Valvoline Inc. · NYSE:VVV
Valvoline — CAGNY Lunch Presentation 2017
27 slides from Valvoline's conference presentation, September 2017
Slide 1: CAGNY Lunch Presentation
CAGNY Lunch Presentation September 2017
Slide 2: Forward-Looking Statements; Regulation G: Non-GAAP Financial Information
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in th
Slide 3: Overview: Who We Are
Valvoline. -— a NEED AFASTER OIL CHANGE? y TRY US! Overview: Who We Are
Slide 4: Our Mission Statement
Our Mission Statement ALUES We are building the world’s leading engine and automotive OW maintenance business by bringing “Hands on Expertise” for the benefit of customers every day. ISION 4
Slide 5: Iconic Brand With History of Innovation
Iconic Brand With History of Innovation 1873 1930 1940 1950 1960 1970 1980 1990 2000 • 1873: The first • 1939: • 1965: • 1996: • 2007: VIOC trademarked Introduces a Introduces Introduces opens its 500th American single grade oil, racing oil DuraBlend, location lubricant brand X-18, (now VR1) Valvoli
Slide 6: Our Brand Sells Across Uniquely Diverse Routes to Market
Our Brand Sells Across Uniquely Diverse Routes to Market Core North Quick Lubes International America Commercial Commercial Do-It-Yourself Do-It-For-Me and Industrial VIOC Express Care and Industrial JVs OEMs (DIY) (DIFM) (C&I) (C&I) LTM 3Q17 Financial Information (Millions) Sales $987 $519 $525 EBI
Slide 7: Core North America Overview
Core North America Overview Fiscal Year Ended September 30th (Percent of U.S branded volume) 44.4% 41.4% 36.6% 33.7% 30.0% -1.0% 2013 2014 2015 2016 LTM 3Q17 Core NA Premium Mix Core NA Strategic Pillars Innovate in Drive Digital, Deliver Products & Targeted Enhanced Packaging Marketing Services 7
Slide 8: Quick Lubes Overview
Quick Lubes Overview Fiscal Year Ended September 30th $882 LTM 3Q17 (000s) $824 $916 $774 10 Year Average of $738 System-Wide SSS(2) $713 4.9% $672 $649 $613 $579 $550 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Valvoline Instant Oil Change Sales per Store(1) Quick Lubes Growth Strategy Accele
Slide 9: International Overview
International Overview Fiscal Year Ended September 30th (Millions of lubricant gallons) 120.0 85.3 94.0 95.0 80.1 75.3 77.8 70.0 45.0 20.0 (5.0) 2013 2014 2015 2016 LTM 3Q17 International Segment Volume Reported Unconsolidated JV Volume(1) International Growth Strategy Continue Build Brand Develop C
Slide 10: A Proven Track Record of Earnings Growth
A Proven Track Record of Earnings Growth Drivers of Strong Profit Mix shift towards premium products: ~44% in LTM 3Q 2017 from 30% in 2013(1) 2017 Fiscal Q3 YTD 10 consecutive years of system-wide SSS growth in VIOC stores(2) System-wide SSS 6.9% Consistent volume and profit growth in international
Slide 11: Overview: Segments
Valvoline. Overview: Segments
Slide 12: Leveraging Capabilities Across Segments
Leveraging Capabilities Across Segments 12
Slide 13: Strategy in Core North America
Strategy in Core North America Innovative Products & Targeted Marketing Enhanced Services Packaging • Leading brand in a key category that • Targeted digital marketing to high • Best in class retail category drives traffic for retailers potential consumers and influencers management capabilities to
Slide 14: Investing in Digital Capabilities to Improve the Customer Experience & Grow Sales
Investing in Digital Capabilities to Improve the Customer Experience & Grow Sales Expertise Allows Customers to Technology Facilitates Business With Valvoline Build Their Own Businesses ● Making a significant, multi-year investment in technology ● Valvoline leverages digital marketing to help both D
Slide 15: Strong and Growing Quick Lube Channel
Strong and Growing Quick Lube Channel Operating Stores Strengthens Business Model Performance Superior Talent Our Sales Per Store Has Grown Steadily...(1) ● Improved Safety Total Recordable Rate over 50% LTM 3Q17 ● Reduced turnover by over 50%, store growth creates $916 $882 career path $824 ● Entry
Slide 16: Significant Opportunities for Growth
Significant Opportunities for Growth Substantial Opportunity For Broad VIOC Geographic Footprint (1) Organic Expansion Mapped to Local Market Level for New Stores ● Data driven, highly analytical approach ● Company-Owned and Franchised Consolidation Opportunity in Fragmented Market Identifying Acqui
Slide 17: International Growth
International Growth Europe China • Stable cash flow generator • Second largest passenger car market • Moderate growth • Rapidly changing emission rules from channel • Growing, consolidating DIFM channel Latin America extensions • Good OEM penetration • Recent rapid growth • Aggressive new channel d
Slide 18: Model For Leveraging OEM Relationship
Model For Leveraging OEM Relationship Leveraging the Cummins Relationship… …To Provide Ongoing Value ● Global marketing partnership ● Strong growth rates in China and India ● Use of Cummins’ channels to market accelerates growth ● Fragmented markets provide significant opportunities to expand share
Slide 19: Key Questions and Financials
Key Questions and Financials
Slide 20: Fundamentals of Base Oil Markets and our Pricing Strategy
Fundamentals of Base Oil Markets and our Pricing Strategy ● Group II and Group III base oils are key Long Base Oil Market Expected to Continue Through 2020 components of higher quality lubricants and Provide Base Oil Pricing Stability ● From 2011 – 2016 Group II and Group III global Billions of Gall
Slide 21: Disciplined Margin Management
Disciplined Margin Management Valvoline Unit Margins Improving Despite Changes in Base Oil Pricing Prices in USD (1) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H’2017 2017 Total Company GP/Gal Base Oil Group II $/Gal 1 2 3 Improved Unit Margins Long Base Oil Market Has Protected Unit Margins
Slide 22: Benefits of Pension Funding
Benefits of Pension Funding Strategic opportunity to reduce unfunded pension liability $400 million voluntary contribution to U.S. pension plan • Reduces risk and volatility ~$400 million voluntary contribution to U.S. pension plan • Reduces costs Reduces Pension Benefit Guaranty Corporation pre
Slide 23: Nine Months Ended June 30, 2017 Consolidated Adjusted Results
Nine Months Ended June 30th, 2017 Consolidated Adjusted Results ($ in millions) Nine Months Ended June 30, Factors Affecting Y-o-Y EBITDA Preliminary and Unaudited 2017 2016 Change Lubricant Gallons 134.1 130.0 3.2% $26 Sales $1,537 $1,435 7.1% $4 $2 Net Income $199 $208 (4.3)% Income Tax Expense 11
Slide 24: Nine Months Ended June 30, 2017 Segment Results
Nine Months Ended June 30th, 2017 Segment Results(1) Core North America Factors Affecting Y-o-Y EBITDA ($ in millions) Nine Months Ended June 30, $4 $0 $0 Preliminary and Unaudited 2017 2016 Change ($17 ) ($3) Lubricant Gallons (in millions) 74.5 76.1 (2.1%) Sales $748 $740 1.1% $182 $166 Operating
Slide 25: Appendix
Valvoline. Appendix
Slide 26: Historical EBITDA and Adj. EBITDA Reconciliation
Historical EBITDA and Adj. EBITDA Reconciliation FY Ended September 30, 9M Ended June 30, LTM 3Q ($ in Millions) 2011 2012 2013 2014 2015 2016 2016 2017 2017 Net income $110 $114 $246 $173 $196 $273 $208 $199 $264 Income tax expense 52 58 135 91 101 148 104 114 158 Net interest and other financing e
Slide 27: LTM 3Q17 EBITDA Reconciliation – Segments
LTM 3Q17 EBITDA Reconciliation – Segments ($ in Millions) FY Ended September 30, 9M Ended June 30, LTM 3Q 2016 2016 2017 2017 Core North America Sales $979 $740 $748 $987 Operating income 212 170 156 198 Depreciation and amortization 16 12 10 14 EBITDA $228 $182 $166 $212 Quick Lubes Sales $457 $332