Innospec Inc. · NASDAQ:IOSP
Innospec — Q4 2016 Earnings Presentation
31 slides from Innospec's earnings presentation, Feb 15, 2017
Slide 1: Investor Presentation Quarter 4, 2016
Investor Presentation Quarter 4, 2016 February 15, 2017 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 4th Quarter Performance
4 Innospec – Summary of 4th Quarter Performance Strong Quarter 4 performance despite quieter Octane Additives Adjusted EPS ahead of our expectations at $1.09 Stable volumes in Fuel Specialties; strong margins Oilfield Services continues to recover – return to profitability Performance Chemicals driv
Slide 5: Financial Presentation
Financial Presentation Ian Cleminson Executive Vice President & Chief Financial Officer
Slide 6: Q4 2016 Consolidated Results
6 Q4 2016 Consolidated Results Good underlying growth of all strategic businesses Margin improvements in all segments Operating Income up 16 percent Q4 2015 Q4 2016 Growth $m $m % Net sales 246.0 237.8 (3)% Gross profit 86.3 91.4 6% Gross margin 35.1% 38.4% 3.3%pt Operating income * 25.2 29.2 16% Ad
Slide 7: Q4 2016 Fuel Specialties
7 Q4 2016 Fuel Specialties Volume growth of 1 percent Product mix driving strong margin performance Operating Income up 22 percent Q4 2015 Q4 2016 Growth $m $m % Net sales 146.2 142.5 (3)% Gross profit 50.6 56.9 12% Gross margin 34.6% 39.9% 5.3%pt Operating income 31.4 38.4 22% Adjusted EBITDA 32.6
Slide 8: Q4 2016 Performance Chemicals
8 Q4 2016 Performance Chemicals Volume growth of 11 percent, offset by currency impact Slightly reduced margin on product mix Full year adjusted sales up 7 percent and adjusted operating income up 28 percent Q4 2015 Q4 2016 Growth $m $m % Net sales 30.6 31.9 4% Gross profit 9.1 9.0 (1)% Gross margin
Slide 9: Q4 2016 Oilfield Services
9 Q4 2016 Oilfield Services Excellent growth – volume up 53 percent Margins remain at good levels Business returns to profitability as anticipated Q4 2015 Q4 2016 Growth $m $m % Net sales 48.7 59.3 22% Gross profit 16.7 24.3 46% Gross margin 34.3% 41.0% 6.7%pt Operating (loss)/income (4.8) 2.4 n/a A
Slide 10: Q4 2016 Octane Additives
10 Q4 2016 Octane Additives Quiet quarter as anticipated Full year sales down 27 percent on 2015 2017 demand still to be confirmed Q4 2015 Q4 2016 Growth $m $m % Net sales 20.5 4.1 (80)% Gross profit 9.9 1.2 (88)% Gross margin 48.3% 29.3% (19.0%)pt Operating income 8.8 0.2 (98)% Adjusted EBITDA 8.9
Slide 11: Q4 2016 Corporate Items
11 Q4 2016 Corporate Items Corporate costs higher than expected range Acquisition costs, share-based compensation and long-term incentive plan Normalized range remains $11 to $12 million per quarter Q4 2015 Q4 2016 $m $m Corporate costs (13.5) (16.1) Pension credit 0.1 1.6 Adjustment to fair value o
Slide 12: Q4 2016 Balance Sheet
12 Q4 2016 Balance Sheet Good operating cash generation continues Approx $200 million outflow for Huntsman acquisition Leverage remains low; balance sheet still strong Q4 2015 Q4 2016 $m $m Total cash and cash equivalents 141.7 101.9 Total debt (136.1) (273.3) Net cash/(debt) 5.6 (171.4) Total worki
Slide 13: Concluding Comments
Concluding Comments Patrick Williams President & CEO
Slide 14: Concluding Comments
14 Concluding Comments Excellent 4th Quarter with adjusted EPS of $1.09 Strong year; entering 2017 with good momentum Good underlying growth in all strategic businesses Margins strong; good cost control Acquisition from Huntsman closed – Portfolio balanced Balance sheet remains strong
Slide 15: Your Opportunity To Ask Questions
Your Opportunity To Ask Questions
Slide 16: Final Comments
16 Final Comments Results announced after close on May 9, 2017 Conference Call on May 10, 2017
Slide 17: Appendix
IX Append IN innospec
Slide 18: Innospec Income Statement - Quarter 4
18 Innospec Income Statement - Quarter 4 Q4 2015 Q4 2016 Variance Pr. Yr. $m $m $m Net sales 246.0 237.8 (8.2) Sales growth (15.4)% (3.3)% N/A Gross profit 86.3 91.4 5.1 Gross margin 35.1% 38.4% 3.3%pt SAR expenses (61.1) (62.2) (1.1) Operating income 25.2 29.2 4.0 Operating margin 10.2% 12.3% 2.1%p
Slide 19: Innospec Income Statement - Full Year
19 Innospec Income Statement - Full Year 2015 2016 Variance Pr. Yr. $m $m $m Net sales 1012.3 883.4 (128.9) Sales growth 5.3% (12.7)% N/A Gross profit 346.0 332.3 (13.7) Gross margin 34.2% 37.6% 3.4%pt SAR expenses (232.0) (234.9) (2.9) Operating income 114.0 97.4 (16.6) Operating margin 11.3% 11.0%
Slide 20: Fuel Specialties - Quarter 4
20 Fuel Specialties - Quarter 4 Q4 2015 Q4 2016 Variance Pr. Yr. $m $m $m Net sales 146.2 142.5 (3.7) Sales growth (6.9%) (2.5%) N/A Gross profit 50.6 56.9 6.3 Gross margin 34.6% 39.9% 5.3%pt Selling (9.4) (12.0) (2.6) Administrative (5.5) (2.7) 2.8 Research (4.3) (3.8) 0.5 SAR expenses (19.2) (18.5
Slide 21: Fuel Specialties - Full Year
21 Fuel Specialties - Full Year 2015 2016 Variance Pr. Yr. $m $m $m Net sales 532.8 509.6 (23.2) Sales growth (6.0%) (4.4%) N/A Gross profit 176.0 186.4 10.4 Gross margin 33.0% 36.6% 3.6%pt Selling (41.5) (43.9) (2.4) Administrative (14.8) (14.9) (0.1) Research (17.6) (17.0) 0.6 SAR expenses (73.9)
Slide 22: Performance Chemicals - Quarter 4
22 Performance Chemicals - Quarter 4 Q4 2015 Q4 2016 Variance Pr. Yr. $m $m $m Net sales 30.6 31.9 1.3 Sales growth (25.4%) 4.2% N/A Gross profit 9.1 9.0 (0.1) Gross margin 29.7% 28.2% (1.5%)pt Selling (4.4) (3.4) 1.0 Administrative (0.6) (1.8) (1.2) Research (0.9) (1.1) (0.2) SAR expenses (5.9) (6.
Slide 23: Performance Chemicals - Full Year
23 Performance Chemicals - Full Year 2015 2016 Variance Pr. Yr. $m $m $m Net sales 155.0 138.7 (16.3) Sales growth (12.7%) (10.5%) N/A Gross profit 42.4 43.4 1.0 Gross margin 27.4% 31.3% 3.9%pt Selling (14.4) (15.6) (1.2) Administrative (7.2) (7.2) - Research (4.5) (4.6) (0.1) SAR expenses (26.1) (2
Slide 24: Oilfield Services - Quarter 4
24 Oilfield Services - Quarter 4 Q4 2015 Q4 2016 Variance Pr. Yr. $m $m $m Net sales 48.7 59.3 10.6 Sales growth (30.2%) 21.8% N/A Gross profit 16.7 24.3 7.6 Gross margin 34.3% 41.0% 6.7%pt Selling (17.3) (19.2) (1.9) Administrative (3.4) (1.8) 1.6 Research (0.8) (0.9) (0.1) SAR expenses (21.5) (21.
Slide 25: Oilfield Services - Full Year
25 Oilfield Services - Full Year 2015 2016 Variance Pr. Yr. $m $m $m Net sales 265.0 191.7 (73.3) Sales growth 64.3% (27.7%) N/A Gross profit 99.1 76.4 (22.7) Gross margin 37.4% 39.9% 2.5%pt Selling (71.1) (67.9) 3.2 Administrative (15.8) (9.4) 6.4 Research (3.2) (3.8) (0.6) SAR expenses (90.1) (81.
Slide 26: Octane Additives - Quarter 4
26 Octane Additives - Quarter 4 Q4 2015 Q4 2016 Variance Pr. Yr. $m $m $m Net sales 20.5 4.1 (16.4) Sales growth (10.5%) (80.0%) N/A Gross profit 9.9 1.2 (8.7) Gross margin 48.3% 29.3% (19.0%)pt Selling (0.2) (0.3) (0.1) Administrative (0.9) (0.7) 0.2 SAR expenses (1.1) (1.0) 0.1 SAR % (5.4%) (24.4%
Slide 27: Octane Additives - Full Year
27 Octane Additives - Full Year 2015 2016 Variance Pr. Yr. $m $m $m Net sales 59.5 43.4 (16.1) Sales growth 7.8% (27.1%) N/A Gross profit 28.5 26.1 (2.4) Gross margin 47.9% 60.1% 12.2%pt Selling (1.3) (1.0) 0.3 Administrative (2.5) (2.4) 0.1 SAR expenses (3.8) (3.4) 0.4 SAR % (6.4%) (7.8%) (1.4%)pt
Slide 28: GAAP Reconciliation Adjusted EBITDA - Quarter 4
28 GAAP Reconciliation Adjusted EBITDA - Quarter 4 Q4 2015 Q4 2016 $m $m Net income 31.5 22.1 Interest expense, net 1.1 1.0 Income taxes 3.7 6.9 Depreciation and amortization 8.9 9.4 Adjustment to fair value of contingent consideration (9.1) (3.1) Fair value acquisition accounting 3.7 - Adjusted EBI
Slide 29: GAAP Reconciliation Adjusted EBITDA - Full Year
29 GAAP Reconciliation Adjusted EBITDA - Full Year 2015 2016 $m $m Net Income 119.5 81.3 Interest expense, net 4.0 3.2 Income taxes 32.8 21.8 Depreciation and amortization 34.0 37.7 Adjustment to fair value of contingent consideration (40.7) (9.4) Fair value acquisition accounting 3.7 - Adjusted EBI
Slide 30: GAAP Reconciliation: Net Income Excluding Special Items - Quarter 4
30 GAAP Reconciliation: Net Income Excluding Special Items - Quarter 4 Q4 2015 Q4 2016 Income before Income before income taxes Net income Diluted EPS income taxes Net income Diluted EPS $m $m $ $m $m $ Reported GAAP amounts 35.2 31.5 1.28 29.0 22.1 0.90 Amortization of acquired intangible assets 4.
Slide 31: GAAP Reconciliation: Net Income Excluding Special Items - Full Year
31 GAAP Reconciliation: Net Income Excluding Special Items - Full Year 2015 2016 Income before Income before income taxes Net income Diluted EPS income taxes Net income Diluted EPS $m $m $ $m $m $ Reported GAAP amounts 152.3 119.5 4.86 103.1 81.3 3.33 Amortization of acquired intangible assets 17.0