Ashland Inc. · NYSE:ASH
Ashland — Ashland Global Holdings — Investor Day (May 2017)
126 slides from Ashland's investor day presentation, May 1, 2017
Slide 1: Investor Day May 1, 2017
Investor DayMay 1, 2017, New York City Ashland’s Strategy and Commitment to Create Shareholder Value 2018-2021
Slide 2: Forward-Looking Statements
Forward-Looking StatementsThis presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Ashland has identified some of these forward-looking statements with words s
Slide 3: Purpose of today: define New Ashland's shareholder value strategy
Summarize our evolution and define the New AshlandDefine financial targets to create shareholder value and their connection to:Core operational levers to deliver financial targetsMarket strategies to accelerate profitable growthClarify capital allocation policies to turn cash into valueProfile dimen
Slide 4: Long history of executing challenging strategic plans
Ashland has a long history of successfully executing challenging strategic plansManagement and Board have made difficult and important decisions to transform from an oil refiner to a premier specialty chemical companyCompleted numerous transformative transactions Acquired Exited 2007 2008 2011 2009
Slide 5: Completed the transformation over the past 5 years
Primary focus of the organization:Improved adj. EBITDA marginIncreased role of ASI1: Now 69% of company sales Capital Allocation ActionsDivested over $2B non-core businessesReturned over $2B to shareholdersOperational ImprovementsFixed supply chain On-time delivery > 95%Reduced SG&A by > $200 MMPu
Slide 6: Successfully completed the separation of Valvoline
Completed IPO one year after announcementTook action to enable cost neutralityStructured separation to be tax freeKept separation costs <$150MMKept mid to high BB credit ratings for both companiesCreated two great companies Distribution date May 12, 2017 Over the last 18 months, we have successfully
Slide 7: New corporate profile: pivot to premier
Revenue End markets served 6,000 69% Employees ASl1 share of Ashland sales 9 LATAM APAC NA 18 EMEA 33 40 Production plants ASI adj. EBITDA2 margin % of Sales(FY '16) Note: All figures as of FY'161. Defined as Ashland Specialty Ingredients reporting segment2. EBITDA margin has been reconciled with re
Slide 8: New leadership team
Executive Committee Kevin WillisSVP & CFO Peter J. GanzSVP, General Counsel & Secretary Bill WulfsohnChairman & CEO Operating Committee Brian McGrathVP Supply Chain Osama MusaVP R&D & CTO Keith SilvermanVP, EHS, Quality & Regulatory Affairs Jean ZappiaVP Intermediates and Solvents Andy Johnston Grou
Slide 9: New brand proposition, blueprint and integrated culture
With a new brand proposition, organizational blueprint and integrated culture Blueprint Brand Promise Ashland Way Ashland is now working as one team with a common purpose integration separation pivot to premier transformation
Slide 10: Commitment to safe and responsible operations
Awarded American Chemistry Council Responsible Care Initiative of the Year award in 2016 One thing that has not changed, is unwavering commitment to safe and responsible operations European Federation for Cosmetic Ingredients 10 facilities globally GMP certified – leader within the cosmetic ingredie
Slide 11: Purpose of today
Summarize our evolution and define the New AshlandDefine financial targets to create shareholder value and their connection to:Core operational levers to deliver financial targetsMarket strategies to accelerate profitable growthClarify capital allocation policies to turn cash into valueProfile dimen
Slide 12: Financial targets to create shareholder value
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; 1. Cumulative Free Cash Flow generation over
Slide 13: Targets driven by 7 core levers
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; 1. Cumulative Free Cash Flow generation over
Slide 14: Ashland's definition of Specialty
Financial returnsEBITDA % of sales > 20%GDP + growthLow cyclicality/volatilityStrong cash conversionROIC well above WACC Small cost with big impact on end productAmplify the efficacyRefine the usabilityAdd to the allureEnsure the integrityImprove the profitability Blue chip marketsTechnology: Levera
Slide 15: Pharmachem profile
Revenue of ~$300 million and adjusted EBITDA margin of ~20% in FY2016Leading provider of:customized solutions and high quality ingredients to the global health and wellness industrieshigh value, differentiated products for fragrance and flavor housesApplications include nutraceuticals, fine perfumes
Slide 16: Pharmachem fit with Ashland
Sustain and grow premium mixPortfolio: Pharmachem fit with Ashland Leverages our customization capabilities into niches where we create valueCustomer-intimacy sales model emphasizing tailored productsCreates unique industry offering: leveraging Pharmachem’s custom manufacturing capabilities with Ash
Slide 17: Pharmachem fits our investment philosophy
… In Action: Pharmachem Fit with Ashland Specialty modelProfit zone: Pharma and PCDifferentiation: Unique, high value ingredients critical to customer productCustomization: Highly customized formulationsFinancial returns: See below "One degree from the core" Advanced formulation expertise Complement
Slide 18: Plan to address I&S impact on portfolio
Profit Zone Differentiation Customization Financial returns Intermediates& Solvents Pharma PersonalCare Coatings Adhesives Composites Other ASI2 1. Intermediates and Solvents 2. Other ASI includes Energy, Construction, Specialties, Nutrition, and Advanced Material Legend Higher fit Lower fit End Mar
Slide 19: Pro forma portfolio post-Valvoline separation
(Post-Valvoline Separation) $3.0 B(1) ~19%3 Ashland Specialty Ingredients Ashland Performance Materials IncludingPharmachem ExcludingIntermediates and Solvents (I&S) Ashland Specialty Ingredients Ashland Performance Materials Pro Forma (Post-Valvoline Separation) $3.0 B Consumer Specialties Industri
Slide 20: Market strategies by business focus
Focus Approximate VOL % CAGR1'13–'16 Common Themes Pharma Growth 2% 1. Continue to drive differentiation to expand premium mix2. Take actions to keep system full and costs competitive3. Grow in emerging regions and expand range of solutions Personalcare Growth 3% Coatings Growth 3% Adhesives Growth
Slide 21: NPI: Leverage strong R&D foundation
~500 22 Scientists Global laboratories 57 >2,800 New platform releases in last 4 years Patents assigned 1. New and Proprietary Product Sales defined as new products in the market for <= 5 years and patented products for life of patentNote: As of Q1 2017 25% Ashland sales from new and proprietary pro
Slide 22: NPI: Four core R&D focus areas
4 Core innovation priorities 18% 30% 34% 18% Polaris™: innovative resins for engineered stone providing quality, durability, and improved surface gloss to enable new designs Multi-Generational Product Planning Encapsulation: long lasting fragrance release technology suitable for aqueous products Pro
Slide 23: NPI: Innovation that delivers on our brand promise
5 Ashland Effects™ at work 1. Efficacy KlucelTM helps ensure stable active ingredient delivery for blockbuster high cholesterol treatment 2. Usability Our ProLipid™ lamellar gel designed to exert a ‘second skin’ effect and Ganex™ waterproofing polymers make sunscreens usable in water and humid envir
Slide 24: NPI: Improving commercialization metrics
1. Commercial Impact Factor is the ratio of actual commercial impact to the planned commercial impact; assessing degree of commercialization 2. Pipeline Turnover Factor is the ratio of the pipeline to the turnover within the pipeline Last 3 months To be initiated Last 12 months Current implementatio
Slide 25: NPI: Stage Gate process
Stage Gate process for moving a new-product project from idea to launch Fast track process with no R&D synthesis work or CapEx Focused, short-term application work primarily involving existing commercial products Avg. time in months(2011-2016) % R&D and Tech cost1(2016) 33 16 2 ~35% ~21% ~44% BU App
Slide 26: Targets driven by 7 core levers
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; 1. Cumulative Free Cash Flow generation over
Slide 27: Better asset utilization: absorption opportunity
1. For all of Ashland 2. Pharma and Nutritional Specialties, and Personal Care $70MM Absorption cost/unit increases concentrated in PNS2, PC2 and Coatings Ashland manufacturing fixed costs are ~$700MM1 per year... ... which drove significant cost challenges from 2013-2016 Fixed cost per unit Product
Slide 28: Better asset utilization: actions to leverage capacity
Driver Action Example TheoreticalPotential1 Lower cost/unit by running plant at 95% capacity Temporarily sell in non-strategic markets $125MM Fill plants at current average margin Repurpose assets $100MM Consolidate plants/lines (products produced at 2 or more plants) Underutilized plant closure $30
Slide 29: Better asset utilization: accomplishing our initiatives
Aligned asset platforms to commercial leadershipRedeployed commercial, operations, and R&D resources which leverage our unique production capabilitiesEnhance sales incentive systemDefine manufacturing improvement opportunity listEstablish new cost per unit metrics to achieve full P&L impactCommissio
Slide 30: Commercial Excellence: action plan
Marketing Pricing Sales Force Effectiveness Deploy new structureExtend to regional view Price over raw material inflationTarget $30MM "pocket price" improvementsEnable profit clarity change sales incentive system Enhance value selling trainingImprove use of Salesforce.comDevelop customer impact st
Slide 31: Commercial Excellence: focus on price to value
Improve competitivenessCommercial Excellence: Initial focus on price to value Dedicated pricing leaders and analystsImplemented a pocket price tool for all businesses in order to assess price outliers and make smart price changesImplemented a price yield tool to track progressEstablished new order p
Slide 32: Commercial Excellence: profit visibility and sales incentives
Improve competitivenessCommercial Excellence: Initial focus on price to value Profit Visibility/Sales Incentives Align FPA resources with BUImplement new financial reporting to enable better profit driver visibilityProfit across the globeVariable vs. fixed costCost by batch sizeRedesign sales incent
Slide 33: Offset SG&A inflation: near-term opportunities
See appendix for specific examples1. Total Ashland; includes Intermediates and Solvents, and excludes Pharmachem 10% volume leverage on flat SG&A improves EBITDA margins by ~90 bps1 Near-term actions identified to reduce SG&A1 Opportunity Global Business Services/Outsourcing $15-25MM Footprint Optim
Slide 34: Offset SG&A inflation example: Dublin, OH campus
Dublin complex housed ~1400 employees in 2007; now less than 500The current cost per employee is roughly $20K / yearWe are consolidating out of ~160K square feet of space in Dublin Administration building Example: reducing 6 sites will save ~$6MM Improve competitivenessOffset SG&A inflation example:
Slide 35: Optimizing back-office operations
Global Business Services (GBS)Two Global Headquarters of excellence in Poland and India with total headcount of 340Provides back-office support for Finance, IT, EH&S, Supply Chain, Legal, and othersContinuous improvement focused with established governance model and metrics Back-office optimization
Slide 36: Targets driven by 7 core levers
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; 1. Cumulative Free Cash Flow generation over
Slide 37: CapEx: leverage existing investments
1) Figures are for Ashland (whole company). Totals do not sum to 100% due to rounding. We spent ~21% of CapEx on growth from '13-'16With current utilization rate of 75-80%, we have 'room to grow' with reduced capital expenditures 2013-2016 CapEx spend1 Over past ~4 years, ~32% of CapEx spent on grow
Slide 38: Working capital: reducing ASI inventory
300 bps reduction in inventory as percent of sales metric results in a $60MM inventory reduction In early 2015 we struggled with on-time delivery We built inventory to support improvements in shipping performanceStructural improvements have been made in inventory management, forecasting, and order e
Slide 39: Purpose of today
Summarize our evolution and define the New AshlandDefine financial targets to create shareholder value and their connection to:Core operational levers to deliver financial targetsMarket strategies to accelerate profitable growthClarify capital allocation policies to turn cash into valueProfile dimen
Slide 40: Active capital allocation
Returned over $2B to shareholders in the last 3 years Established Asbestos Trust Signed agreement to acquire Pharmachem Assigned majority of pension liabilities to VVV Paid down $1.9B debt Capital allocation policiesRecent actions Active capital allocation
Slide 41: Pharmachem transaction overview
Transaction to be fundedwith bank financing and available cash Transaction multiple of ~10.5x Pharmachem’s estimated fiscal 2017 adjusted EBITDA; ~7.5x after adjusting for expected cost synergies and tax optimization Expect to be accretive to EPS in first year following close of transaction and to e
Slide 42: Capital allocation: current priorities
Eliminate debt related to Pharmachem acquisitionReduce other debt as appropriateMaintain mid to high BB credit rating Debt Reduction First priority Other allocation priorities Selective small to mid-sized acquisitions with attractive returns well in excess of our cost of capital Acquisitions Capital
Slide 43: Financial targets to create shareholder value
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; 1. Cumulative Free Cash Flow generation over
Slide 44: Break
Break
Slide 45: Pharma and Nutrition
Pharma and Nutrition
Slide 46: Today's focus: Pharma & Nutrition Specialties
Today's focus Nutrition Pharma Cellulosics: HPC, HEC, HPMC, CMCAcetylenics: PVP, PVPP Cellulosics: CMC, HPC, HPMCAcetylenics: PVPP Pharma & Nutrition Specialties (PNS) Pharmaceutical generates the majority of PNS profits
Slide 47: Pharmaceutical overview
Areas of strength Binding &disintegration Pill & tabletcoatings ~12%of ASH FY 2016 sales Expert in the $2.1B oral solid dosage (OSD) excipient market with ~3% projected CAGR to 2020 driven by global middle class expansion, aging population, and growth in genericsOur excipient portfolio is highly dif
Slide 48: Excipients are a small but critical part of every pill
Excipients are small but critical part of every pill Actives / Everything else Functional excipients<5% Marketing / R&D $6.4 B Excipient market Not interested Attractive adjacency (e.g. biologics, injectables) (e.g. colorants, fillers) Lower margin Higher margin Our focus: Oral Solid Dosage$2.1 B 1:
Slide 49: Key strategic themes
Key strategic themes 1 Pharma is a growing profit engineGrowth driven by mix shift towards higher-margin products and underlying volume growth 2 We have a winning strategyUtilizing the strength of our portfolio to deliver customized excipient solutions with industry leading tech service 3 We are inv
Slide 50: Pharma is a growing profit engine
Pharma is a growing profit engineStrong performance driven by cellulosics 3% industry growthImproving mix towards cellulosicsCellulosics value pricingCapacity limitationsMore competition in portions of the acetylenics product line ü ü ü 2.4% Volume growth GP margin expansion 60 bps 60% 40% 20% 0% 10
Slide 51: Winning strategy: broad portfolio of functional excipients
Winning strategyBroad portfolio of functional excipients diabetes treatment Metformin Major generic approached us to help:increase swallowabilityreduce tablet size Our solution utilized a unique blend of our excipients, reducing tablet size by 20% 10 Functional chemical platforms ~700 Uniquely tailo
Slide 52: Winning strategy: tailored solutions with formulation expertise
Winning strategyDelivering tailored solutions with formulation expertise ~25% excipient revenue from new products 75 dedicated scientists and an interconnected network of global labs allows us to work alongside our customers We launched a novel DC HPMC excipient that enabled 150% faster material flo
Slide 53: Investing to accelerate growth: regional growth
Investing to accelerate growthCapturing regional growth with targeted investments We're positioning ourselves to grow in Asia through capital investments Global pharma growth lead by Asia 1%1 US pharma growth 2%1 EMEA pharma growth 6%1 Asia pharma growth Asia growth ~2X global average, driven byCont
Slide 54: Investing to accelerate growth: improving the mix
Investing to accelerate growthImproving the mix Klucel® HPC capacity expansion online 2017 Benecel® HPMC capability improvements online 2017 Address non-pharma related volume declines with 'fill the plant' sales efforts and network / sourcing optimization Asset optimization strategy 'Optimization':
Slide 55: Investing to accelerate growth: bioavailability
Investing to accelerate growthFocused innovation to enable bioavailability Lopinavir We developed a novel excipient package to reduce side effects and improve solubility We were asked to help remedy side effects to minimize regulatory risk 0% 20% 40% 60% 80% 100% Pipeline drugs Market drugs Drug sol
Slide 56: Expansion into nutraceuticals
Expansion into nutraceuticalsNutraceuticals is well-aligned compliment to PNS $39B Globalmarket size 6% Forecast growth rate 40% US share of market Market metrics Aging populationMiddle class growthHealth and wellnessNatural and clean labelFunctional nutrition Market trends Nutra-ceuticals Pharma –
Slide 57: Pharmachem is a strong fit
Expansion into nutraceuticals Pharmachem is a strong fit ~$300 MMFY 2016 Revenue Manufactures custom and branded nutraceutical formulationsGlobal leader in all-natural fragrance fixatives Leverages Pharmachem: nutraceutical channels to grow our excipients & food additives businessLeverages Ashland:
Slide 58: Pharma will continue to be an engine for profitable growth
Pharma will continue to be an engine for profitable growth at Ashland We are set up for success Healthy underlying market demandMix shift towards high-margin cellulosicsCellulosics value-pricing Comprehensive portfolio of excipient technologiesUniquely collaborative technical service teams Adding ce
Slide 59: Personal Care
Personal Care
Slide 60: Personal care overview
3 specialty areas Hair care Skin care Oral care ~19%of ASH FY 2016 sales We innovate scientifically proven solutions for personal care with specialty ingredient platforms in VP, VE, cellulosics and biofunctionals Leader in $6B specialty ingredients market with ~3% projected CAGR to 2020 due to mega-
Slide 61: Strong market presence in hair, skin and oral care
Hair care Skin care Pioneered sunscreen waterproofingTop 3 in skin rheologyTop 5 in UV absorbersTop 10 in biofunctionals Top 3 in styling fixativesTop 3 in hair rheologyTop 10 in conditioning polymers Three business areas with strong market presence Source: Kline, Internal estimates Oral care Leader
Slide 62: Key strategic themes
1 Maintain strong focus on new, highly differentiated applicationsEarn a premium with unique technologies, formulation expertise and customer enablement 2 Accelerate growth from "naturals" and emerging market trendsGrow natural & sustainable portfolio and enable rapid regional launches with regional
Slide 63: Upgrade mix: focus on highly differentiated applications
Reputed platforms developed by 125 world-renowned scientists in 9 regional centers of excellenceSkin biology expertiseRoot-to-tip hair careOral actives deliverySensory excellence Unique technology Customer enablement Leading end-to-end product launch supportRegulatory clearanceClinical testingClaim
Slide 64: FiberHance BM example
FiberHance™ BM Unique technology Customer enablement Formulation expertise Our innovative and patented bond multiplier chemistry addresses a key market need in repairing hair break-age from coloring and straighteningDisplaces higher-price alternatives with cost-effective manufacturingProven efficacy
Slide 65: Whitening technology example
Our unique whitening technology improves the stability and delivery of whitening agents – putting professional-grade whitening solutions in over-the-counter consumer products We made it possible for a major oral care firm to formulate peroxide in its whitening product – leading to one of the most su
Slide 66: Sunscreen formulations example
Bayer adopted our sunscreen mousse prototype to develop a new and unique whipped sunscreen that applies evenly and leaves skin feeling softer and smoother We work with customers to formulate customized sunscreens that last longer, feel less greasy - and have novel textures Sunscreens are a $10B mark
Slide 67: Helping develop products that ensure customer success
We help our customers to ensure end-product success by substantiating new & unique label claims, navigating regulatory challenges, and communicating value to consumers Ashland’s Vincience team innovated a black truffle extract to energize skin cells in Estée Lauder's prestige Re-Nutriv "Ultimate Dia
Slide 68: Renewed focus on what drives innovation success
Focus on cellulosics, acetylenics and biofunctionals where we have deep experience and manufacturing scale ✓ ✓ ✓ Engage the customer Focus on core chemistries Move quickly to market Strong value proposition Decentralized development at regional centers of excellence that are able to customize and te
Slide 69: Accelerate growth from naturals trend
Source: Transparency Research Natural, organic and ethical products will outgrow the market ~3x to 2020We are ready today Accelerate growth from "naturals" trendWe are actively growing our natural and sustainable portfolio 2 Rest of portfolio Botanicals Cellulosics Guar Johnson & Johnson uses Zeta F
Slide 70: Accelerate growth from emerging market trend
Meeting local challenges with regional centers of excellence Source: Euronomonitor Unique preferences, habits, hair/skin types and climates driving personal care purchase behaviorGreater e-commerce role in product selection and adoption, requiring accelerated innovationComplex formulation engineerin
Slide 71: Improve margins in more competitive segments
Consolidate purchases to fewer, valued suppliersOptimize global procurement systemDrive predictability with long-term contracts Partner with suppliers Asset utilization-focused R&DTargeted sales and marketing efforts based on enhanced order-level informationRationalize product offerings Increase ass
Slide 72: Leverage synergies from Pharmachem
Contract manufacturing Fragrance market access Botanical actives extraction Aloe Vera Strengthen biofunctionals platform with new botanical extraction capabilities Adds new active to biofunctional arsenal as well as plant sourcing and processing capabilities Improved channel access for high-growth a
Slide 73: Personal care will be a core growth driver
We are set up for success Personal care will be one of Ashland's core growth drivers Maintain strong focus on new, highly differentiated applications Improve margins in more competitive segments of the market Accelerate growth from "naturals" and emerging market trends Leverage synergies from Pharma
Slide 74: Industrial Specialties
Industrial Specialties
Slide 75: Industrial Specialties overview
~33%of ASH FY 2016 sales We provide high performance products that are typically a small percentage of the total cost of the end product, but provide significant value and impact Industrial Specialties (IS) overview $990MM Common business model:Focus on premium sub-segmentsClose collaboration with c
Slide 76: IS – Other Industries
IS – Other Industries $337 MM PerformanceSpecialties Construction Focus on unique applications with complex performance needsTarget selective areas for growth Energy Energy is a much smaller portion today of Industrial Specialties’ portfolioBeginning to see an up-tick in the market as oil prices hav
Slide 77: Industrial Specialties – Coatings
Our 3 strengths ~11%of ASH FY 2016 sales Market leader in $2.8B market for architectural coatings additives with 3% CAGR; the market is primarily driven by remodeling & new construction and a shift towards premium paintsOur products are 2-4% of the paint can but provide high value in use to the pain
Slide 78: Coatings: key strategic themes
1 We are the premier rheology provider60+ years expertise in architectural coatings, #1 in HEC, industry standard for rheology and coatings additives We're focused on further strengthening our leadership in HECOur global presence allows us to manage cost and customer supply, ensuring we stay #1 3 Co
Slide 79: We are the premier rheology provider
We span the paint range from low to premium with the key rheology chemistriesWe continually innovate rheology chemistryWe advance measurement science Global manufacturing capabilities Patent pending ART(Application Reader Technology) device We are the premier rheology providerWith strong capabilitie
Slide 80: Enabling customers with premium products
Enabling customers with premium productsOur expertise and technical support leads the industry Switzerland Italy France Portugal Working together, we improved viscosity and enhanced color for a new solvent-free paint Problem: customer needed a more effective rheology agent Solution: partnered to for
Slide 81: Staying cost competitive in HEC
We're staying cost competitive in HECProactive actions to improve HEC leadership position Increasing research focus in process technology improvements Accelerating on-going manufacturing cost reductions with lean six sigma program Implementing new asset optimizationstrategy aligned with commercial s
Slide 82: Industrial Specialties – Adhesives
Niche player in the $22B specialty formulated adhesives market with a 3% CAGR. Adhesives is a materials business with high performance demands and continual innovationOur Adhesives portfolio is nimble, capturing a premium in niche applications throughout the market We enable high performance applica
Slide 83: Adhesives: key strategic themes
2 We win with customer focused innovation, R&D, and tech service30% of revenue generated from new products 1 Adhesives is a significant contributor to Ashland's profit and has demonstrated strong growthSuccessful value proposition; disciplined pricing and cost management; leadership position in Pres
Slide 84: Adhesives success model
Our Success Model Adhesives is a growing, high profit contributorLeadership position in PSAs drives significant growth Target specialty niches with high performance demands in:GraphicsSpecialty tape & LabelPackaging Capitalize on mega trends to accelerate growth50+ years experience in automotive adh
Slide 85: Solving customers' problems through collaboration
Problem: adhesive for perishable product with heat sealing sleeve label Solution: worked closely through scale up with our Pureseal™ productSuccessful label for Yoplait Our R&D and tech service are always solving for our customers, driving strong profit growth We win with innovation, R&D, and tech s
Slide 86: Accelerating growth with global reach
We are accelerating growth with global reachInvestments in assets and R&D to meet global needs New structural adhesive Products for Europe Capacity expansion to extend geographic penetration Regional R&D / technical service centers Innovation from global labs delivers 30%+ revenue from new productsD
Slide 87: Industrial Specialties: set up for success
Industrial Specialties will continue to deliver innovation around customer needs We are set up for success Growth in higher-margin premium syntheticsAdhesives growth and disciplined pricingSelective growth & optimization in Other Industries Adapting marquee coatings products for diverse customer nee
Slide 88: Composites
Composites
Slide 89: Composites overview
Unsaturated polyester resins (UPR) Gelcoat We solve customer problems around the world, improving the integrity and allure of their composite products with high performance resins Premium resins used in structural & semi-structural applicationsInfrastructure – corrosion & fire retardantAutomotive &
Slide 90: Composites key strategic themes
1 Accelerate growth in the premium "specialties" segmentRe-align resources, leverage 50+ year track record (Derakane ™), global reach, and world class technical service to accelerate growth in high-spec segments (e.g. corrosion, marine, automotive) 2 Manage our cost structure in non-specialty core U
Slide 91: Focus on high-spec resins
Infrastructure Tub & shower Pipes Corrosion Fire Retardant Electrical Panels Marine Automotive Polymer Concrete Performance Reqs Degree of Specification "High-spec" Eng. Stone Increasing Gross Margin % Targeting "high-spec" applications Source: IHS; Internal estimates High-spec ~30% of the $9B UPR m
Slide 92: Brand name in corrosion resistance
Our Epoxy vinyl ester resins have...Higher strengthBetter corrosion resistance & durabilityWider operating rangeLower maintenance Strong Derakane™ brand, technical service, global reach & over 50 years of case histories Drivers of value 50 years of proven experience with Derakane ™Dedicated science
Slide 93: Gelcoats with superior performance
Accelerate growth in the "specialties" segmentOur gelcoats have superior performance 1 Drivers of value Small part of cost, but significant cosmetic and functional impact - it’s what you see in the showroomIndustry-leading application knowledge and formulation supportHigh degree of customer touch an
Slide 94: UPR for high-end, high-spec applications
Accelerate growth in the "specialties" segmentOur UPR is used for high-end, high-spec applications 1 Drivers of value Dedicated Engineered Stone lab & global technical supportProduct customizationImproved performance vs. competing alternativesReduced waste during productionLeverage multi-generationa
Slide 95: Manage our cost structure in core UPR
Maintain efficient network Drive cost out initiatives Asset utilization EMEA:3 plants Americas:7 plants Asia:2 plants Manage our cost structure in core UPRMulti-pronged strategy to stay cost competitive 2 1 2 3 Actively manage footprint to optimize cost (3 facilities closed in past 5 years)Leverage
Slide 96: Composites has driven significant cash contribution
Gross profit % Drive cash generationComposites has driven significant cash contribution 3 Low capital Intensity Focus on driving working capital 7% is typical in compositesLow capital spending (<5% of sales) Contribution to rest of business Absorbs significant portion of overall Ashland corporate ov
Slide 97: Composites: set up for success
Composites will drive profitability with growth in high-margin segments and cost control Accelerate growth in the premium ‘specialties’ segment Drive cash generation Aggressively manage our cost structure We are set up for success 50+ year track record (Derakane ™)Global reachWorld-class technical s
Slide 98: Purpose of today
Summarize our evolution and define the New AshlandDefine financial targets to create shareholder value and their connection to:Core operational levers to deliver financial targetsMarket strategies to accelerate profitable growthClarify capital allocation policies to turn cash into valueProfile dimen
Slide 99: Drive strong execution: 5 system elements
Core levers Innovation Pricing/Commercial Asset utilization SG&A flat WC/CapEx Tied to compen-sation - 8 of 11 leaders new or in expanded role - Newmarket and operational strategies - New metrics and scorecards tied to account-ability - Lean Six Sigma programs - New Project Manage-ment Office Discip
Slide 100: Pillar priorities for 2017
Pillar Priorities for 2017Increase new product impact to 30% of sales by 2020Deliver our fiscal 2017 planDrive price-to-value initiative to yield >$30 millionIncrease plant utilization/absorption by $30 millionDrive flat SG&A spend vs. prior year Internally connecting our core operating levers to ou
Slide 101: Targets driven by 7 core levers
Note: Adjusted EPS growth, Adjusted EBITDA and Free Cash Flow are forward looking non-GAAP financial measures. See Slide 1 for an explanation for why reconciliations are not available to the most directly comparable forward looking GAAP financial measure; . Cumulative Free Cash Flow generation over
Slide 102: Always solving
“t Ashland always solving etiaass PAshiana
Slide 103: Appendix
Appendix
Slide 104: Biographies/key accomplishments
Biographies/key accomplishments KevinWillisLeads worldwide financial functions and processes including the transformation to new Ashland BrianMcGrath27 yrs with Ashland in various leadership rolesMoving to Zurich in June to also lead European Leadership team Dr. OsamaMusaMore than 350 patents and pa
Slide 105: Acronym reference guide
Acronym reference guide Acronym Definition Acronym Definition APAC Asia Pacific Region LATAM Latin American Region ASH Ashland LMW Low Molecular Weight ASI Ashland Specialty Ingredients LTI Long Term Incentive program BU Business Unit(s) NA North American Region DC Directly Compressible NPI New prod
Slide 106: Backup: Pharmachem
Backup: Pharmachem
Slide 107: Pharmachem: Financial Impact
Pharmachem: Financial Impact Expected to be accretive to EPS in first year following close of transaction and to enhance long-term EPS growthStrong cash flow generation Attractive double-digit returnsExpected to be accretive to EBITDA marginsFinanced primarily with bank financing with remainder from
Slide 108: Pharmachem: Synergies
Pharmachem: Synergies Expected annual cost synergies of ~$10MM, primarily driven by leverage from Ashland’s scale and infrastructure, de-tolling opportunities and in-sourcing initiativesCost synergies expected to be realized by end of second year following transaction closeIncremental tax synergies
Slide 109: Examples: R&D focus areas
Examples: R&D focus areas
Slide 110: Polaris resins in engineered stone
The challenge:Engineered stone products demand high customization, ample design possibilities & durability for frequent use The solution: Polaris™ resins enable improved quality, process efficiency & durability adapted to multi-designs Superior mechanical performance, wetting & curing behavior of ou
Slide 111: Captivates Encapsulation
The offering:Offers “cleaner” encapsulation technology versus competitive technology with improved stability, long term aesthetic and performance compared to benchmarkCustomized capsules in size, color and ingredients with:Exciting visual impactDynamic color releaseUnique delivery methodStability of
Slide 112: FiberHance BM solution
The challenge:Market needed a new hair strengthening ingredientThe solution: FiberHanceTM BM Solution “brings damaged hair back to virgin – from inside” with:Hair mechanical strengtheningLower water uptakeProvide limited damage during hair chemical treatmentsThe result: Initial launch of technology
Slide 113: Re-engineering polyAPTAC manufacturing process
The challenge:PolyAPTAC technology was suitable for industrial applications; Ashland wanted to extend the ability to use this technology into Personal CareThe solution: Developed an innovative way to purify the industrial polyAPTAC grade, lowering the level of monomers and making it suitable for Per
Slide 114: Examples: Innovation that delivers on our brand promise
Examples: Innovation that delivers on our brand promise
Slide 115: Atorvastatin with Klucel
The challenge:Formulating a once-daily, oral cholesterol medicationThe solution: KlucelTM 's non-ionic and pH insensitive properties ensures controlled deliveryOur R&D team’s customized solution ensured safe, effective performance with the customer’s formulationThe result: A reliable, safe, and trus
Slide 116: Bayer sunscreen with ProLipid and Ganex
The challenge:Sunscreen application is messy and ‘sticky’ which negatively impacts consumer complianceCoppertone wanted to revolutionize sunscreen with a formulation that was: A unique rich and creamy foamThat goes on easily and absorbs quickly Helps leave skin feeling soft & smoothThe solution: Our
Slide 117: Tuberlux black diamond truffle extract
The challenge:Estée Lauder was looking to build on a successful line of prestigious skin repair and moisturizing productsThe solution: In collaboration with Estée Lauder we discovered TuberluxTM, an unseen cellular energizing biofunctional extract derived from the rare and precious "black diamond tr
Slide 118: Aroset PSA provides convenience
The challenge:Avery needed re-sealable industrial packaging to meet growing demand for greater customer convenience and waste minimizationThe solution: Our Aroset 2570 PSA has removable and re-sealable characteristicsThe result: Aroset 2570 was selected for re-sealable packaging because of its resis
Slide 119: Derakane is saving our customers money
The challenge:Gas cylinder manufacturers were looking to replace metal with a lighter, safer and more cost effective materialThe solution: We worked closely with Thanh Tai Composite Plastic (in Vietnam) to design a cylinder with outstanding corrosion resistance, toughness, and fire retardanceDerakan
Slide 120: Examples: Better Asset Utilization
Examples: Better Asset Utilization
Slide 121: Lower cost-per-unit in Jiangmen
CMC utilization 2017 YTD 2016 2015 2014 +18% After a fall off in the energy market utilization at the Jiangmen facility fell by 12% CMC utilization in Jiangmen rebounded in 2017... Decreased production volume would increase per unit fixed cost burden by ~15% from 2014-16To address the per unit incre
Slide 122: Freetown plant repurposed to reduce CapEx need
Back Freetown plant successfully completed the 2nd commercial batch trial of Flexcryl 1624Once approved, plant will able to supply 400-450MT/month of material to support business growthRepurposed equipment in Freetown will successfully reduce the need for $5MM of CapEx at the Piedmont plant Freetown
Slide 123: Three plant closures since 2011
Back Three plant closures since 2011 improving utilization & GP ... but there's more to do 2014 2015 2013 2011 2012 Gross Profit $ Gross Profit % Sauveterre closure Kelowana closure Additional sites across Ashland are being evaluated, representing a further $30MM in savings Mississauga closure
Slide 124: Products to bring in-house
Low ROI High ROI Less feasible More feasible We've identified and targeted seven products/operations to bring in-house Analysis sanitized We spend ~$38MM per year with 60+ tollers to outsource various operations.As we've focused our operations, we've built new capabilities and achieved critical mass
Slide 125: Shifting the mix at Doel
Back We had poor profit realization from our Low Molecular Weight (LMW) HPMC product linesIts costly, multi-step manufacturing process required 2-3X equipment time, compared to other product lines produced In 2015, we made the decision to stop LMW production; shifting & rationalizing the mix to high
Slide 126: De-bottlenecking at Parlin plant
Back 2013 2012 2014 +30% 2015 2016 De-bottlenecking activities at Parlin increased capacity by 30% The challenge: From 2012 to 2015, increasing global HEC demand caused Ashland to explore opportunities for additional manufacturing capacityMitigation activities: The Parlin plant made incremental Cape