Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
InnospecA New Phase of Development
JANUARY 2013
Forward-Looking StatementsThis presentation contains certain "forward-looking statements" within the meaning of the PrivateSecurities Litigation Reform Act of 1995. All statements other than statements of historical factsincluded or incorporated herein may constitute forward-looking statements. Such forward-lookingstatements include statements (covered by words like “expects”, “anticipates”, “may”, “believes” orsimilar words or expressions), for example, which relate to operating performance, events ordevelopments that we expect or anticipate will or may occur in the future (including, without limitation,any of the Company’s guidance in respect of sales, gross margins, pension liabilities and charges, netincome, growth potential and other measures of financial performance). Although forward-lookingstatements are believed by management to be reasonable when made, they are subject to certain risks,uncertainties and assumptions, and our actual performance or results may differ materially from theseforward-looking statements. Additional information regarding risks, uncertainties and assumptionsrelating to the Company and affecting our business operations and prospects are described in theCompany’s Annual Report on Form 10-K for the year ended December 31, 2011, and other reports filedwith the U.S. Securities and Exchange Commission. You are urged to review our discussion of risks anduncertainties that could cause actual results to differ from forward-looking statements under theheading "Risk Factors”. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
2
Use of Non-GAAP Financial Measures
The information presented in this presentation 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 include EBITDA which is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense (net), income taxes, depreciation, amortization and impairment of Octane Additives business goodwill. The Company believes that such non-GAAP financial measures provide useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses these non-GAAP financial measures internally to allocate resources and evaluate the performance of the Company’s operations. While the Company believes that such measures are useful in evaluating the Company’s performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures used by other companies and do not provide a comparable view of the Company’s performance relative to other companies in similar industries.
3
Outline
• Corporate Profile
• History
• Financial Performance
• Compliance Update
• 2013-2014 Prognosis
• Metrics
4
Innospec – A NASDAQ Company which is :
• Growing
• In good quality markets
• Continues to deliver on organic growth
• First stage of acquisition strategy now delivering
• Highly cash generative
• Net debt free
• Innovative
• Extended analyst coverage to four
– Monness Crespi Hardt
– Sidoti
– CJS Securities
– KeyBanc
5
Innospec Inc. – Company profile
• Innospec Inc. – NASDAQ (IOSP)
• Corporate HQ in Littleton, CO
• Regional offices in USA, UK, continental
Europe, Africa and Asia
• Manufacturing sites in USA, UK, France
and Germany; global network of offices
and testing facilities
• Revenue of $774 million (2011)
• Approximately 850 employees in 20
countries
6
Innospec’s Business Focus
PerformanceChemicals
Octane Additives
FuelSpecialties
InnospecOilfield
Specialties
7
Innospec Fuel Specialties
• We focus solely on fuel and fuel additive
technology
• We develop and market products to
– Improve cleanliness, efficiency and safety
– Reduce emissions and maintenance costs of engines,
boilers and gas turbines
• We will improve any fuel based on oil, coal,
or biofuel
“Focused on Fuel”
8
Uniquely - We treat the Whole Barrel
• Automotive Gasoline
• Automotive Gasoil
& Middle Distillates
• Jet Fuel
• Light Heating Oil
• Industrial Heavy Fuel Oil
• Marine Bunker Fuel
• Crude Oil
Cru
de
Oil
9
Innospec’s Competitive Advantage in Fuel Specialties
• Dedicated people to support customers
– Best-in-class sales and technical teams
– Focused and dedicated to fuel additives
– Strong global presence, and still extending
• Good technology – focused on fuel
• Dedicated R&D
– High % of sales are from new products
10
Performance
Chemicals
11
• Specialty surfactant manufacturing company
– Focused on the personal care industry
• Sun care, Hair conditioning, Antiperspirant/Deodorant,
Skin cleansing and Skin care
• Products in the market
AVON, SCHRING PLOUGH,
UNILEVER, NEUTROGENA
FINSOLV TN
C12-15 Alkyl Benzoate
L’OREAL, SEXY HAIR
CONCEPTS, L’OREAL
FINQUAT CT
QUATERNIUM 75
COTY, UNILEVER
FINESTER EH-25
C12-15 Alkyl Ethylhexanoate
PAUL MITCHELL,
JOHN FREIDA
FINESTER DOM-R
Diethylhexyl maleate
Personal Care
12
• Manufacturer of Fragrance Ingredients - Examples
Lilestralis® - lily of the valley
fragrances for fabric softeners, soaps
and other household and personal
care products
Osyrol® - Sandalwood
fragrance for fine
perfumes
Aroma Chemicals
13
Polymers
14
• EVA (ethylene – vinyl acetate) copolymers
– Used in plastic injection moulding, hoses, films & foams
• Polyethylene Waxes
– Plastics processing, Candles, Adhesives
– Also used as part of Personal Care portfolio
• Relatively ‘commodity’ part of Active Chemicals
– Subject to greater swings of demand and margins
• Asset Optimization
Octane Additives
15
TEL Phase-out
• World’s only producer of tetra ethyl lead (TEL)
– lead for leaded gasoline
• TEL in Motor Gasoline in terminal decline
• Countries still to convert to unleaded gasoline
– North Africa and the Middle East
• Customer Exits can be quick and with little warning
• Aviation gasoline requires significant research and development
– Safety is paramount
– Large legacy aircraft fleet
– TEL is mandated by civil aviation regulations
• Management focus on generating cash from remaining volume
16
Oil Field Specialties
Natural Expansion into an
Adjacent Market
17
Oil Field Specialties
• Opportunity to expand into an adjacent market using
amendments to existing technology.
• Good quality markets – higher growth rates in both developed
and developing countries.
• Change in Exploration and Production – Unconventional
– Shale, deepwater
– Requires novel technology
• Solutions to problems are allied to refinery issues
• Prime opportunity for acquisitions
– First acquisition completed in December 2012
18
Strata Control Inc
• Oilfield Specialties – Leader in Lost Circulation
Materials
• Approx $18 million in sales
• Concentrated in USA
– Limited exports
• Crowley, Louisiana, USA
• Patented technology
• Accretive in 2013
19
Operating Model – Keeping it Simple
Global activities
StrategyLegal & ComplianceKey accountsR&DCo-producer salesLeverage purchasingAcquisitionsFinance ITHR
Americas
Europe,
Middle East
& Africa
Asia
Pacific
Integrated regional businessesP&L responsibility
Sales, Marketing, Supply chain, Manufacturing
Customers
20
Innospec Inc. – Sales Growth – All Innospec
0
100
200
300
400
500
600
700
800
2004 2005 2006 2007 2008 2009 2010 2011 Q3 YTD
2012
Octane Additives
Active Chemicals
Fuel Specialties
21
Compliance
• Total commitment from senior team to Compliance
– A clear top-down compliance ethic communicated
• Substantial Investment in Enhanced Compliance
– Extensive and on-going review of all contracts and relationships.
– Extensive employee training
• Enhanced Compliance Structure
– US based General Counsel / Head of Compliance
– UK based Global Compliance Counsel
– Processes and training designed to prevent recurrence
22
Outlook 2013-2014
Market Dynamics – Fuel Specialties
• Miles on the road continues to grow
– Particularly in developing markets
• Fuel Balance changing
– Gasoline declining in US & Europe – passenger car fuel economy
– Diesel continues to grow in all markets
• Legislation in emerging markets (eg; sulfur, biofuels)
• Customer Base evolving
– Changing names in refining
– Emergence of national oil companies
• No significant changes in competitive landscape
24
Market Dynamics – Performance Chemicals
• Underlying growth in personal care continues
– Strong growth in developing markets (eg; Brazil, China)
• Consumer Trends driving product development
– Improved product performance
– X-free ; elimination of unwanted components
• Sulfates, nitrosamines, 1,4 dioxane
– Natural/renewable materials
• Vegetable preferred to petrochemical
• Competitive Landscape – consolidation
– Large players get larger (BASF/Cognis; Solvay/Rhodia)
– Provides space for smaller players with good technology and superior
customer service.
25
Market Dynamics – Octane Additives
• TEL in motor gasoline – sunset industry
• Three remaining users – North Africa / Middle East
• Timing of transition to unleaded gasoline unclear
– Market feedback not easy to get
• Business unlikely to continue beyond 2014
• 2013 demand remains uncertain
26
Market Dynamics – Oilfield Specialties
• Market continues to recover post-2009
• US shale drilling moved from gas to oil
– Depressed natural gas prices
– Need to be prepared for any reversal
• Emerging Shale Opportunities globally
– eg; UK development approval late 2012
• Environmental Concerns drive technology
– New technology to reduce environmental footprint
– R&D opportunities
• Competitive Landscape
– Some consolidation (eg; Halliburton / Multichem)
– Plenty room for smaller players to deliver good technology with
superior service levels.
27
Strategy
28
Innospec in Good Shape to Expand
• Solid base from which to expand
– We have continued to expand throughout the downturn
• Finances in good shape
– Strong balance sheet
– Even after almost $100m cash out in dividends and
acquisition costs in Q4.
• Corporate services fit for purpose
• Legacy compliance issues dealt with and behind us
29
Innospec Strategy – Organic Growth
• Fuel Specialties
– Technology-driven ; Continued investment in R&D
• Engine technology and fuel quality offers opportunities
– Geographical expansion
• New offices established in Brazil and Russia
• Oilfield Specialties
– Focus on a small number of key customer relationships
– Strata acquisition is the first significant step
– Existing organisation augmented by new hires
– Low risk expansion into an adjacent market
– Widening of coverage :
• Drilling, completion and production chemicals
30
• Performance Chemicals
– Technology Development
• Improved Performance - Surfactants, Benzoate Esters
• Customer drive for ‘natural’ green products
• Octane Additives
– Motor Gasoline
• Understand Mogas Customer Demand
• Ensure that customers who want to buy, can buy
– Aviation Gasoline
• Stay close to aviation fuel developments
– Maximise value from the asset – supply/demand
Innospec Strategy – Organic Growth
31
Next Steps – Acquisition Strategy
• Finance position continues to be strong:
– Strong balance sheet
– Excellent bank support
• Acquisition Profiles
– Existing core markets (Personal Care, Oil Field Chemicals, Fuel
Additives)
– Smaller ‘technology’ acquisitions - $20m - $100m
– Remain alert for substantially larger opportunities in the latter part of
2013.
32
TPC Group
• Innospec was involved in competitive bidding for TPC Group
• Large transformational acquisition with opportunities :
– Improved operation
– Synergies with Fuel Specialties
• Bid was supported by :
– Banks
– Private equity investment from Blackstone Capital
• Withdrew from the bid
– Decided that the return was not sufficient for our shareholders
33
Balanced Capital Management Program
• Acquisitions remain a priority for growth
• Share Repurchases or Dividend may also be used as
part of capital management.
– 2011 program repurchased almost 1 million shares
• Retired 3% of the equity, at a cost of $26 million.
– 2012 dividend of $2 per share
• At a cost of $47 million.
– Further programs will be considered subject to cash
availability
34
Key Management Metrics
•Sales Growth
•Gross Profit
•Operating Income
•Cash Flow
•Net Debt / EBITDA
35
Delivering on our Commitments
Commitments (2009) Delivery (2010-2012)
Resolve FCPA Delivered
New Management Team Delivered
Organic Growth Delivered and continuing
Board Restructuring Delivered
Geographic Expansion (Brazil, Russia) Delivering
Market Expansion (Oilfield) Delivering
Strengthen Balance Sheet Delivered
Analyst Coverage Delivered
Acquisitions First one delivered – more to come
Buybacks & Dividend Buy-back (2011)
Dividend (2012)
Stock Price Improved by > 10x
36
Summary
• Innospec delivered on 100% of its 2009 promises
• First acquisition now completed (Oilfield Specialties)
• Continue to seek further attractive acquisitions
• Balanced capital management program – 2012 dividend
• Underlying markets still in reasonable shape
• Competitive Position remains strong
37