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Engineered Polymers
Michael Wilson & Stephen LewisAugust 7, 2019
Disclaimer: This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward looking statements generally include the words “may,” “could,” “should,” “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues,” “forecast,” “prospect,” “potential” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; synergies and the potential benefits of the acquisition of Georgia-Pacific’s pine chemicals business and the acquisition of Perstorp Holding AB’s Capa caprolactone business (the “acquisitions”); capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; markets for securities and expected future repurchase of shares, including statements about the manner, amount and timing of repurchases. Like other businesses, Ingevity is subject to risks anduncertainties that could cause its actual results to differ materially from its expectations or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, risks that theexpected benefits from the acquisitions will not be realized or will not be realized in the expected time period; the risk that the acquired businesses will not be integrated successfully; significant transaction costs; unknown or understated liabilities; general economic and financial conditions; international sales and operations; currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations; competition from infringing intellectual property activity; attracting and retaining key personnel; the impact of Brexit; conditions in the automotive market or adoption of alternative technologies; worldwide air quality standards; a decrease in government infrastructure spending; declining volumes and downward pricing in the printing inks market; the limited supply of crude tall oil (“CTO”); lack of access to sufficient CTO; access to and pricing of raw materials; competition from producers of alternative products and new technologies, and new or emerging competitors; a prolonged period of low energy prices; the provision of services by third parties at several facilities; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, floods, fires; other unanticipated problems such as labor difficulties including renewal of collective bargaining agreements, equipment failure or unscheduled maintenance and repair; protection of intellectual property and proprietary information; information technology security breaches and other disruptions; government policies and regulations, including, but not limited to, those affecting theenvironment, climate change, tax policies, tariffs and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes. These and other important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in thisdocument are and will be more particularly described in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2018 and our other periodic filings. Readers are cautioned not to place undue reliance on Ingevity’s projections and forward-looking statements, which speak only as the date thereof. Ingevity undertakes no obligation to publicly release any revision to the projections and forward-looking statements contained in this announcement, or to update them to reflect events or circumstances occurring after the date of this announcement.
Non-GAAP Financial Measures: This presentation includes certain non‐GAAP financial measures intended to supplement, not
substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are providedwithin the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided.
3
Value-creating acquisition consistent with our strategy
Strategic Rationale Strong, market-leading business focused on high-
growth end-use applications
Complementary fit with Ingevity business model andcapabilities Technology-focused relationships drive
customer intimacy Similar manufacturing process and approach
Provides new avenues for strategic growth and value creation
Top-tier financial profile, enhances long term profitability
3
What is Caprolactone?
4
Capa® value chain
Feedsto
ck
Monom
er
Deri
vati
ves
Key performance enhancement benefits
Benzene Hydrogen peroxide
Caprolactone polyols
Caprolactonelactides
Cyclohexanone
Caprolactone thermoplastics
Compounds
Caprolactonemonomer
Capa molecules
Food friendly
More Flexible
Tougher
Brighter
Long-lasting
Better looking
More resistant
Biodegradable
Key applications
Resins and Coatings
Elastomers Adhesives Bioplastics
5
Strong, market-leading business focused on high-growth end-use applications
125
Projected Market Growth and Share by Product Segment
Monom
er
Poly
ols
Th
erm
opla
sti
c
46%
Polyols
synthesis
Reactive
modifier
Coating
additives
~4–5%
~6–7%
~4–5%
38%
Coatings
Elastomers
Adhesives ~7%
Additives for
adhesives
Shoe
components
Materials for
medical
devices
Components in
biodegradables
~8%
16%~3%
~8%
~>15%
Weighted average growth = ~6%
26%
48%
26%
2018 market split by volume Applications
Underlying market growth
Market
2018 revenueby product
Ingevity
Global market leader with unique technology and state-of-the-art manufacturing capabilities
Strategically targeted to high-value end-markets
Source: Company information, management estimates
74%derivatized
APAC
25%
EMEA
48%
Americas
27%
Revenue by geography (2018A)
Track record of strong growth in markets with significant penetration upsideCaprolactone <20% adopted in addressable markets
6
~10% ~30% ~10% <5%
490
175220
165
Total addressable market Caprolactones current share
Coatings & Resins
Elastomers Adhesives Bioplastics
Engineered polymersrevenue breakdown by application(FY18A)
Revenue CAGR(FY15A-18A)
~12% ~9% ~4% ~24%
9%
45%
46%
63%
34%
3% 18%
82%
100%
Monomer Polyols Thermoplastics
Estimated caprolactone current market size and addressable market potential ($M)
Significant untapped potential within existing key market segments for caprolactone to increase penetration
Offers a higher degree of formulating possibilities compared to other polyols
Industry leader in developing tailored caprolactone solutions with 40+ years of chemical know-how
Source: Company information, management estimates
Ingevity polyols offer significant advantages over alternatives
7
Characteristics and advantages of caprolactone polyols
Strength
High durability
High quality finish
Resistant to wear and tear
Maintains form and function
SEALS MINING SCREENS WIND TURBINE
Performance advantage
TPU producer Pre-polymer supplierCoatings
formulator
Injection moulder Screen moulder OEM coatings applicator
Seal and gasket supplier Equipment producer Assembler
OEM, e.g. Parker, Freudenberg
OEM e.g. Steinhaus, Metso
End user windmillcontractor
End user – industrial Mine operator
Examples
Distinctive positioning of caprolactonepolyols
Caprolactone Polyols
Polycarbonatepolyols
PTMEG
Polyether polyols
Specialty
polyols
Polyester polyols
EO/PO polyethers
Ingevity polyols are highly effective in enhancing the vital properties within the various value chains in which it is used at relatively limited cost, offering significant advantagesover alternative substitutes
High durability High quality finish
Resistance to wear and tear
Maintains form and function
Polyol performance pyramid
Ingevity thermoplastics enhance or substitute in a variety of applications
Bioplastics Provides flexibility Biodegradable and compostable Offers an alternative to PBAT Enhances manufacturing processes
Films Paper coatings Disposable packaging, cups
and utensils Starch & PLA containing
biopolymers
PBAT PBS
Durable Strong Stiff
Moldable at 60°C Repeatedly reshapable Biodegradable
Radiation masks shapeddirectly on the patient serving to immobilize part of the body
Immobilization devices Splints
Cross linked Polyethylene
Wood castings
Characteristics and advantages of thermoplastics
Adhesives
Medical devices
Key benefits of caprolactone Alternatives End products
Low temperature processing Ease of thermoforming Rigidity Low shrinkage with no deformation No skin contact issues or irritation
Unrivalled durability Penetrates difficult substrates Provides flexibility Easier to process and apply vs.
competing products
TPU Surlyn Polyesters EVA Polyamide
Hot-melts Fabric lamination Shoe components adhesive
8
Examples
Sales from new business development (NBD) pipeline supporting growth
9
Pip
elin
e a
s of
Q4 2
018
New prospect Commercialization stageCustomer progress path
Revenue Potential
1 4 52 3Pipeline entry and sample
delivery
Sample approval
Successful trial /
up-scaling
Commercial agreement / first order
Recurring sales reported in
budget
Selective process for inclusion of leads at an early stage leading to a low
failure rate throughout the pipeline
Products are tailored to meet customer requirements, capitalizing on the
Innovation team’s expertise
At stage 5, the product becomes part of Ingevity’s recurring product portfolio
2011 2012 2013 2014 2015 2016 2017
Sale
s volu
me f
rom
N
BD
pip
elin
e
New management team with a particular
focus on NBD
Source: Company information
~$70M
~$25M ~$25M~$20M~$40M
Focus on growth through innovation supported by a strong new product pipeline
10
Continued development of new applications for existing markets and innovative downstream derivatives
5.3%
13.1%
FY15A FY18A
Strong Sales Growth from Innovation & Derivative Focus
Capa polyols in sports flooring applications
Capa polyols to produce a microcellular PU elastomer for railway damping pads
Capa thermoplastics as a heel counter material
Capa polyols to produce a resilient band material for medical applications
Capa polyols for partial adoption in polyester based synthetic PU leather applications
1) Innovation Sales defined as volume of derivatives products commercialized within preceding 5 years as a percentage of total derivatives volume.
Focus on derivative strategy lead to Innovation Sales1 growth of ~250% between 2015 and 2018
11
Value-creating acquisition consistent with our strategy
Ingevity is the established market leader in caprolactone monomer & derivative chemistry
We have targeted markets and applications with higher growth rates with significant upside in market penetration
Caprolactone provides product performance benefits and is superior to many alternative chemistries
The business is aligned with Ingevity’s strengths:
Technology-focused relationships drive customer intimacy
Reaction / purification process and focus on derivatives
Products & solutions that purify, protect and enhance
11
Appendix
12
World class assets and product development that supports growth
13
Manchester
London
Warrington
Liverpool
Wales
EnglandCambridge
Oxford
Bristol
Plymouth
Cardiff
Leeds
Brighton
Flexible manufacturing site with in-house innovation and technical capability
Monomer Plant
Central Lab
Polymer Plant
Pilot Reactor
Largest caprolactone plant in the world with flexible capabilities to support growth
Complex manufacturing process developed over 40 years
Hydrogen peroxide supply available on site via pipeline
Well-established continuous improvement program
Well maintained assets demonstrated by high plant reliability
Dedicated innovation lab and personnel
On-site pilot reactor
Technical services including product and application development support
Ingevity Engineered Polymers competitive advantages
14
Niche chemistry with defensible competitive advantage
Expensive to replicate a similar platform with comparable competencies
No new meaningful competitors have been able to gain a substantial foothold since 2001
Ingevity is the only player to have expanded production capacity in the last 10 years
Deep customer intimacy as key driver for relevant innovations
Technologies not available for licensing
Complex production process
Required access to monomer for polyols/thermoplastics
Significant upfront costs in light of current market size
Requirement for support and innovation capability
Ingevity is the established global leader with strong capabilities in downstream derivatives
15
Caprolactone producers
Major Producers
Monomer capacity
(kt)
Dedicated plant
LocationGeographic
marketsProcess
Vertical integration
Raw materials Downstream products
H2O2 Cyclohex. Polyols Thermopl.
~45 Warrington
(UK)Global
Hydrogen peroxide
~15 Hiroshima
(Japan)Global
Hydrogen peroxide
~9 Freeport, TX
(US)
US and EMEAmainly
Dicarboxylicacids producing
HDO and caprolatone
N.A.
None ExtensiveKey
Source: Company information, management estimates
Long history of executing strategy and delivering growth…
16
Redefining Capa market leadership
Investing to support growth
Increased focus on derivative strategy
Focus on selected applications and capturing new customers
2007 2011 2014 2018 2022
Pre Perstorp
Dow closes US plant that included caprolactone production
Capa doubles monomer capacity to ensure availability of supply and support caprolactone market growth
Pilot plant built to support
Innovation
Investment into fast growing
bioplastics market
Scaling volumes of
derivatives in easier to
penetrate applications
Focus on five key strategic segments (resins, coatings, adhesives, elastomers, bioplastics)
Investment in application development to support Innovation and New Business Development
Updating monomer production technology
Capa lactides launched
Increasing shift towards higher margin derivatives
Developing own process for HDO manufacturing from residue stream
Abbreviations
17
EO Ethylene Oxide
EVA Ethylene Vinyl Acetate
HDO 1,6-Hexanediol
PBAT Polybutylene Adipate Terephthalate
PBS Polybutylene Succinate
PLA Poly Lactic Acid
PO Propylene Oxide
PTMEG Poly-tetramethylene Glycol
PU Poly Urethane
PUE Polyurethane Elastomer
TPU Thermoplastic Polyurethane