry 1,200 1,300 • The only UHMwPE (ultra-high molecular
Slide 14: Formulation Process
FORMULATION PROCESS • Like Avient, Dyneema® offers similar core competencies around formulation and material science • Technology that combines polymers and fibers to provide specialized, high performing solutions for customers • Design capabilities ensure that applications are highly customized for
Slide 15: Dyneema in the Value Chain
DYNEEMA ® IN THE VALUE CHAIN INTERMEDIATE MANUFACTURING OEM / APPLICATION (CUSTOMERS) Military Personnel, Law Enforcement UHMwPE Heavy Marine, Fiber / Tapes Offshore Wind Energy and Mooring, Aquaculture • Material Science • Formulation • Service Outdoor, Footwear, Apparel, Inflatables 15
Slide 16: Demand Trends
DEMAND TRENDS • Military spending and near-term demand for higher performing personal protection products (like Dyneema®) expected to increase o European NATO members annual defense spend expected to increase by up to 20%(1) o Accelerated launch of next generation technology in North America • Polic
Slide 17: Products: Alignment with Sustainability Goals
P RO D U C T S ALIGNMENT WITH SUSTAINABILITY GOALS 17
Slide 18: Avient's Existing Composites Portfolio
AVIE NT ’S E XIS T ING COMP OS IT E S P ORT F OL IO DIVERSE CAPABILITIES AND SOLUTIONS SERVING MANUFACTURERS AND OEMS LFT Tapes Laminates/Panels Shapes Pultrusion Engineered Fibers 18
Slide 19: Avient's Composites Portfolio Sales and EBITDA
AV I E N T ’ S C O M P O S I T E S P O RT F O L I O S A L E S A N D E B I T DA $750 $700 $680 200 • Dyneema® acquisition will further $650 $600 improve Composites EBITDA margins $180 $550 to 26% 150 $500 $450 $400 • Dyneema® will complement our $350 100 existing portfolio with deep formulation $300
Slide 20: Distribution Divestiture Considerations
D I S T R I BU T I O N D I V E S T I T U R E C O N S I D E R AT I O N S
Slide 21: Distribution Highlights
D I S T R I BU T I O N H I G H L I G H T S • Leading North American Distribution business with longstanding blue-chip supplier and customer 150 relationships EBITDA (in $M) • Commercial excellence and regulatory knowledge have grown healthcare portfolio to over 25% of sales and $105 positioned busin
Slide 22: Dyneema Transaction Overview
DY N E E M A ® T R A N S AC T I O N OV E RV I E W Transaction - $1.48B net purchase price Value - Represents 11.4x expected 2022 EBITDA - Committed financing in place - Permanent financing to be combination of available cash on-hand, new Financing Senior Unsecured Notes, new Senior Secured Term Loan
Slide 23: Capital Structure / Leverage
C A P I TA L S T RU C T U R E / L E V E R AG E (1) Pro Forma Capitalization (2022 estimates, all figures in $M) • Financing commitments secured from Morgan Stanley Cash and Cash Equivalents $ 595 and J.P. Morgan Senior Secured Term Loan due 2026 $ 605 • New Senior Secured Term Loan B and new Senior
Slide 24: Two-Year Leverage Goal
T WO - Y E A R L E V E R AG E G OA L Clariant Color Acquisition Dyneema® Acquisition 3.5x 2.9x 2.7x 2.5x 2.2x 1.7x (1) (1) (2) 2019PF 2020PF 2022E 2022PF 2023E 2024E (1) Pro forma for the acquisition of the Clariant Color business 24 (2) Pro forma for the acquisition of Dyneema® and potential divest
Slide 25: Pro Forma Modeling
P RO F O R M A M O D E L I N G 2022E ® Pro Forma Pro Forma Avient Dyneema ® Distribution ($M) w/ Dyneema w/Sale Revenue $ 5,100 $ 415 $ 5,515 $ (1,775) $ 3,740 Adjusted EBITDA 635 130 765 (105) 660 EBITDA % 12% 31% 14% 6% 18% Pro Forma EPS (Adjusted) $ 3.50 $ 0.00 $ 3.50 $ (0.56) $ 2.94 Pro Forma EP
Slide 26: Our Specialty Journey
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Slide 27: Acquisition History
AC Q U I S I T I O N H I S TO RY Established Acquisitions (> 7 years) Commercial Operating Income Operating Margins Resources(1) ($ in millions) $122 21% 360 + 39% + 210% + 1200 bps 259 $40 9% At Acquisition 2021 At Acquisition 2021 At Acquisition 2021 (1) Commercial Resources include associate head
Slide 28: Clariant Color Acquisition
C L A R I A N T C O LO R AC Q U I S I T I O N Clariant Color EBITDA Growth ($ in millions) $205 • Acquisition of Clariant Color business significantly expanded presence in healthcare, packaging and consumer end markets $133 2019PF (1) 2021 • Strength of portfolio – double-digit annual EBITDA growth
Slide 29: Specialty Transformation
S P E C I A LT Y T R A N S F O R M AT I O N 100% % of Adjusted EBITDA(1) 80% 60% 100% 40% 86% 66% 20% 46% 0% 7% (2) 2005 2010 2015 2021 2022 PF JVs Distribution Performance Products & Solutions Specialty (1) Adjusted EBITDA is EBITDA excluding corporate costs and special items (2) Pro forma for the
Slide 30: EBITDA Margins vs. Peers
2 0 2 2 E B I T DA M A RG I N S V S . P E E R S Median: 15% Median: 21% 28% 28% 26% 25% 22% 21% 19% 18% 16% 16% 15% 15% 14% 14% 12% 12% 9% 9% Avient Today ECL HXL SCL BNR RPM EMN UNVR KWR CE FUL ALB FMC ASH HUN Avient PF AVY PPG Avient Specialty Other Specialty / Formulators Chemical Companies Avien
Slide 31: Culture and People
CULTURE AND PEOPLE Great | KK 100 wns Place Sustainable Newsweek To Companies a _ Work ® WSJ MANAGEMENT TOP Certified 250 DEC ca 2022 THE BEST-RUN COMPANII AS RANKED BY THE DRUCKER INSTITUTE a SC AVIENT
Slide 32: Our Specialty Journey Continues
O U R S P E C I A LT Y J O U R N E Y C O N T I N U E S • Dyneema® brings leading technology and brand with the World’s Strongest Fiber™, deep history of application development and strong management team focused on specialty applications • Dyneema® transaction is aligned with our previously stated a
Slide 33: Avient
YX AVIENT
Slide 34: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures (Unaudited) (Dollars in millions, except for per share data) Senior management uses comparisons of adjusted net income from continuing operations attributable to Avient shareholders and diluted adjusted earnings per share (EPS) from continuing operations
Slide 35: Reconciliation to Condensed Consolidated Statements of Income
Three Months Ended March 31, 2021 GAAP Special Adjusted Reconciliation to Condensed Consolidated Statements of Income Results Items Results Operating Income $ 120.4 $ 2.4 $ 122.8 Income before income taxes $ 102.6 $ 2.4 $ 105.0 Income tax expense - GAAP (22.9) — (22.9) Income tax impact of special i
Slide 36: Reconciliation of EBITDA by Segment
Three Months Ended Year Ended Reconciliation of EBITDA by Segment March 31, December 31, 2022 2021 2021 Operating income: Color, Additives and Inks $ 94.5 $ 88.8 $ 303.1 Specialty Engineered Materials 39.7 34.2 132.0 Distribution 24.2 24.0 93.2 Corporate and eliminations (29.8) (26.6) (147.1) Operat
Slide 37: Reconciliation to EBITDA and Adjusted EBITDA
Three Months Ended Year Ended March 31, December 31, Reconciliation to EBITDA and Adjusted EBITDA: 2022 2021 2021 Net income from continuing operations – GAAP $ 84.5 $ 79.7 $ 230.6 Income tax expense 26.6 22.9 74.0 Interest expense 16.9 19.3 75.3 Depreciation and amortization from continuing operati