Element Solutions Inc. · NYSE:ESI
Element Solutions — Platform Specialty Products — Corporate Update (October 2015)
48 slides from Element Solutions's corporate update, Oct 27, 2015
Slide 1: Business Update Call
Business Update Call October 27, 2015
Slide 2: Safe Harbor
Safe Harbor Please note that this presentation is intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. In this presentation, we may discuss events or results that have not yet occurred or been realized, commonly referred to as “f
Slide 3: Important Information
Important Information No Offer or Solicitation This presentation is for information purposes only and is not intended to, and does not, constitute or form part of any offer or invitation, or the solicitation of an offer, to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, an
Slide 4: Speakers
Speakers Martin E. Franklin Founder and Executive Chairman, Jarden Corporation Chairman Founder and Co-Chairman, Nomad Holdings Ltd. Daniel H. Leever CEO of Platform and its predecessor, MacDermid Chief Executive Officer Benjamin Gliklich Most recently, VP Corporate Development, Finance and
Slide 5: Agenda
Agenda Executive Summary Business Update Performance Applications Agricultural Solutions Financial Overview Q&A Appendices 4
Slide 6: Platform Timeline
Platform Timeline July June February Alent January Acquisition November OMG Announced Acquisitions October $500 Million Announced August $1.1 Billion Term Loan May Chemtura Senior Notes April AgroSolutions €83 Million Acquisition Term Loan $483 Million January $300 Million Equity Off
Slide 7: Platform – Leading Diversified “Asset-Lite, High-Touch” Specialty Chemicals
Platform – Leading Diversified “Asset-Lite, High-Touch” Specialty Chemicals Platform is building a global portfolio of high quality, high cash flow specialty chemical businesses across a diverse range of verticals Platform Specialty Products Flavors Coatings Water Market Assembly Surface Electronic
Slide 8: Platform End Market Evolution
Platform End Market Evolution Revenue by Business Segment (1) Platform including Acquisitions ($ in millions) Announced in 2014 and 2015 YTD Agricultural Solutions 57% (2) Performance Applications Platform including Ag 43% Acquisitions Announced in 2014 Performance Applications 26% Agricultural 2014
Slide 9: Organizational Structure
Organizational Structure Office of the Chairman Chairman CEO Martin E. Daniel H. Leever Franklin COO CFO Benjamin Gliklich Sanjiv Khattri President, Interim President, Finance & Other Corporate Perf. Applications Ag. Solutions IT Functions Scot Benson Jonathan Evans 8
Slide 10: Near Term Priorities
Near Term Priorities Complete Alent Financing Integrate and Realize Synergies Provide Consistent and Profitable Growth Improve Balance Sheet through Earnings Growth and Cash Flow Generation Continue to Build Best-in-Class Leadership Team 9
Slide 11: Agenda
Agenda Executive Summary Business Update Performance Applications Agricultural Solutions Financial Overview Q&A Appendices 10
Slide 12: Announced Acquisition Status Update
Announced Acquisition Status Update Purchase Expected Announced Financing Regulatory Price Closing June 2015 $367 million $483 million All approvals Q4 2015 cash on hand received from equity Q1 2016 raise in July (second 2015 transaction) EC and PM Businesses July 2015 $2.25 billion(1) $46
Slide 13: Pro Forma Platform Business Overview
Pro Forma Platform Business Overview Last Twelve Months Ended June 30, 2015 ($ in millions) Pro Forma Platform Sales: $3,598 Adjusted EBITDA: $805(1) Performance Applications Margin: 22% Sales: $744 Adj. EBITDA: $213(2) Pro Forma Agricultural Margin: 29% Solutions Specialty chemicals for PF Perfor
Slide 14: Industry-Leading Positions in Diversified Niche Markets
Industry-Leading Positions in Diversified Niche Markets Platform focuses on businesses with attractive market positions and defensible barriers to entry ($ in millions) Estimated Estimated Long Term End Market Segment Market Size ($m) Annual Growth Global BioStimulants Agricultural Solutions - BioSo
Slide 15: Diversified Global Footprint
Diversified Global Footprint Pro Forma Agricultural Solutions Combined Platform Pro Forma 2014 $3,778 million Asia North 11% America 17% AIME 14% Europe: North America: 27% of sales Latin Europe America 20% of sales Asia: 23% 35% 22% of sales Pro Forma Performance Applications Africa, India & Middle
Slide 16: Significant Synergy Potential
Significant Synergy Potential $50 million(1) of estimated synergies from Alent combination $20 million* of additional expected synergies from OMG EC and PM businesses $5 million* of Agricultural Solutions synergies realized in same quarter as Arysta close ($ in millions) Agricultural Solutions
Slide 17: Pro Forma EBITDA Bridge
Pro Forma EBITDA Bridge ($ in millions) $1,000 $885 $900 $120 $800 $865 $29 $166 $700 $570 $600 $500 $550 $400 $300 $200 $100 – Platform Alent OM EC & PM Expected Synergies(1) Pro Forma Post-Close EBITDA Pro Forma Adjusted EBITDA 6/30/15 LTM Adjusted EBITDA 6/30/15 LTM Adjusted EBITDA (Full Synergie
Slide 18: Compelling Cash Flow Generation & Stable Financial Performance
Compelling Cash Flow Generation & Stable Financial Performance Stable financial performance through the economic cycles Adj. PF EBITDA – CapEx (% of EBITDA) ($ in millions) Cash Conversion (%) (1) $700 240% $600 $553 $569 200% $500 $486 $395 160% $400 $364 $312 120% $300 $200 80% 87% 88% 87% 89% 89%
Slide 19: Agenda
Agenda Executive Summary Business Update Performance Applications Agricultural Solutions Financial Overview Q&A Appendices 18
Slide 20: Performance Applications – Favorable Industry Fundamentals
Performance Applications – Favorable Industry Fundamentals Estimated Growth in Electronics Market ($ in billions) $2,068 $1,764 $827 $690 $246 $191 $310 $261 $431 $497 $191 CAGR: -0.3% $188 2014 2019 Traditional PCs Mobile phones & tablets Servers, Storage, Infrastructure Automotive Electronics Othe
Slide 21: Alent is a Perfect Match with Platform’s Strategic Criteria for Acquisitions
Alent is a Perfect Match with Platform’s Strategic Criteria for Acquisitions Platform’s Investment Criteria “Asset-Lite, High-Touch” Business Model that Drives Free Cash Flow Leading Positions in Niche Markets Diversified Revenue Base “Bookends” Strategy with Emphasis on Innovation and
Slide 22: Alent Business Overview
Alent Business Overview Alent plc LTM 6/30/15 Sales: $657 LTM 6/30/15A Adjusted EBITDA(1): $166 ($ in millions) Margin: 25% (2) Assembly Materials Surface Chemistries NSV: $324 NSV: $333 Adjusted EBITDA: $98 Adjusted EBITDA: $79 Margin: 30% Margin: 24% Develops, manufactures and sells innovative s
Slide 23: Assembly Materials (Alpha) Product Lines
Assembly Materials (Alpha) Product Lines Business % of Key growth unit Group NSV(1) Products Applications drivers 12% Bar solder Used in mature wave soldering process PCB surface area Wave solder Flux 24% Solder paste Used with stencil to attach solder to PCB PCB surface area Wire solder
Slide 24: Surface Chemistries (Enthone) Product Lines
Surface Chemistries (Enthone) Product Lines Business % of Key growth unit Group NSV(1) Products Applications drivers 24% Decorative Chemistries to enable plating directly onto plastic Industrial / auto growth coatings Use on autoparts (engine valves, shock absorbers) Performance Wear resistant
Slide 25: Performance Applications - Commercial Complementarity
Performance Applications - Commercial Complementarity Platform Enthone / OM Group Pro Forma Direct Metallization + = Electrolytic Copper + = Final Finish + = Molded Interconnect + = Device Memory Disk + = Anti Corrision + = Decorative Coating + = 24 Source: Platform management.
Slide 26: Pro Forma Surface Treatment Facility Footprint
Pro Forma Surface Treatment Facility Footprint Europe Naarden / Netherlands Hertogenbosch / Netherlands Asia North America Norrköping / Sweden Aberdeen / UK Wigan / UK Langefeld / Germany Birmingham / UK Mississauga / Canada Waterbury / CT Wantage / UK Forst / Germany Budapest / Hungary Sihung City
Slide 27: Operational and Performance Update
Operational and Performance Update Q3 Performance Update • Top-line down driven by headwinds in China and currency volatility • Continued margin improvement despite top-line challenge • Margin driven by electronics product mix and offshore as well as cost controls • Global Automotive OEM program con
Slide 28: Agenda
Agenda Executive Summary Business Update Performance Applications Agricultural Solutions Financial Overview Q&A Appendices 27
Slide 29: Agricultural Solutions – Q3 Highlights
Agricultural Solutions– Q3 Highlights Global Agrochemical market conditions remained challenging in Q3 • Market had benefitted from five straight record years from 2010 – 2014 … Long term fundamentals still solid • Driven by low commodity prices, foreign exchange volatility and high channel inventor
Slide 30: Agricultural Solutions – Business Update
Agricultural Solutions – Business Update Europe Impact on PAH Strong growing conditions in Western Europe North America Impact on PAH Low wheat prices Weak row crop prices Ukraine and Russia credit Asia Impact on PAH Trees / Nuts / Vines (TNV) growth concerns Drought in Canada and Califo
Slide 31: Agricultural Solutions: North America Distribution Strategy
Agricultural Solutions: North America Distribution Strategy Agricultural Solutions North America will limit “pre-season” selling of certain of its key products in order to improve inventory levels and increase economics • “Pre-season” selling is a necessary and common industry practice − Products fo
Slide 32: 2016 Outlook
2016 Outlook The Agrochemical market is expected to grow modestly in volume and planted acres • In 2015, at the farm level, consumption and planted acres were up but high starting inventory levels muted growth • Our view on growth assumes an environment with low commodity prices and a strong USD F/X
Slide 33: Agenda
Agenda Executive Summary Business Update Performance Applications Agricultural Solutions Financial Overview Q&A Appendices 32
Slide 34: Preliminary Platform Pro Forma Q3 Results
Preliminary Platform Pro Forma Q3 Results Pro Forma @ Actual Exchange Rates (AER) 1 Pro Forma @ Constant Exchange Rates (CER) 2 for the Three Months Ended: for the Three Months Ended: 9/30/2015 9/30/2014 YoY% 3 9/30/2015 9/30/2014 YoY% 3 ($ in millions) Performance Performance $175 - $180 $197 (9.9%
Slide 35: Preliminary Platform Pro Forma YTD Results
Preliminary Platform Pro Forma YTD Results Pro Forma @ Actual Exchange Rates (AER) 1 Pro Forma @ Constant Exchange Rates (CER) 2 for the Nine Months Ended: for the Nine Months Ended: 9/30/2015 9/30/2014 YoY% 3 9/30/2015 9/30/2014 YoY% 3 ($ in millions) Performance Performance $537 - $542 $570 (5.4%)
Slide 36: Continued Balance Sheet Flexibility
Continued Balance Sheet Flexibility As reported • Capitalization 06/30/15 ($ in millions) Significant liquidity position Cash and cash equivalents $672 ̵ $672 million in cash Revolver Balance - $325mm (undrawn) ̵ $325 million of unused revolver capacity Original TL - Macdermid - $755mm 739 ̵ Over $2
Slide 37: Conclusion: Near Term Priorities
Conclusion: Near Term Priorities Complete Alent Financing Integrate and Realize Synergies Provide Consistent and Profitable Growth Improve Balance Sheet through Earnings Growth and Cash Flow Generation Continue to Build Best-in-Class Leadership Team 36
Slide 38: Q&A
Q&A Performance Applications Agricultural Solutions EC and PM Businesses 37
Slide 39: Appendices
PRODUCTS CORPORATION x PLATFORM SPECIALTY /_N Appendices 38
Slide 40: Preliminary Platform Q3 Results
Preliminary Platform Q3 Results For the Three Months Ended: For the Nine Months Ended: 9/30/2015 9/30/2014 YoY% 1 9/30/2015 9/30/2014 YoY% 1 ($ in millions) Performance Performance $175 - $180 $197 (9.9%) $537 - $542 $570 (5.4%) Applications: Applications: Agricultural Agricultural Sales $410 - $420
Slide 41: Agricultural Solutions Organizational Chart
Agricultural Solutions Organizational Chart Interim President, Jonathan Evans COO, Flavio Prezzi MD, MD, MD, MD, MD, MD, Africa, India North America, Asia Latin America Europe Animal Health and Middle East Australia & New Zealand Head of Global Global Head of Chief Financial Head of R&D and Portfoli
Slide 42: Performance Applications Organizational Chart
Performance Applications Organizational Chart President, Scot Benson COO, Frank Monteiro VP Global Supply VP Human Chain VP Finance Resources Sr. VP Alpha Sr .VP Electronics Sr. VP Industrial VP Global End VP Graphics VP Offshore Assembly Solutions Solutions Solutions User Markets Solutions Solution
Slide 43: Platform Reconciliation of Net Loss to Adjusted EBITDA
Platform Reconciliation of Net Loss to Adjusted EBITDA for 6 months ended June 30, 2015 ($ in millions) 6 Months Ended June 30, 2015 Net loss available to common stockholders ($39) Adjustments to reconcile net (loss) to Adjusted EBITDA: Interest expense $93 Income tax expense 25 Depreciation and amo
Slide 44: MacDermid Reconciliation of Net Income (Loss) to Adjusted EBITDA
MacDermid Reconciliation of Net Income (Loss) to Adjusted EBITDA Predecessor/Successor Combined December 31, ($ in millions) 2012 2013 2014 Net income (loss) available to common stockholders $46 ($181) ($7) Adjustments to reconcile net income (loss) to Adjusted EBITDA: Interest expense $50 $52 $36 I
Slide 45: Arysta Reconciliation of Net Loss to Adjusted EBITDA
Arysta Reconciliation of Net Loss to Adjusted EBITDA December 31, ($ in millions) 2012 2013 2014 Net loss available to common stockholders ($157) ($102) ($26) Adjustments to reconcile net (loss) to Adjusted EBITDA: Interest expense $136 $135 $116 Income tax expense 45 48 50 Depreciation and amortiza
Slide 46: Chemtura AgroSolutions Reconciliation of Net Income to Adjusted EBITDA
Chemtura AgroSolutions Reconciliation of Net Income to Adjusted EBITDA December 31, ($ in millions) 2012 2013 2014 Net income available to common stockholders $39 $47 $25 Adjustments to reconcile net income to Adjusted EBITDA: Interest expense $1 – $2 Income tax expense 18 29 40 (1) Depreciation and
Slide 47: Agriphar Reconciliation of Net Income to Adjusted EBITDA
Agriphar Reconciliation of Net Income to Adjusted EBITDA December 31, ($ in millions) 2012 2013 2014 Net income available to common stockholders $19 $24 $13 Adjustments to reconcile net income to Adjusted EBITDA: Interest expense $2 $2 $1 Income tax expense 9 11 7 (1) Depreciation and amortization e
Slide 48: Alent Reconciliation of Net Income to Adjusted EBITDA
Alent Reconciliation of Net Income to Adjusted EBITDA December 31, (£ in millions) 2012 2013 2014 Net income available to shareholders £45 £62 £47 Adjustments to reconcile net income to Adjusted EBITDA: Pro forma adjustment to operating profit before JVs and exceptionals (6) – – Depreciation 9 9 9 S
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