Transcript Innospec Integration & Expansion

Innospec
Integration & Expansion
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Forward-Looking Statements
This presentation 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. Such forward-looking statements include statements (covered by words like
“expects,” “estimates,” “anticipates,” “may,” “believes” or similar words or expressions), for
example, which relate to operating performance, events or developments 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, net
income, growth potential and other measures of financial performance). Although
forward-looking statements 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 these forward-looking statements.
Additional information regarding risks, uncertainties and assumptions relating to the
Company and affecting our business operations and prospects are described in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and other
reports filed with the U.S. Securities and Exchange Commission. You are urged to review
our discussion of risks and uncertainties that could cause actual results to differ from
forward-looking statements under the heading "Risk Factors” in such reports. 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.
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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 comprise EBITDA, income before income taxes excluding special
items and net income excluding special items and related per share amounts.
EBITDA 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 segment 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.
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Innospec’s Business Focus
Performance
Chemicals
Fuel
Specialties
Innospec
Octane
Additives
1300 employees in 20 countries
Oilfield
Specialties
INNOSPEC’s transformation- SALES 2004-2014
2004 Sales $ 439 million
Fuel & Oilfield
Specialties
Performance
Chemicals
Octane
Additives
2014 Sales $ 961 million
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SOURCES OF EBITDA
2014 EBITDA
2004 EBITDA
Fuel & Oilfield
Specialties
Performance
Chemicals
Octane Additives
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Fuel
Specialties
FUEL SPECIALTIES
What We Do
Fuel Additives – detergents; cold flow improvers;
lubricity improvers; corrosion inhibitors;
conductivity improvers
Product Benefits
Make fuels on-specification
Create brand-leading & premium fuels
Customers
Major oil companies,
Fuel marketers/retailers; fleets, marine, aviation
How We Compete
Market Drivers
Innovative Technology & Customer Service
Miles/vehicles on the road; legislation
Fuel economy & engine technology
Market Leader
Market Position
Sales Growth Potential GDP + 1-3 points
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FUEL SPECIALTIES
Crude Oil
• Global, blue-chip customers
• Widest range of technologies
• Uniquely – we treat the whole
barrel
• Focused on Fuel - Specialists
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Oilfield
Specialties
OILFIELD SPECIALTIES
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What We Do
Corrosion & scale inhibition; H2S scavenging; wax
modifiers; frac fluids; lost circulation materials
Product Benefits
Efficient drilling & frac’ing; Flow Assurance; Asset
Integrity
Customers
E&P companies; service companies
How We Compete
Innovative Technology & Customer Service
Market Drivers
Oil & Gas Demand; Changes to drilling and
production techniques;
Minimize environmental impact
Market Position
Started very small – creating a new mid-tier leader
based on technology and service
Sales Growth
Potential
High single digit / low double digit % (mid-higher oil
prices)
Low single digit (Lower oil prices)
Oilfield Specialties Strategy
• To build up a balanced business in :
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DATE
Drilling chemicals and services
Frac/stim
Production chemicals and services
Oil & Gas
ACQUISITION
FOCUS
Dec 12
Strata Control
Drilling
Oct 13
Bachman Services
Production
Nov 14
Independence Oilfield
Chemicals
Frac/Stim
Production
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IOSP Current Footprint in Oilfield Chemicals
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UNRIVALLED RANGE OF CHEMISTRIES
Scale
Inhibitors
Wax Control
Biocides
CrossLinkers
Lost Circulation
Materials
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Flowback
Recovery
Surfactants
Corrosion
Inhibitors
Gas Sweetening
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LOGISTICS
&
TREATMENT SERVICES
INNOVATIVE APPLICATION
TECHNOLOGY
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STATE OF THE ART LABORATORY
SERVICES
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IN SUMMARY ……..
• A new force in Oilfield Chemicals
• Setting the bar high in
– Innovative Technology
– Service
• Presence in all the major lowest lift
cost basins
• Wide range of technical solutions
• Experienced industry professionals
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PERFORMANCE
CHEMICALS
PERFORMANCE CHEMICALS – portfolio
development
2012
2014
Personal Care
Aroma
Chemicals &
Polymers
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PERFORMANCE CHEMICALS –
Personal care
What We Do
Product Benefits
Surfactants, benzoate esters, silicones
Customers
Formulators and retailers of premium brands
Skin Care & Hair Care
How We Compete
Innovative Technology & Customer Service
Market Drivers
Product performance – skin care and hair care –
premium brands
Natural; X-free
Market Position
Very small player – strong in technology
innovation
Luxurious foam/lather; low irritation; shine; skinfeel
Sales Growth Potential High single digit / low double digit %
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OCTANE
ADDITIVES
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TEL Phase-out (OCTANE ADDITIVES)
• Motor Gasoline
– One remaining country (Algeria)
– Phase out due in 2015
• Aviation Gasoline
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TEL still mandated in 100LL
Essential for general aviation fleet
FAA program targets first alternatives by 2018
(Reported within Fuel Specialties)
• Management of Mogas phase-out well underway
– No site exit (not a superfund site)
– Above ground remediation only (mainly demolition)
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STRATEGY
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Innospec Group Strategy
Business Unit
Technology Expansion Geographical Expansion
Fuel Specialities
Oilfield Specialties
Personal Care
Polymers & Waxes
Aroma Chemicals
Octane Additives
Asset Optimisation
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Innospec Strategy
• Fuel Specialties
– Technology-driven ; Continued investment in R&D
– Geographical expansion
• Brazil operating well
• Russia impacted by political instability, sanctions, low oil prices
• Canada, China and India – possible near-term trading operations
• Octane Additives
– Motor Gasoline
• Understand remaining demand and ensure supply – responsible
exit
– Aviation Gasoline
• Stay close to aviation fuel developments
Innospec Strategy
• Personal Care
– Technology Development
• Improved Performance - Surfactants, Benzoate Esters
• Customer drive for sulfate-free & ‘natural’ products
• Now offering ‘shine’ as well as ‘foam/lather’ and ‘cleansing’
• Strategy – “take more space in the bottle’
– Acquisition Opportunities
• Technology Additions
– ‘More space in the bottle’
• Geography
– Accelerate expansion outside USA
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Innospec Strategy
• Oilfield Specialties – Key Focus
– North American market is very still reasonably strong
– Consolidation and low oil prices offer opportunities
– Acquisitions integrating well
• Build-out from existing assets
– Further establishment & growth in existing basins
– Growth of integrated Frac/Stim & Production Chemicals
– Quality service and cost-effective treatments
Salisbury, NC
High Point, NC
UK- Ellesmere Port
Widnes,Millbrook
Pencader, DE
Germany
Herne & Leuna
Moscow
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Englewood, CO
OK
Oklahoma
City
Enid
Beijing
Greece
Piraeus
Spain
Madrid
Chatsworth
, CA
Seoul
Cyprus
Hong
Kong
France
vernon
TX -Houston
The Woodlands
Midland
Pleasanton
Italy
Milan
Subic
Bay
Crowley,
LA
Dubai
Singapore
Brazil
Sao Paolo
Itajae
Manufacturing /
Technology
Technology
New Dehli
Cape Town
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Innospec Inc. – Sales Growth – On Track
1000
900
800
700
600
500
400
300
200
100
0
2004
2005
2006
2007
Fuel Specialties
2008
2009
2010
Performance Chemicals
2011
2012
2013
Octane Additives
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2014
IOSP SHARE PRICE
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Balanced Capital Management Program
• Share Repurchases or Dividend - part of capital
management.
– 2011 program repurchased 3% of shares ($26 million)
– 2012 dividend of $2 per share ($47 million)
• New Dividend Policy Announced November 2013
– 50 cents per share for 2013
– 55 cents per share for 2014
• 2014 Buy-Back Facility in place
– $20 million
Innospec – Strong Base for Expansion
• Growth businesses in good quality markets
• Strong technology base and R&D pipeline
• Building out geographical presence
• Balance Sheet in good shape
– Strong balance sheet – even after current acquisitions.
– $200m revolving credit facility with appropriate headroom to
execute strategy
– Leverage still at 1x EBITDA
• Focus on integration, build-out and delivery
– Remain alive to good acquisition opportunities
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