Innospec Inc. · NASDAQ:IOSP
Innospec — Q2 2016 Earnings Presentation
30 slides from Innospec's earnings presentation, Aug 3, 2016
Slide 1: Investor Presentation Quarter 2, 2016
Investor Presentation Quarter 2, 2016 August 3, 2016 Patrick S. Williams President & CEO Ian Cleminson Executive Vice President & Chief Financial Officer
Slide 2: Forward-looking Statements
2 Forward-looking Statements This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements
Slide 3: Use of Non-GAAP Financial Measures
3 Use of Non-GAAP Financial Measures The information presented in this press release includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP). These non-GAAP financial measures comprise EBITDA, income bef
Slide 4: Innospec – Summary of 2nd Quarter Performance
4 Innospec – Summary of 2nd Quarter Performance GAAP EPS of $1.18; Adjusted EPS of $1.03, 8% ahead of Q2 2015, excluding divestment Strong EBITDA performance at 19% of sales Significant cash generation resulting in only $4.7 million of net debt All businesses performed well Oilfield Services improve
Slide 5: Financial Presentation
Financial Presentation Ian Cleminson Executive Vice President & Chief Financial Officer
Slide 6: Q2 2016 Consolidated Results
6 Q2 2016 Consolidated Results Sales down 6% on Q2 2015; comparative includes divested Aroma Chemicals business Gross margin up 1.5 percentage points EBITDA up 28%, Adjusted EPS up 1% despite divestment Q2 2015 Q2 2016 Growth $m $m % Net sales 242.9 228.0 (6)% Gross profit 87.5 85.5 (2)% Gross margi
Slide 7: Q2 2016 Fuel Specialties
7 Q2 2016 Fuel Specialties Sales up 6% Good performance in EMEA and Asia Pacific Americas business improving Q2 2015 Q2 2016 Growth $m $m % Net sales 121.8 129.3 6% Gross profit 44.0 43.7 (1)% Gross margin 36.1% 33.8% (2.3%)pt Operating income 25.6 24.2 (5)% EBITDA 26.7 25.5 (4)%
Slide 8: Q2 2016 Performance Chemicals
8 Q2 2016 Performance Chemicals Underlying sales up 9% (adjusted for divestment) Good gross margin development – positive mix of personal care Underlying operating income up 81% (adjusted for divestment) Q2 2015 Q2 2016 Growth $m $m % Net sales 43.9 35.3 (20)% Gross profit 11.3 11.3 - Gross margin 2
Slide 9: Q2 2016 Oilfield Services
9 Q2 2016 Oilfield Services Sales down in line with customer activity Margins remain good with favorable mix Heading back towards profitability as anticipated Q2 2015 Q2 2016 Growth $m $m % Net sales 70.7 46.5 (34)% Gross profit 28.4 19.9 (30)% Gross margin 40.2% 42.8% 2.6%pt Operating income/(loss)
Slide 10: Q2 2016 Octane Additives
10 Q2 2016 Octane Additives Strong quarter with continued deliveries to Algeria Margins strong on high production throughput Business likely to continue – although no further firm orders Q2 2015 Q2 2016 Growth $m $m % Net sales 6.5 16.9 N/A Gross profit 3.8 10.6 N/A Gross margin 58.5% 62.7% 4.2%pt O
Slide 11: Q2 2016 Corporate Items
11 Q2 2016 Corporate Items Underlying corporate costs in line with expectations Acquisition-related costs added $1.0 million Comparative quarter included significant legal fee recovery Q2 2015 Q2 2016 $m $m Corporate costs (7.4) (12.4) Pension credit 0.1 1.7 Adjustment to fair value of contingent co
Slide 12: Q2 2016 Cash Flow & Balance Sheet
12 Q2 2016 Cash Flow & Balance Sheet Very strong cash generation with $50.4 million in the quarter Net debt reduced to only $4.7 million Balance sheet strengthened further Q4 2015 Q2 2016 $m $m Total cash and cash equivalents 141.7 153.2 Total debt (136.1) (157.9) Net cash/(debt) 5.6 (4.7) Total wor
Slide 13: Concluding Comments
Concluding Comments Patrick Williams President & CEO
Slide 14: Concluding Comments
14 Concluding Comments Strategy delivering – right on plan All business units performing and positive signs in most key markets Committed to Acquisition of significant Personal & Home Care business Would take Performance Chemicals to sales revenue of over $350 million globally Balanced capital manag
Slide 15: Your Opportunity To Ask Questions
Your Opportunity To Ask Questions
Slide 16: Final Comments
16 Final Comments Thanks to investors, customers and employees for their continued support Q3 2016 results timetable (provisional) Results announced after close on November 3, 2016 Conference Call at 10am ET on Friday November 4, 2016
Slide 17: Appendix
IX Append IN innospec
Slide 18: Innospec Income Statement - Quarter 2
18 Innospec Income Statement - Quarter 2 Q2 2015 Q2 2016 Variance Pr. Yr. $m $m $m Net sales 242.9 228.0 (14.9) Sales growth 9.8% (6.1)% N/A Gross profit 87.5 85.5 (2.0) Gross margin 36.0% 37.5% 1.5%pt SAR expenses (56.7) (59.3) (2.6) Operating income 30.8 26.2 (4.6) Operating margin 12.7% 11.5% (1.
Slide 19: Innospec Income Statement - YTD
19 Innospec Income Statement - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 512.1 440.1 (72.0) Sales growth 15.9% (14.1%) N/A Gross profit 169.3 161.7 (7.6) Gross margin 33.1% 36.7% 3.6%pt SAR expenses (111.6) (110.1) 1.5 Operating income 57.7 51.6 (6.1) Operating margin 11.3% 11.7% 0.4%pt Adju
Slide 20: Fuel Specialties - Quarter 2
20 Fuel Specialties - Quarter 2 Q2 2015 Q2 2016 Variance Pr. Yr. $m $m $m Net sales 121.8 129.3 7.5 Sales growth (4.2%) 6.2% N/A Gross profit 44.0 43.7 (0.3) Gross margin 36.1% 33.8% (2.3%)pt Selling (11.1) (10.9) 0.2 Administrative (2.7) (4.3) (1.6) Research (4.6) (4.3) 0.3 SAR expenses (18.4) (19.
Slide 21: Fuel Specialties - YTD
21 Fuel Specialties - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 265.3 252.7 (12.6) Sales growth (4.8%) (4.7%) N/A Gross profit 85.9 85.7 (0.2) Gross margin 32.4% 33.9% 1.5%pt Selling (21.5) (20.5) 1.0 Administrative (6.4) (8.1) (1.7) Research (8.9) (9.0) (0.1) SAR expenses (36.8) (37.6) (0.8
Slide 22: Performance Chemicals - Quarter 2
22 Performance Chemicals - Quarter 2 Q2 2015 Q2 2016 Variance Pr. Yr. $m $m $m Net sales 43.9 35.3 (8.6) Sales growth (5.4%) (19.6%) N/A Gross profit 11.3 11.3 - Gross margin 25.7% 32.0% 6.3%pt Selling (3.5) (3.8) (0.3) Administrative (1.9) (1.9) - Research (1.2) (0.9) 0.3 SAR expenses (6.6) (6.6) -
Slide 23: Performance Chemicals - YTD
23 Performance Chemicals - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 90.7 70.0 (20.7) Sales growth 0.3% (22.8%) N/A Gross profit 23.4 22.1 (1.3) Gross margin 25.8% 31.6% 5.8%pt Selling (7.0) (7.6) (0.6) Administrative (4.6) (3.3) 1.3 Research (2.3) (2.1) 0.2 SAR expenses (13.9) (13.0) 0.9 SA
Slide 24: Oilfield Services - Quarter 2
24 Oilfield Services - Quarter 2 Q2 2015 Q2 2016 Variance Pr. Yr. $m $m $m Net sales 70.7 46.5 (24.2) Sales growth N/A (34.2%) N/A Gross profit 28.4 19.9 (8.5) Gross margin 40.2% 42.8% 2.6%pt Selling (18.7) (19.7) (1.0) Administrative (4.0) (0.8) 3.2 Research (0.7) (1.0) (0.3) SAR expenses (23.4) (2
Slide 25: Oilfield Services - YTD
25 Oilfield Services - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 137.4 82.7 (54.7) Sales growth N/A (39.8%) N/A Gross profit 50.4 31.5 (18.9) Gross margin 36.7% 38.1% 1.4%pt Selling (34.5) (31.9) 2.6 Administrative (7.8) (4.7) 3.1 Research (1.5) (2.0) (0.5) SAR expenses (43.8) (38.6) 5.2 SAR
Slide 26: Octane Additives - Quarter 2
26 Octane Additives - Quarter 2 Q2 2015 Q2 2016 Variance Pr. Yr. $m $m $m Net sales 6.5 16.9 10.4 Sales growth (61.3%) 160.0% N/A Gross profit 3.8 10.6 6.8 Gross margin 58.5% 62.7% 4.2%pt Selling (0.4) (0.4) - Administrative (0.6) (0.6) - SAR expenses (1.0) (1.0) - SAR % (15.4%) (5.9%) 9.5%pt Operat
Slide 27: Octane Additives - YTD
27 Octane Additives - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 18.7 34.7 16.0 Sales growth 8.7% 85.6% N/A Gross profit 9.6 22.4 12.8 Gross margin 51.3% 64.6% 13.3%pt Selling (0.7) (0.5) 0.2 Administrative (1.0) (1.3) (0.3) SAR expenses (1.7) (1.8) (0.1) SAR % (9.1%) (5.2%) 3.9%pt Operating
Slide 28: GAAP Reconciliation EBITDA - Quarter 2
28 GAAP Reconciliation EBITDA - Quarter 2 Q2 2015 Q2 2016 $m $m Net income 34.5 28.9 Interest expense, net 0.9 0.7 Income taxes 17.3 7.5 Depreciation and amortization 8.6 9.6 Adjustment to fair value of contingent consideration (26.6) (2.4) EBITDA 34.7 44.3
Slide 29: GAAP Reconciliation EBITDA - YTD
29 GAAP Reconciliation EBITDA - YTD 2015 2016 $m $m Net Income 52.4 47.8 Interest expense, net 1.9 1.5 Income taxes 23.3 13.1 Depreciation and amortization 16.9 18.7 Adjustment to fair value of contingent consideration (23.1) (4.0) EBITDA 71.4 77.1
Slide 30: GAAP Reconciliation: Net Income Excluding Special Items - Quarter 2
30 GAAP Reconciliation: Net Income Excluding Special Items - Quarter 2 Q2 2015 Q2 2016 Income before Income before income taxes Net income Diluted EPS income taxes Net income Diluted EPS $m $m $ $m $m $ Reported GAAP amounts 51.8 34.5 1.40 36.4 28.9 1.18 Foreign currency exchange losses/(gains) 4.7