v
NYSE: NP
Q4 2019 Investor Presentation
60% 40%
We are a global specialty materials company focused on high value NICHE markets
2
Image-oriented
FINE PAPER & PACKAGING
Performance-based
TECHNICAL PRODUCTS
Net Sales $1 bn
Proven STRATEGIES To create LONG-TERM value
Drive organic growth in core businesses where we have defensible, leading market positions, supplemented by value-adding M&A
Deliver meaningful cash flow with balanced capital deployment to maintain a high ROIC, strong balance sheet, and attractive dividend
Protect or enhance margins through cost and pricing initiatives and relentless focus on optimizing operational efficiencies
3
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
Filtration DigitalMedia
Pkg &Design
3-5%
5-7%
3-4%
FiltrationDigital Print Media
Pkg & Design
$247
$233$239
$253
$232
7% 6% 7%9% 9%
200.0
210.0
220.0
230.0
240.0
250.0
260.0
Q318 Q418 Q119 Q219 Q3191.0%
6.0%
11.0%
16.0%
21.0%
26.0%
31.0%
Net Sales Fx/DivestAdj. EBIT %
Added US filtration capacity ramping up (though cost inefficiencies remain due to smaller run sizes and underutilization)
Margins now recovering from an unprecedented run-up in input costs
Weaker global economies impacting demand near term; addressing through cost management, asset optimization and focus on cash flow generation
Emerging From recent challenging period
WITH KEY growth CATALYSTS IN PLACE Targeted growth markets with opportunities to expand w/out significant capital US transportation filtration capacity to provide profitable ~$80 mm EOC sales
Air/liquid industrial filtration markets offer additional opportunities to expand
Leading global position in a fast growing digital transfer media market
Premium packaging/design mitigating secular pressures in fine paper
• Geographic expansion (80+% of TP sales currently in No. America/Europe)
• Strong financial position to weather storms/support value-adding investments
Target Market Size ($3bn)
Target Market Growth Rates
4
Performance Materials (~55%)
Filtration (~45%)
Growing and profitable performance-based markets
~ $600MM Net Sales
TECHNICAL PRODUCTS
5
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
6
35
55
75
95
115
135
155
175
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Europe NAFTA Asia RoW
OtherNeenahH&VAhlstrom
Filtration
Transportation Global market growing ~3+% per year, with
tight capacity and only 3 global players Filter media used for air, fuel, oil and cabin
air in cars and trucks/heavy duty equipment Trend towards more demanding engines that
require higher performing filters > 80% of sales recurring (after-market)
Other Markets Present in fast-growing markets including
water, industrial, and beverage filter media
Net SalesOrganic CAGR 7%
Global Transportation Filtration Market/Shares~ US $1.3 billion
7
Runway for growth First US asset started up in 2017 after
consuming available capacity in Europe Global customers support our expansion
and desire added choice in No. America Asset provides best in class capabilities and
cost position ~$80 million EOC sales at attractive margins
to lead to meaningful profit turnaround
Performance Materials
Backings Sizeable global category with media
primarily used in tapes and abrasives Markets generally grow with GDP though
currently under pressure Focused on performance niches requiring
downstream applications
specialties Markets include digital transfer media,
labels, security, and others Markets generally growing at GDP+ Saturating and coating know-how used
to impart unique characteristics
Abrasive backings
Tape backings
Digital transfer media
Medical packaging
Performance labels
Security covers
8
$263
$324 $352 $336 $353
$404 $429
$466 $502
$583
5%
9% 9%10% 11%
12%13% 14%
11%
8%
-3%
2%
7%
12%
17%
22%
27%
32%
$-
$100
$200
$300
$400
$500
$600
$700
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net Sales
Adjusted EBIT %
*
Technical Products Financial Trends
CAGR6%/yr
EMERGING FROM CHALLENGING PERIOD Selling prices and cost management beginning
to overcome rapid run up of input costs Global volumes remain pressured, addressing
through cost management and R&D efforts
FAST-GROWING TOP LINE; RECENT margins Reflect US FILTRATION Asset start-up Markets growing GDP+ Organic investments supplemented with M&A lead
to volume and share gains through performance, innovation and geographic expansion
Historical margin expansion through: Mix enhancement, led by profitable and faster
growing filtration products Leveraging cost efficiencies and scale Managing pricing and costs to offset inputs R&D-driven new or improved products
9
* includes ~$16 mm for products previously in “Other” segment
includes US filtration start up
Fine Paper & Packaging
Premium Packaging (~20%)
Commercial print (~60%)
Retail (~20%)
High returns and cash flows while repositioning for growth
~ $425MM Net Sales
10
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
11
Consolidated niche market of unique papers used for high-end commercial printing and consumer applications
Neenah is the clear market leader in both commercial and consumer channels with our well-known brands
Market faces secular pressures from electronic substitution. Opportunistic volume opportunities in lower value premium opaque and other grades
Commercial print/RETAIL
Premium market $575 MM & shares
12
Opportunistic volume adjacencies
Neenah60%
Mohawk Fine Papers
20%
Others20%
Premium Packaging
Targeted addressable market of $450 MM of high value items in small packages.
Growing 3-5%/yr. Neenah growth target =2x market
Products include spirit & wine labels, premium folding board, luxury box wrap, and plastic-substitute gift cards and others
Efficiently uses fine paper assets and texture & color capabilities
Beauty49%
Alcohol29%
Retail/ Other22%
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2014 2015 2016 2017 2018
Neenah Sales
TargetedMarkets
13
$256$273 $275
$402$428 $436 $443 $452 $455 $446
14% 15% 14% 14% 14% 14%16% 16%
15%
12%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
27.0%
29.0%
31.0%
33.0%
35.0%
-44
1220283644526068768492
100108116124132140148156164172180188196204212220228236244252260268276284292300308316324332340348356364372380388396404412420428436444452460468476484492500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net SalesAdj. EBIT %
FP&P Financial Trends
CAGR> 5%/yr
STABLE MID-TEEN EBIT MARGINS providing STRONG CASH FLOWS for redeployment Commercial print secular market pressures partly
mitigated through growth in premium packaging, digital and wide format, M&A, and other actions Mid-teen EBIT margins supported by pricing with
strong brands and careful management of costs High return on capital Substantial cash generation
14
EMERGING FROM CHALLENGING PERIOD Selling prices and other actions helping to
restore margins and overcome rapid rise in input costs and freight in 2017-18
Divestiture of non-strategic mill in Dec. 2018 improving utilization and operating efficiencies
Consistent profitable growth
Capital Efficiency/ROIC
Strong balance sheet
Shareholder returns, including an attractive dividend
Financial PRINCIPLES
15
Value-adding capital deployment
Mid-single digit top line growth
Sound Return on Capital Strong balance sheet Increasing cash returns to shareholders Market-beating shareholder returns
Return to Shareholders
$160 MM
Value-Adding Organic Capital
$150 MM
Acquisitions $245 MM
Substantial cash flows and balanced capital deployment has resulted in:
Five-year cash deployment
17%11%
8%
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
NP S&P500 R2000 Value
Annual Shareholder Return (2010-18)
16
$3.21 $3.70$4.54 $4.32
$3.50
2014 2015 2016 2017 2018
AdjustedE.P.S.
Consistent profitable growth…
Five-year top-line growth driven by share gains, new products, price/mix improvement and acquisitions
2017-18 profitability reflecting impacts of filtration capacity ramp-up and temporarily unrecovered input costs following a period of rapid increases
$840$888
$942$980
$1,035
11% 12% 13% 11% 8%
-3.0%
2.0%
7.0%
12.0%
17.0%
22.0%
27.0%
32.0%
510
610
710
810
910
1010
1110
2014 2015 2016 2017 2018
Net SalesAdjusted EBIT %
17
13% 12%13%
10%9%
2014 2015 2016 2017 2018
% ROIC
WACC~ 8%
…while maintaining solid roic
Disciplined organic capital investments, with majority of spending delivering attractive financial returns
Improvement expected as new US filtration capacity ramps up and continual focus on asset efficiency and footprint optimization
History of value-adding acquisitions as well as divestitures of non-returning assets
18
175 175 175 175 175
54 4680 64
30
1.6x 1.4x1.8x 1.9x 1.8x
0
0.5
1
1.5
2
2.5
3
3.5
4
0
50
100
150
200
250
300
Dec-15 Dec-16 Dec-17 Dec-18 Sep-19
Bonds S-T Debt
$229 $221$255
Strong cash generation has kept Debt to EBITDA ratio below 2 times despite significant organic investments and M&A
Ample borrowing capacity and flexibility to act on future opportunities
$175 million bond due 2021; 5.25% Ba3/BB
Short-term debt through ABL revolver (sized $200 MM)
All debt pre-payable without fees or penalties
Debt($ millions)
….and A strong balance sheet
Debt/EBITDA
19
$239
$205
USES OF Cash Prioritize highest return investments
(organic, value-adding M&A, debt reduction)
Track record of dividend growth; providing attractive yield Authorized $25MM share buyback
plan used opportunistically
Cash Generation Sizeable cash flow generation
Efficient assets; capital spend 3-5% of sales (maintenance spend ~ $15 MM)
Low cash tax rate (mid-teen) supported by prior period R&D tax credits
$1.20$1.32
$1.48$1.64
$1.80
0.75
0.95
1.15
1.35
1.55
1.75
1.95
2015 2016 2017 2018 2019
Dividendsper share
Capital deployment
$67 $63$47
$57 $55
7% 7%5% 6% 5%
0%
5%
10%
15%
20%
25%
2014 2015 2016 2017 20180
10
20
30
40
50
60
70
80
90
100Free Cash Flow
FCF FCF % NS
20
Compensation philosophy
Performance-based pay important for both salary and hourly personnel
Bulk of executive team pay is performance-based (CEO = 70%)
Management also required to hold a multiple of base salary in stock (4-6 times)
Return on Capital
Shareholder Return
(vs. Russell 2000)
Revenue Growth
Performance Share Metrics
Earnings per Share
Performance-based and aligned with shareholders
21
Active and disciplined process with dedicated resources and ideas from a robust network of sources
Focused on growing, profitable and defensible niche markets, with a strong bias to technical products categories
Most targets $50 - $250 MM of sales
Require strategic fit to unlock synergies
Part of how we will add value and increase company growth rate
Strategic Touch Points
Geographies
TechnologiesProducts/End Markets
Customers
2014Crane
(Filtration)
2015FiberMark
(Packaging, Perf. Materials)
2017Hazen
(Packaging)
2017Coldenhove
(Perf. Materials)
2013Southworth(Fine Paper)
track record of value-adding M&A
22
Well-positioned for FUTURE
Leading positions in defensible and profitable core categories Catalysts to increase organic growth US filtration ramp up and share gains Expanded presence in digital transfer market Premium packaging growth
Sizeable base cash flow and a strong balance sheet
Record of value-adding capital deployment
Fine Paper & Packaging
Technical Products
Neenah Today
Premium Packaging &
Fine PaperTechnical Products
Neenah Future
23
Appendix
About NEENAH
Sales of over US$ 1 billion in more than 80 countries
Global manufacturing footprint:
U.S. (9 sites, plus Atlanta HQ)
Europe & U.K. (4 sites)
>2,600 employees worldwide
Diverse capabilities with purpose-built assets
Fine Paper and Packaging
Technical Products
25
GAAP ReconciliationContinuing Operations
$ millions 2014 2015 2016 2017 2018YTD
2019GAAP Operating Income $ 86.6 $ 101.4 $ 114.1 $ 104.3 $54.1 $56.2
Impairment loss 31.1Pension/Insurance Settlement/Other 3.7 0.8 (2.6) 1.4 5.2Restructuring, Integration and Other Costs 2.3 6.5 7.0 1.3 (1.8) 0.8
Adjusted Operating Income $ 92.6 $ 107.9 $ 121.9 $ 103.0 $ 84.8 $62.2
Depreciation & Amortization 25.0 27.5 30.1 32.1 35.0 25.5Amort. Equity-Based Compensation 6.0 6.5 5.8 6.4 4.0 4.8
Adjusted EBITDA $ 123.6 $ 141.9 $ 157.8 $ 141.5 $123.8 $92.5
Earnings (Loss) per Share $ 3.99 $ 3.53 $ 4.26 $ 4.68 $2.17 $2.33Impairment loss 1.37Pension/Insurance Settlement/Other 0.14 0.03 (0.10) 0.06 0.24Restructuring, Integration and Other Costs 0.08 0.24 0.25 0.06 (0.11) 0.03Tax Adjustments (1.00) (0.07) (0.32) 0.01
Adjusted Earnings per Share $ 3.21 $ 3.70 $ 4.54 $ 4.32 $3.50 $2.60
Results for year ended December 31, 2014, include integration and restructuring costs of $2.3 million, a pension plan settlement charge of $3.5 million and costs related to the early extinguishment of debt of $0.2 million. Results for the year ended December 31, 2015, include integration and restructuring costs of $6.5 million. Results for the year ended December 31, 2016, include integration and restructuring costs of $7.0 million and a pension plan settlement charge of $0.8 million. Results for the year ended December 31, 2017, include integration and restructuring costs of $1.3 million, a pension plan settlement charge of $0.6 million and Insurance Settlement of ($3.2). Results for the year ended December 31, 2018, include an impairment loss of $31.1 million, acquisition-related adjustments, integration and restructuring costs of ($1.8) million, a pension plan settlement charge of $1.8 million and Insurance Settlement of ($0.4)
26
Forward Looking Statements
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
27
Contact Us
For more informationVisit Our Website: www.neenah.comEmail: [email protected]
Investor RelationsBill McCarthyVice President- Investor Relations3460 Preston Ridge RoadSuite 600Alpharetta, GA 30005Phone: (678) 518-3278Email: [email protected]
28
Top Related