Innospec Inc. · NASDAQ:IOSP
Innospec — Q3 2016 Earnings Presentation
30 slides from Innospec's earnings presentation, Nov 3, 2016
Slide 1: Investor Presentation Quarter 3, 2016
Investor Presentation Quarter 3, 2016 November 3, 2016 Patrick S. Williams President & CEO Ian Cleminson Executive Vice President & Chief Financial Officer
Slide 2: Forward-looking Statements
2 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.
Slide 3: Use of Non-GAAP Financial Measures
3 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 adjusted EBITDA, in
Slide 4: Innospec – Summary of 3rd Quarter Performance
4 Innospec – Summary of 3rd Quarter Performance Underlying business performance is right on track One-off charges & order phasing impact EPS in the short-term Fuel Specialties – strong growth in operating margin Performance Chemicals – innovation continues to drive great growth Oilfield Services – b
Slide 5: Financial Presentation
Financial Presentation Ian Cleminson Executive Vice President & Chief Financial Officer
Slide 6: Q3 2016 Consolidated Results
6 Q3 2016 Consolidated Results Sales below a very strong comparative quarter (Octane Additives; Oilfield Services) Order phasing in Oilfield and Fuel Specialties; Gross Margin Improvement One-off costs impacting EPS Q3 2015 Q3 2016 Growth $m $m % Net sales 254.2 205.5 (19)% Gross profit 90.4 79.2 (1
Slide 7: Q3 2016 Fuel Specialties
7 Q3 2016 Fuel Specialties Revenues lower in Americas, flat in EMEA, excellent growth in Asia Pacific Richer mix drives higher gross margins 12% Growth in Operating Income Q3 2015 Q3 2016 Growth $m $m % Net sales 121.3 114.4 (6)% Gross profit 39.5 43.8 11% Gross margin 32.6% 38.3% 5.7%pt Operating i
Slide 8: Q3 2016 Performance Chemicals
8 Q3 2016 Performance Chemicals Continued excellent growth, based on both existing and new products Personal Care growth drives richer mix and improved margins Business well positioned to combine with new acquisition Q3 2015 Q3 2016 Growth $m $m % Net sales 33.7 36.8 9% Gross profit 9.9 12.3 24% Gro
Slide 9: Q3 2016 Oilfield Services
9 Q3 2016 Oilfield Services Business break-even in the quarter Sales down on 2015 but up 7% sequentially on Q2 Customer activity picking up slowly Q3 2015 Q3 2016 Growth $m $m % Net sales 78.9 49.7 (37)% Gross profit 32.0 20.6 (36)% Gross margin 40.6% 41.4% 0.8%pt Operating income 7.2 - (100)% EBITD
Slide 10: Q3 2016 Octane Additives
10 Q3 2016 Octane Additives Sales down on very strong comparative quarter Last portion of Algeria order delayed until October No further visibility on orders Q3 2015 Q3 2016 Growth $m $m % Net sales 20.3 4.6 (77)% Gross profit 9.0 2.5 (72)% Gross margin 44.3% 54.3% 10.0%pt Operating income 8.0 1.9 (
Slide 11: Q3 2016 Corporate Items
11 Q3 2016 Corporate Items Significant impact of one-off items on EPS Underlying corporate costs in expected range Tax rate for year expected to be 20% Q3 2015 Q3 2016 $m $m Corporate costs (9.3) (15.2) Pension credit - 1.6 Adjustment to fair value of contingent consideration 8.5 2.3 Profit on dispo
Slide 12: Q3 2016 Balance Sheet
12 Q3 2016 Balance Sheet Balance sheet remains very strong $29.8 million of cash generation; net cash of $19.6 million Further increase in semi-annual dividend Q4 2015 Q3 2016 $m $m Total cash and cash equivalents 141.7 167.1 Total debt (136.1) (147.5) Net cash 5.6 19.6 Total working capital 167.1 1
Slide 13: Concluding Comments
Concluding Comments Patrick Williams President & CEO
Slide 14: Concluding Comments
14 Concluding Comments Business performance on-track EPS impacted by one-off items Business continues to grow and generate good cash Acquisition from Huntsman – on track for Q4 Increase in semi-annual dividend Very well placed for Quarter 4, and for 2017
Slide 15: Your Opportunity To Ask Questions
Your Opportunity To Ask Questions
Slide 16: Final Comments
16 Final Comments Thanks to investors, customers and employees for their continued support Q4 2016 results timetable (provisional) Results announced after close on February 16, 2016 Conference Call at 10am ET on Friday February 17, 2016
Slide 17: Appendix
IX Append IN innospec
Slide 18: Innospec Income Statement - Quarter 3
18 Innospec Income Statement - Quarter 3 Q3 2015 Q3 2016 Variance Pr. Yr. $m $m $m Net sales 254.2 205.5 (48.7) Sales growth 11.4% (19.2)% N/A Gross profit 90.4 79.2 (11.2) Gross margin 35.6% 38.5% 2.9%pt SAR expenses (59.3) (62.6) (3.3) Operating income 31.1 16.6 (14.5) Operating margin 12.2% 8.1%
Slide 19: Innospec Income Statement - YTD
19 Innospec Income Statement - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 766.3 645.6 (120.7) Sales growth 14.3% (15.8%) N/A Gross profit 259.7 240.9 (18.8) Gross margin 33.9% 37.3% 3.4%pt SAR expenses (170.9) (172.7) (1.8) Operating income 88.8 68.2 (20.6) Operating margin 11.6% 10.6% (1.0%)
Slide 20: Fuel Specialties - Quarter 3
20 Fuel Specialties - Quarter 3 Q3 2015 Q3 2016 Variance Pr. Yr. $m $m $m Net sales 121.3 114.4 (6.9) Sales growth (7.4%) (5.7%) N/A Gross profit 39.5 43.8 4.3 Gross margin 32.6% 38.3% 5.7%pt Selling (10.6) (11.4) (0.8) Administrative (2.9) (4.1) (1.2) Research (4.4) (4.2) 0.2 SAR expenses (17.9) (1
Slide 21: Fuel Specialties - YTD
21 Fuel Specialties - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 386.6 367.1 (19.5) Sales growth (5.7%) (5.0%) N/A Gross profit 125.4 129.5 4.1 Gross margin 32.4% 35.3% 2.9%pt Selling (32.1) (31.9) 0.2 Administrative (9.3) (12.2) (2.9) Research (13.3) (13.2) 0.1 SAR expenses (54.7) (57.3) (2.
Slide 22: Performance Chemicals - Quarter 3
22 Performance Chemicals - Quarter 3 Q3 2015 Q3 2016 Variance Pr. Yr. $m $m $m Net sales 33.7 36.8 3.1 Sales growth (27.1%) 9.2% N/A Gross profit 9.9 12.3 2.4 Gross margin 29.4% 33.4% 4.0%pt Selling (3.0) (4.6) (1.6) Administrative (2.0) (2.1) (0.1) Research (1.3) (1.4) (0.1) SAR expenses (6.3) (8.1
Slide 23: Performance Chemicals - YTD
23 Performance Chemicals - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 124.4 106.8 (17.6) Sales growth (8.9%) (14.1%) N/A Gross profit 33.3 34.4 1.1 Gross margin 26.8% 32.2% 5.4%pt Selling (10.0) (12.2) (2.2) Administrative (6.6) (5.4) 1.2 Research (3.6) (3.5) 0.1 SAR expenses (20.2) (21.1) (0
Slide 24: Oilfield Services - Quarter 3
24 Oilfield Services - Quarter 3 Q3 2015 Q3 2016 Variance Pr. Yr. $m $m $m Net sales 78.9 49.7 (29.2) Sales growth 119.8% (37.0%) N/A Gross profit 32.0 20.6 (11.4) Gross margin 40.6% 41.4% 0.8%pt Selling (19.3) (16.8) 2.5 Administrative (4.6) (2.9) 1.7 Research (0.9) (0.9) - SAR expenses (24.8) (20.
Slide 25: Oilfield Services - YTD
25 Oilfield Services - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 216.3 132.4 (83.9) Sales growth 136.4% (38.8%) N/A Gross profit 82.4 52.1 (30.3) Gross margin 38.1% 39.4% 1.3%pt Selling (53.8) (48.7) 5.1 Administrative (12.4) (7.6) 4.8 Research (2.4) (2.9) (0.5) SAR expenses (68.6) (59.2) 9.
Slide 26: Octane Additives - Quarter 3
26 Octane Additives - Quarter 3 Q3 2015 Q3 2016 Variance Pr. Yr. $m $m $m Net sales 20.3 4.6 (15.7) Sales growth 34.4% (77.3%) N/A Gross profit 9.0 2.5 (6.5) Gross margin 44.3% 54.3% 10.0%pt Selling (0.4) (0.2) 0.2 Administrative (0.6) (0.4) 0.2 SAR expenses (1.0) (0.6) 0.4 SAR % (4.9%) (13.0%) (8.1
Slide 27: Octane Additives - YTD
27 Octane Additives - YTD 2015 2016 Variance Pr. Yr. $m $m $m Net sales 39.0 39.3 0.3 Sales growth 20.7% 0.8% N/A Gross profit 18.6 24.9 6.3 Gross margin 47.7% 63.4% 15.7%pt Selling (1.1) (0.7) 0.4 Administrative (1.6) (1.7) (0.1) SAR expenses (2.7) (2.4) 0.3 SAR % (6.9%) (6.1%) 0.8%pt Operating inc
Slide 28: GAAP Reconciliation Adjusted EBITDA - Quarter 3
28 GAAP Reconciliation Adjusted EBITDA - Quarter 3 Q3 2015 Q3 2016 $m $m Net income 35.6 11.4 Interest expense, net 1.0 0.7 Income taxes 5.8 1.8 Depreciation and amortization 8.2 9.6 Adjustment to fair value of contingent consideration (8.5) (2.3) Adjusted EBITDA 42.1 21.2
Slide 29: GAAP Reconciliation Adjusted EBITDA - YTD
29 GAAP Reconciliation Adjusted EBITDA - YTD 2015 2016 $m $m Net Income 88.0 59.2 Interest expense, net 2.9 2.2 Income taxes 29.1 14.9 Depreciation and amortization 25.1 28.3 Adjustment to fair value of contingent consideration (31.6) (6.3) Adjusted EBITDA 113.5 98.3
Slide 30: GAAP Reconciliation: Net Income Excluding Special Items - Quarter 3
30 GAAP Reconciliation: Net Income Excluding Special Items - Quarter 3 Q3 2015 Q3 2016 Income before Income before income taxes Net income Diluted EPS income taxes Net income Diluted EPS $m $m $ $m $m $ Reported GAAP amounts 41.4 35.6 1.45 13.2 11.4 0.47 Foreign currency exchange (gains)/losses (1.2