Investor Presentation · 2020. 8. 6. · Innovation pipeline and R&D enabling faster growth in...
Transcript of Investor Presentation · 2020. 8. 6. · Innovation pipeline and R&D enabling faster growth in...
Investor Presentation August 2020
60% 40%
A global specialty materials company focused in premium markets
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Image-oriented
FINE PAPER
& PACKAGING
Performance-based
TECHNICAL
PRODUCTS
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Addressing COVID
Actions taken to protect employees and preserve liquidity
• Implemented appropriate policies to protect employees and keep them safe
• Strict spending controls across all facets of the business
• Capital spending prioritized and reduced to approximately $15 million
• Aggressive management of supply chain; reducing inventories, rationalizing skus, optimizing footprint and operating schedules
• Significant impact to demand in Q2, however sequentially improving demand through the quarter
Expect >$50 mm of cash improvement vs. base plan
✓ Margins recover as pricing/cost actions overcome unprecedented run-up in input costs
✓ US filtration capacity ramping up (though cost inefficiencies remain due to underutilization)
✓ Innovative new product launches
✓ Improved operational efficiencies
Strategy execution delivering pre-COVID
$110
$115
$122
$131
11%12%
13%
14%
9%
11%
13%
15%
17%
19%
LTM Q219 LTM Q319 LTM Q419 LTM Q120
95
100
105
110
115
120
125
130
135EBITDA
Margin
Playing a key role in the value chain
We take various inputs and employ multiple proprietary technologies to
impart customer-desired performance characteristics or quality requirements
Our products are critical to end-use performance, but represent a small
portion of end-product cost
Typically sold to customers for final processing
ManufacturingFinal
Converting & Packaging
End ProductRaw
MaterialsValue-add Processing
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Proven strategies to create long-term value
Drive organic growth in core businesses where we have defensible, leading market positions and focus investments, including M&A ,in targeted growth platforms
Deliver meaningful cash flow with balanced capital deployment to maintain a strong balance sheet and provide an attractive dividend
Protect or enhance margins and ROIC through systemic cost initiatives, pricing discipline and relentless focus on capital-efficient growth
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Our Growth Platforms
FiltrationSeparation and purification of air and liquids for critical applications
Custom Engineered MaterialsSpecialty media for demanding end-use markets
Packaging & DesignEnriching the customer
experience through color, texture, and design
Digital & Specialty CoatingEnhancing substrates through chemical and polymer science
Example Growth Markets• Transportation• Water Purification • Air (HVAC/HEPA/Industrial)• Food/Beverage
Example Growth Markets• Composites• Acoustical/thermal insulation• Glass mat• Medical packaging
Example Growth Markets• Premium packaging• Stored value cards• Consumer• Retail solutions
Example Growth Markets• Digital transfer paper• Labels • Wide format• Silicone release liner
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Performance Materials (~55%)
Filtration (~45%)
> $500MM Net Sales
TECHNICAL PRODUCTS
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Strong customer relationships with long qualification
periods
Leading Positions in Defensible Niche
Markets
Broad Range of Technical Abilities
▪ Innovative offerings from a global footprint
▪ Long-term joint development relationships
▪ Strong technical support and service
▪ High value, growing specialty markets
▪ Long customer qualifications - strong barrier
▪ Our media is a key performance driver, but a small part of product cost
▪ Multiple technologies and chemistries
▪ Proprietary formulations & strong “dark” IP
▪ Leading performance and innovation
Technical Products Why we are successful
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Europe NAFTA Asia RoW
OtherNeenahH&VAhlstrom
35
55
75
95
115
135
155
175
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Media for air, fuel, oil and cabin air in cars and
heavy duty equipment. >80% recurring sales
Consolidated market; 3 global players
Market moving to high performing filters
US investment to provide >$70 mm EOC sales
Neenah Transportation Filtration Net Sales €
Organic CAGR 7%
Market Size & Share by Region
#1
Filtration Media
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Transportation
Global Market$1.3 Bn
GDP+ growth
Water filtration
Demand growing GDP+
Currently only US manufacturer for
component of reverse osmosis filters
Air/industrial filtration
Demand growing almost 2x GDP
Addressable market sized at $2 bn
Recent entry in face masks and expansion
into other industrial end markets
Beverage filtration
GDP+ growth market
Manufacture media for coffee capsules
Other End Markets
▪ Focused on performance niches where we
add value downstream applications
(saturation and coating)
▪ Products include backings used in
specialty tapes and abrasives, and other
markets including digital transfer media,
labels, security and others
▪ Innovation pipeline and R&D enabling
faster growth in digital printing, labeling
and other categories
Abrasive Backings
Tape Backings
Digital Transfer Media
Medical Packaging
Performance Labels
Security Covers
Performance Materials:A collection of growing niche businesses
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FINE PAPER & PACKAGING
Premium Packaging (~20%)
Graphic Imaging (~80%)
~ $400MM Net Sales
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Fine Paper & Packaging Why we are successful
LeadingBrands
Go To MarketInnovation
Best in Class Manufacturing
Capabilities
▪ Leading brand equity pulls demand
▪ Pricing ability to recoup input costs
▪ Selective distribution
▪ Specialty colors, textures and coatings allow creation of unique and customized product portfolio
▪ Unique purpose-built assets provide fast, flexible and low cost offerings at highest quality
▪ Design and rapid prototyping, provides customers a more holistic solution and create barriers for competitors
▪ Able to replicate short lead times with outstanding service
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Neenah60%
Mohawk Fine Papers
20%
Others20%
▪ Neenah is the clear market leader in both commercial and consumer channels with our well-known brands
▪ Consolidated niche market of unique papers used for high-end commercial printing and consumer applications
▪ Market faces secular pressures from electronic substitution. Opportunistic volume opportunities in lower value premium opaque and other grades
GRAPHIC IMAGING
Premium market $575 MM & shares
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Opportunistic volume adjacencies
PREMIUM PACKAGING
▪ Targeting “high value items in small packages”
▪ Market growing 3-4%/yr. Neenah target/historical performance = 2x market
▪ Categories include labels for spirits, wine and craft beers, premium folding board and box wrap for retail and beauty products, and plastic-substitute gift cards and advertising signage
▪ Efficiently uses fine paper assets and texture & color capabilities
Beauty
49%
Alcohol
29%
Retail/
Other
22%
Addressable market by end use~$ 450MM
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✓ Generate consistent profitable growth
✓ Capital efficient decisions, guided by ROIC
✓ Maintain a prudent balance sheet
✓ Provide shareholder returns, including an attractive dividend
Financial Principles
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✓Mid-single digit top line growth
✓ Attractive Return on Capital
✓ Strong balance sheet and cash flows
✓ Total shareholder returns of almost 2x the R2000 index
Return to
Shareholders
$177 MM
Value-Adding
Organic Capital
$150 MM
Acquisitions
$169 MM
Substantial cash flows and balanced capital deployment has resulted in:
Five-year cash deployment
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Value-adding capital deployment
Consolidated P&L Data
$626
$738 $782$840 $888
$942$980$1,035
$940$840
14% 14% 15% 15% 16% 17%14%
12% 13% 13%
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25.0%
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35.0%
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200
400
600
800
1000
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2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM
Q220
Net Sales
Adj. EBITDA %
$1.84
$2.63$2.87$3.21
$3.70
$4.54$4.32
$3.50 $3.47
$2.86
2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM
Q220
Adjusted
E.P.S.
✓ Top-line growth driven by share gains, new products, price/mix improvement and acquisitions.
✓ Earnings in 2017-19 include impact during early years of US filtration capacity ramp-up and timing of input cost recovery
CAGR> 3%/yr
CAGR> 5%/yr
2011-2013 excludes divested Lahnstein
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▪ Top line growth reflects GDP+ growing markets, organic volume and share gains, and M&A
▪ Opportunity to expand margins through:
Continued US filtration ramp up (start up costs began in 2017)
Operational efficiencies and scale
Share/mix gains with innovative new products
$336 $353
$404 $429
$466 $502
$583 $542
$503
15% 15% 15%16%
18%15%
13% 12% 13%
-3%
2%
7%
12%
17%
22%
27%
32%
37%
42%
$-
$100
$200
$300
$400
$500
$600
$700
2012 2013 2014 2015 2016 2017 2018 2019 LTM
Q220
Net Sales
Adj. EBITDA % $402$428 $436 $443 $452 $455
$446
$397
$337
16% 16% 16%18% 18%
17%14%
17% 17%
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1220283644526068768492
100108116124132140148156164172180188196204212220228236244252260268276284292300308316324332340348356364372380388396404412420428436444452460468476484492500
2012 2013 2014 2015 2016 2017 2018 2019 LTM
Q220
Net SalesAdj. EBITDA %
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Segment P&L Data
CAGR4%/yr
CAGR-2%/yr
▪ Commercial print market facing secular pressures of 3 to 5% annually
▪ Neenah sales growth through 2018 reflect acquisitions, share gains, packaging growth and pricing. Business divestiture and distributor transition in 2019, COVID impacts in 2020
▪ Consistent attractive margins and cash flow
Technical Products Fine Paper & Packaging
9%
5%4%
4% 4%3%
✓ Disciplined investments and history of value-adding acquisitions
✓ Continual focus on asset efficiency and returns
✓ Willingness to divest non-returning assets or businesses
✓ Expected continued improvement as US filtration capacity continues to ramp up
✓Outperforming many peers
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ROIC/Capital Efficiency
12%13%
10%9% 9%
8%
2015 2016 2017 2018 2019 LTMQ220
Neenah ROIC Trends
2019 ROIC versus selected peers
175 175 175 175206
4680 64
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1.4x
1.8x 1.9x
1.6x 1.6x
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Dec-16 Dec-17 Dec-18 Dec-19 Jun-20
Bonds/TLBS-T Debt
$221
$255
✓Cash generation and prudent spending has kept debt to EBITDA ratio below 2 times
✓Ample liquidity and significant borrowing capacity on existing credit facilities
✓Credit facilities with reasonable terms and covenant light
✓Recent $200 mm Term Loan B used to redeem $175 mm of 2021 Senior Notes
Debt($ millions)
Debt/EBITDA
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$239
$201
Strong balance sheet
Cash & Equivalents
$3 $5 $10 $9 $26
$206*
* June 2020 reported debt and cash balances each have been reduced $175 million to reflect the July 16
redemption of Senior Notes
*
20%
11% 11% 11%
0
0.05
0.1
0.15
0.2
0.25
10-Yr TSR Avg
vs. Market
Cash Deployment/Shareholder Returns
$63
$47$57 $55
$76 $80
7%5% 6% 5%
8%9%
0%
5%
10%
15%
20%
25%
2015 2016 2017 2018 2019 LTM Q220
0
10
20
30
40
50
60
70
80
90
100Free Cash FlowFCF FCF % NS
$1.32
$1.48
$1.64
$1.80$1.88
0.75
0.95
1.15
1.35
1.55
1.75
1.95
2016 2017 2018 2019 2020
Dividends
per share
▪ Capital deployment prioritizes highest returns (organic, value-adding M&A, debt reduction)
▪ Strong cash generation due to:
▪ Efficient asset base; capital spend 2-4% of sales (maintenance ~ $15MM)
▪ Low cash tax rate helped by R&D tax credits
▪ Impressive track record of growing dividend
▪ $25MM/yr buyback plan used to offset dilution (~$5mm/yr) and opportunistically
▪ Total shareholder returns 2x the market
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▪ Strong foundational businesses, with leading positions in defensible and profitable core categories and historically attractive margins
▪ Catalysts in place to drive growth without significant capital required
▪ US filtration ramp up and share gains
▪ Expanded presence in digital transfer
▪ Premium packaging
▪ Neenah Operating System
▪ Financial strength
▪ Management team with long-term track record of value-adding capital deployment
Fine Paper &
PackagingTechnical
Products
Neenah Today
Packaging
& Fine
Paper
Technical
Products
Neenah Future
Take-Aways
For more information
Visit Our Website: www.neenah.com
Email: [email protected]
Investor RelationsBill McCarthyVice President- Investor Relations
3460 Preston Ridge Road
Suite 600
Alpharetta, GA 30005
Phone: (678) 518-3278
Email: [email protected]
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Contact Us
Appendix
Statements in this presentation which are not statements of historical fact are “forward-looking statements” within the “safe harbor”' provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Neenah, Inc. at the time this presentation was made. Although Neenah believes that the assumptions underlying such statements are reasonable, it can give no assurance that they will be attained. Factors that could cause actual results to differ materially from expectations include the risks detailed in the section “Risk Factors” in the Company’s most recent Form 10-K and SEC filings.
In addition, the company may use certain figures in this presentation that include non-GAAP financial measures as defined by SEC regulations. As required by those regulations, a reconciliation of these measures to what management believes are the most directly comparable GAAP measures would be included as an appendix to this presentation and posted on the company’s web site at www.neenah.com
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Forward Looking Statements
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GAAP Reconciliation
Results for the year ended December 31, 2015, include integration and restructuring costs of $6.5MM. Results for the year ended December 31, 2016, include integration and restructuring costs of $7.0MM and a pension plan settlement charge of $0.8MM. Results for the year ended December 31, 2017, include integration and restructuring costs of $1.3MM, a pension plan settlement charge and insurance settlement of ($2.6MM). Results for the year ended December 31, 2018, include an impairment loss of $31.1MM, restructuring, integration and other costs of $2.1MM and a pension plan settlement charge and insurance settlement of ($2.5MM). Results for the year ended December 31, 2019, include restructuring, integration, and other costs $6.2MM and pension plan settlement charge ($1.4MM).
Continuing Operations
$ millions 2015 2016 2017 2018 2019 LTM Q220
Net Income (Loss) $ 51.1 $ 73.0 $ 80.3 $ 36.4 $ 55.4 ($3.7)
Loss from discontinued operations 9.4 0.4 - 0.8 - -
Income from Continuing Operations (Loss) 60.5 73.4 80.3 37.2 55.4 (3.7)
Plus: Provision for income taxes 29.4 29.6 11.4 3.9 11.1 (1.6)
Plus: Interest expense, net 11.5 11.1 12.6 13.0 11.8 11.5
EBIT (Operating Income) 101.4 114.1 104.3 54.1 78.3 6.2
Plus: Asset Restructuring Impairment costs - - - 31.1 4.7 58.0
Plus: Other restructuring and non-routine costs 6.5 7.0 1.3 2.1 1.5 2.7
Plus: Loss on debt extinguishment - - - - - 1.9
Plus: COVID-19 costs - - - - - 1.5
Plus: Pension, insurance settlement and other costs - 0.8 (2.6) (2.5) (1.4) (0.3)
Adjusted EBIT 107.9 121.9 103.0 84.8 83.1 70.0
Plus: Net depreciation and amortization 27.5 30.1 32.1 35.0 33.8 33.2
Plus: Stock-based compensation 6.5 5.8 6.4 4.0 5.6 5.1
Adjusted EBITDA $ 141.9 $ 157.8 $ 141.5 $ 123.8 $ 122.5 $108.3
Diluted Earnings (Loss) per Share $ 3.53 $ 4.26 $ 4.68 $2.17 $3.26 (0.24)
Plus: Asset Restructuring Impairment costs - - - 1.37 0.21 2.62
Plus: Other restructuring and non-routine costs 0.24 0.25 0.06 (0.11) 0.06 0.11
Plus: Loss on debt extinguishment - - - - - 0.08
Plus: COVID-19 costs - - - - - 0.07
Plus: Pension, insurance settlement and other costs - 0.03 (0.10) 0.06 (0.06) (0.02)
Plus: Tax adjustments (0.07) - (0.32) 0.01 - 0.24Diluted Adjusted Earnings per Share $ 3.70 $ 4.54 $ 4.32 $3.50 $3.47 2.86
GAAP Adjusted EBITDA segment reconciliation
Continuing Operations$ millions 2011 2012 2013 2014 2015 2016 2017 2018 2019
LTM Q220
Technical Products
GAAP Operating Income (Loss) $ 33.9 37.7 $ 38.9 $ 46.0 $ 54.1 $ 65.6 $ 55.3 $ 50.9 $ 44.6 ($10.3)
Plus: Asset restructuring and impairment costs - - - - - - - - - 51.6
Plus: Other Restructuring and non-routine costs - - - 1.6 1.8 1.4 - (1.8) 0.3 0.3
Plus: Pension & SERP related costs - - - - - - - 0.4 (1.5) (1.5)
Plus: Loss of debt extinguishment - - - - - - - - - 0.1
Plus: COVID-19 costs - - - - - - - - - 0.7
Adjusted EBIT $ 33.9 $ 37.7 $ 38.9 $ 47.6 $ 55.9 $ 67.0 $ 55.3 $ 49.5 $ 43.4 $40.9
Plus: Net depreciation and amortization 13.8 12.6 13.1 11.3 13.9 17.7 19.6 24.5 24.2 24.1
Adjusted EBITDA $ 47.7 $ 50.3 $ 52.0 $ 58.9 $ 69.8 $ 84.7 $ 74.9 $ 74.0 $ 67.6 $65.0
Net Sales $ 352 $ 336 $ 353 $ 404 $ 429 $ 466 $ 519 $ 583* $ 542 $503
Adj. EBITDA Margin of NS (%) 14% 15% 15% 15% 16% 18% 15% 13% 12% 15%
Fine Paper and Packaging
GAAP Operating Income $ 32.7 $ 50.0 $ 59.9 $ 60.8 $ 67.3 $ 70.7 $ 69.5 $ 29.4 $ 53.2 $39.1
Plus: Asset restructuring and impairment costs - - - - - - - - - 3.7
Plus: Other Restructuring and non-routine costs - 5.8 0.4 - 1.5 1.8 (2.9) 23.9 5.7 4.4
Plus: Pension & SERP related costs - - - - - - - 0.4 - -
Plus: COVID-19 costs - - - - - - - - - 0.6
Adjusted EBIT $ 32.7 $ 55.8 $ 60.3 $ 60.8 $ 68.8 $ 72.5 $ 66.6 $ 53.7 $ 58.9 $47.8
Plus: Net depreciation and amortization 16.5 9.4 9.3 8.6 9.9 10.9 11.0 9.9 9.1 8.8
Adjusted EBITDA $ 49.2 $ 65.2 $ 69.6 $ 69.4 $ 78.7 $ 83.4 $ 77.6 $ 63.6 $ 68.0 $56.6
Net Sales $ 275 $ 402 $ 428 $ 436 $ 443 $ 452 $ 455 $ 446 $ 397 $337
Adj. EBITDA Margin of NS (%) 18% 16% 16% 16% 18% 18% 17% 14% 17% 17%
27Technical Products 2018 NS * includes ~$16 mm for products previously in “Other” segment 2011-2015 excludes Lahnstein