Taminco Corporation Q1 FY 13 Earnings Conference Call

Transcription

1 Taminco Corporation Q1 FY 13 Earnings Conference Call May 14, 2013

2 Disclaimer FORWARD-LOOKING STATEMENTS Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the federal securities laws, and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as anticipate, expect, suggests, plan, believe, intend, estimates, targets, projects, should, could, would, may, will, forecast, and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this presentation, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If we do update one or more forward-looking statements, there should be no inference that we will make additional updates with respect to those or other forward-looking statements. FURTHER INFORMATION This presentation should be read together with our SEC filings, including with the Management s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto included in such filings. You may get these documents for free by visiting EDGAR on the SEC website at Alternatively, Taminco will arrange to send you our SEC filings if you request it by calling toll-free For more information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements please refer to the Risk Factors section of our Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission and subsequent filings by the Company. NON-GAAP FINANCIAL MEASURES In this presentation, Taminco presents Adjusted EBITDA and Adjusted EBITDA margin because it believes these measures are useful as supplemental measures in evaluating the performance of its operating businesses and provide greater transparency into our results of operations. Adjusted EBITDA and Adjusted EBITDA margin should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with U.S. GAAP. See Appendix A for the definitions and reconciliations of these non-gaap measures. MARKET, RANKING AND OTHER INDUSTRY DATA In this presentation we rely on and refer to information and statistics regarding our industry, the size of certain markets and our position within the sectors in which we compete. Some of the market and industry data contained in this presentation are based on independent industry publications or other publicly available information and data from a report issued by Arthur D. Little Benelux S.A./N.V. that we commissioned in October 2012, which is not publicly available, while other information is based on our good faith estimates, which are derived from our review of internal surveys, as well as independent sources listed, and our management s knowledge and experience in the markets in which we operate. Our estimates have also been based on information obtained from our customers, suppliers and other contacts in the markets in which we operate. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under Risk Factors, Cautionary Statement Regarding Forward-Looking Statements and Management s Discussion and Analysis of Financial Condition and Results of Operations in our SEC filings. 2

3 First Quarter 2013 Overview Q1 FY'13 was another quarter of continued strategy execution, above-market growth, and strong cash generation Total Volumes of 144kT versus 135kT in Q1 FY 12, up 7% year-over-year Total Net Sales of a record $310 million versus $283 million in Q1 FY 12, up 10% year-over-year Total Adjusted EBITDA grew to a near record $66 million Robust operating cash flow generation of $49 million in Q1 FY 13 Priced our Initial Public Offering of 15.8 million primary shares or 24% of the total outstanding shares on April 17, 2013 Publicly traded on the NYSE under the ticker TAM Generated gross proceeds of $237 million (excluding any potential proceeds that may be generated from the greenshoe option that expires on May 17 th ) which will be used to pay fees and expenses and retire 9.125% Holding Company PIK Toggle Notes As of 3/31/2013 and pro forma for the IPO, LTM Adjusted EBITDA is $243 million and Taminco is levered on a net basis at 3.5x (excluding any potential proceeds that may be generated from the greenshoe option) Positive outlook for FY 13, expecting another record year for Volume, Net Sales and Adjusted EBITDA Other significant events Completed re-pricing of Senior Secured Credit Facilities in January 2013, which reduced the interest rate by 75bps and increased cash flow 3

4 Taminco - A Global Specialty Chemical Company Taminco Corporation LTM Net Sales: $1,143 mm LTM Adj. EBITDA: $243 mm Adj. EBITDA Margin (LTM): 21% Functional Amines Specialty Amines Crop Protection Niche Specialty Chemicals Taminco is a global leader in the niche Alkylamines industry Alkylamines are produced by combining ammonia and an alcohol Vertically integrated business model Diverse portfolio of high value specialty derivatives Alkylamines and derivatives play a critical, functional role in many chemical products 4

5 Taminco - A Sustainable Industry Leader Company Highlights Volume by End Markets Global Industry Leader with Sustainable Market Position Leading global producer of alkylamines and its derivatives #1 or #2 market position globally in the vast majority of chemicals Taminco produces Energy 7% Other 21% Agriculture 30% ~80% of End Markets Exposed to Mega Trends ~80% of Taminco s End Markets Exposed to Positive Mega Trends Mega Trends driven by urbanization and population growth globally End market CAGR of 5% -8% through 2016 Water Treatment 13% Personal & Home Care 14% Animal Nutrition 15% Volume by Geography Integral Supplier to Blue Chip Customer Base Average relationship of 13 years with top customers Provides products that are difficult to substitute Strong Emerging Markets Platform Latin America Asia 6% 8% Resilient, Robust Financial Profile Adjusted EBITDA margins averaged above 20% since 2009 Grew Adjusted EBITDA 20% during 09 downturn Significant recent investment to support growth Europe 36% North America 50% Advantaged North America position accounts for nearly half of Taminco s sales volume 5 Note: Volume by end-markets as of 12/31/2012 and volume by geography as of 3/31/2013.

6 Q1 FY 13 Highlights Commentary Q1 FY'13 Net Sales by Region Strong regional demand and growth in our derivatives capacity helped drive 9% volume growth in N. America Our European businesses continued to outperform the broader European economy and showed 2% volume growth over the comparable period last year Latin America continued to grow strongly (32% volume growth over the comparable period last year) while Asia volumes were flat in first quarter, mainly due to adverse weather conditions Emerging Markets: 14% Europe 38% Asia 8% Latin America 6% Americas: 54% North America 48% Functional Amines had 4% year-over-year volume growth, primarily due to growth in agriculture (herbicides) in the US, the recovery of some demand in Latin America, and overall healthy growth in most end markets Specialty Amines had 16% year-over-year volume growth due to strong growth in most end-markets, including personal & home care, animal nutrition, and energy, boosted additionally by the ramp-up of our new DIMLA unit in the US Crop Protection volume was down from last year. Fungicide volumes were up 6% offset by a significant decrease in our formulations business due to adverse weather conditions in Asia and Europe Specialty Amines $133 Q1 FY'13 Net Sales: $310 million Q1 FY'13 Net Sales by Division Crop Protection $37 43% 12% 45% Functional Amines $140 6

7 Q1 FY 13 Divisional Highlights Division Performance Commentary Q1 FY 13 Performance Functional Amines Healthy volume growth due to strong herbicide market in the U.S. and recovery in Latin America Sustainable margins despite raw material price increases year-over-year Adjusted EBITDA growth of 7% due to continued optimization of product portfolio $ in mm / KT Q1 FY 13 Q1 FY 12 YoY Volume (kt) % Adj. EBITDA ($) % Specialty Amines Double digit volume growth primarily due to strong demand in personal & home care, animal nutrition, and energy Incremental growth through full-year impact of DIMLA unit in U.S., despite costs to support the ramp up of our new capacity and strategic plan Europe continues to outperform economy $ in mm / KT Q1 FY 13 Q1 FY 12 YoY Volume (kt) % Adj. EBITDA ($) % Crop Protection Adverse weather conditions in Europe and Asia impacted Q1 FY 13, which is expected to partly recover in remainder of the year Margin improvement due to price increases offset by incremental fixed costs Volume pressure drove an 8% contraction in Adjusted EBITDA $ in mm / KT Q1 FY 13 Q1 FY 12 YoY Volume (kt) (15)% Adj. EBITDA ($) (8)% 7

8 Taminco Performance and Outlook Q1 FY 13 Performance $ in mm / KT Q1 FY 13 Q1 FY 12 YoY Volume (kt) % Net Sales % Adj. EBITDA % Taminco s Q1 FY 13 performance was driven by strong volume growth in the two largest divisions, in particular double digit volume and net sales growth in surfactants and animal nutrition We have begun to realize the benefit of a variety of our capital growth projects, in particular the expansion of our derivatives capacity in the U.S. Our methylamine expansion project at our Pace, Florida site is on track to be completed by Q3 FY 14 Rising raw material prices year-over-year have not materially affected our unit margins given the cost pass through (CPT) structure of our contracts We have added incremental fixed costs associated with strengthening the organization to support both the significant capacity we recently added in the U.S. and the anticipated near-term strategic projects as part of our long-term growth plan The outlook for the business is positive, expecting solid volume, Net Sales and Adjusted EBITDA growth for the remainder of the year, despite the economically challenging times We expect Adjusted EBITDA for FY 13 to reach another record level as we expect continued execution and contributions from our recent capital projects and growth from our strong end-markets 8

9 Cash Flow and Balance Sheet Update Free Cash Flow: 3 Months Ended March 31, 2013 Q1 FY 13 Financial Highlights Q Net Income $ 8 Depreciation and Amortization 28 Change in Trade Working Capital - Income Statement LTM 3/31/13 Volume: 555KT LTM 3/31/13 Revenue: $1,143 million LTM 3/31/13 EBITDA: $243 million Change in Other Assets / Liabilities 13 Net Cash from Operations $ 49 Less: Maintenance Capital (2) Less: Growth Capital (10) Balance Sheet & Cash Flow Trade Working Capital: $119 million Q1 FY 13 Maintenance Capital Expenditures: $2 million PF Net Debt (1) / LTM EBITDA: 3.5x Free Cash Flow $37 9 (1) As of 3/31/2013 and pro forma for the IPO, net debt is $828 (excluding any potential proceeds that may be generated from the greenshoe option).

10 Appendix Additional Information

11 Top Customers Selected Product Attributes Market Position Growth Exposed to High Growth End Markets Agriculture Animal Nutrition Personal & Home Care Water Treatment Energy Outlook (1) 6% 5% 7% 6% 8% #1 (2) #2 (3) Top 2/3 (4) #1 (5) #3 (6) Protects cash crops against disease Intermediate and formulation salts for herbicides Critical feed additive for animal health Benefits poultry and other meat s nutritional value Cleansing properties for various products such as shampoos, detergents and fabric softeners Helps purify municipal water and water used for waste treatment Removes impurities in oil and natural gas (1) Per ADL, January Growth per annum based on aggregate value. (2) Represents market position for MIPA, Metam, and Thiram (largest products sold into end-market). (3) Represents market position for Choline Chloride (largest product sold into end-market). (4) Represents market position for DIMLA (largest product sold into end-market). (5) Represents market position for DMAE (largest product sold into end-market). ~80% of Taminco s end markets exposed to positive Mega Trends 11

12 Our Business Model Feedstock Alkylamines Derivatives End Markets C 2-6 Alcohols Ammonia Methanol Other Ingredients e.g. ethylene oxide, hydrogen, carbon disulphide, acetic acid Higher Alkylamines Methylamines Alkylamine Derivatives Competitive Advantages of Taminco s Vertically Integrated Business Model Flexible Energy efficient Neutral Unique Water Treatment Surfactants Oil & Gas Treatment Pharma Precursors Coatings & Metal Working Fluids Solvents Biocides Rubber Chemicals Animal Feed Crop Protection Taminco s Position in the Value-Chain Alkylamines are organic compounds produced through reaction of an alcohol with ammonia Difficult to substitute and to replicate Small portion of our customers overall costs Low cost model through heat and steam recycling (optimizing energy efficiency) Manufacturing flexibility to shift production among derivatives Large, global, blue-chip customer base, which is served regionally through strategically located manufacturing faciliities Neutral supplier to customers by not competing in certain downstream endmarkets Taminco s products in the value chain 12

13 Reconciliation of Net Income to Adj. EBITDA ($ in millions) Reconciliation of Net Income to Adjusted EBITDA Predecessor Successor Proforma Actual January 1, February 14, 2012 Three months ended March 31, 2012 Three months ended March 31, 2012 Three months ended March 31, 2013 Net Income ($54) ($43) ($13) $8 GAAP Income Taxes 9 (16) (1) 6 Net Interest Expense & Def Fin. Fees Operating Depreciation & Amortization Acquisition Related Depreciation EBITDA ($30) ($36) $32 $66 Transaction related costs - 67 $29 - Foreign exchange gains/losses (2) Joint-Venture Investment Employee stock comp. charges Apollo management fee Adjusted EBITDA $30 $34 $64 $66 13

14 Use of Non-GAAP Financial Measures We present Adjusted EBITDA and Adjusted EBITDA margin to enhance a prospective investor s understanding of our results of operations and financial condition. EBITDA consists of profit for the period before interest, taxation, depreciation and amortization. Adjusted EBITDA consists of EBITDA and eliminates (i) transaction costs, (ii) restructuring charges, (iii) foreign currency exchange gains/losses, (iv) non-cash equity in earnings/losses of unconsolidated affiliates net of cash dividends received (as we receive cash only when these unconsolidated affiliates pay us a dividend, regardless of equity-based earnings), (v) stock option compensation and (vi) sponsor management and director fees and expenses (successor period only). Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of Net Sales. We believe that making such adjustments provides investors meaningful information to understand our operating results and ability to analyze financial and business trends on a period-to-period basis. You should not consider Adjusted EBITDA or Adjusted EBITDA margin as an alternative to (a) operating profit or profit for the period, as reported in accordance with U.S. GAAP, as a measure of our operating performance, (b) cash flows from operating investing and financing activities as a measure to meet our cash needs or (c) any other measures of performance under generally accepted accounting principles. You should exercise caution in comparing Adjusted EBITDA and Adjusted EBITDA margin as reported by us to similar measures of other companies. In evaluating Adjusted EBITDA, you should be aware that we are likely to incur expenses similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by non-recurring items. We present Adjusted EBITDA and Adjusted EBITDA margin because we believe Adjusted EBITDA and Adjusted EBITDA margin are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with U.S. GAAP. Our management, including our chief operating decision makers, uses Adjusted EBITDA as a factor in evaluating the performance of our business. This measure is not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP measures of performance. The most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for Adjusted EBITDA is net income. Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Some of these limitations include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements that would be required for such replacements; (iii) it does not reflect the interest expense, or the cash requirements necessary, to service interest or principal payments on our debt; (iv) it does not reflect stock option expense or its potentially dilutive impact; (v) some of the exceptional items that we eliminate in calculating Adjusted EBITDA reflect cash payments that were made, or will be made in the future; and (vi) other companies in our industry may calculate Adjusted EBITDA differently than we do, which limits its usefulness as a comparative measure. 14