Cytec Industries Inc. (NYSE : CYT)

Transcription

1 Cytec Industries Inc. (NYSE : CYT) Morgan Stanley Basic Materials Conference Presented By Dave Drillock Vice President and Chief Financial Officer February 21, 2008

2 Forward Looking Statement and Non-GAAP Measures During the course of this meeting we may make forward-looking statements. All statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as expects, anticipates, plans, intends, projects, and outlook. Although they reflect our current expectations, these statements are not guarantees of future performance because they involve a number of risks, uncertainties, and assumptions. Included in this presentation are estimates for full year 2008 sales and earnings. These were included in our Jan 30, 2008 press release, which was also furnished as an exhibit to a current report on Form 8-K. These estimates set forth the Company s assumptions and management s best estimate of the full year 2008 sales and earnings at that time based on various assumptions set forth in the press release. There can be no assurance that sales or earnings will develop in the manner then projected or that the results of the fourth quarter will be consistent with the results then projected. Actual results may differ materially. We recommend that you review Cytec s SEC filings for a discussion of some of the factors which could cause actual results to differ materially from its expectations and projections. This and other Cytec information may be accessed at In sections of this presentation certain non-gaap measures are provided and identified as such. We believe that the non-gaap measures can more accurately reflect comparisons of year to year trends and is consistent with how we review the information. A reconciliation of all non-gaap measures to the applicable GAAP measure is provided in the appendix at the end of this presentation.

3 The Cytec Profile 2007 Sales of $3.5 billion Sales by Business Segment Sales by Geography Cytec Building Blocks 13% Cytec Specialty Chemicals 68% Cytec Surface Specialties 47% 13% Asia Pacific 14% 37% North America 19% Cytec Engineered Materials 68% 21% Cytec Performance Chemicals Europe 43% 6% Latin America Leading Global Provider Of Specialty Chemicals And Materials

4 Cytec s Growth Strategy GDP Growth Growth With Market Focus on Technology Grow With New Product Introductions and Existing Products For New Applications TOP LINE Geographic Expansion Grow In Areas Such As: Asia, Latin America Targeting 5-7% 5 Top-Line Growth & Double-Digit Digit EPS Growth BOTTOM LINE Bolt-On Acquisitions Operational Excellence Continue to Enhance productivity Focus Focus On On Creating Creating Sustainable Sustainable Technology Technology Franchises Franchises

5 Financial Highlights Year Average $ Growth Rate 14% $3.2 Earnings per Share $2.7 $2.2 Sales $ (Billions) $1.7 EPS* 1.00 $1.2 Sales Highlights Achieved EBITDA of M$465 Improved Balance Sheet, paying down almost $100 million of our debt Paid dividends of $19 million in 2007 and increasing by 25% in 2008 Announced a new $100 million share repurchase program *Adjusted EPS Made Good Progress In In A Challenging 2007 Environment

6 Cytec Surface Specialties 2007 Sales M$1,640 Operating Margin 6% Sales by Segment Sales by Geographic Region Waterborne Radcure Asia Pacific North America Liquid Coating Resins Aminos 16% 17% 27% Latin America 5% 17% 21% 17% 23% 57% Solventborne Powder Europe Global Leadership Position In In The The Markets We We Serve

7 Cytec Surface Specialties Radcure Pioneer and worldwide leader in UV & EB curable oligomers and monomers Enables high production throughput and low energy requirements Eco-friendly products yield zero or low solvent emissions Powder Leader in all segments of powder coating resins Global markets expected to grow 7% per year Compliant to the most stringent environmental regulations Liquid Coating Resins Broad product portfolio to service coatings market Leader in waterborne alkyd, epoxies, and aminos Opportunities to replace solvent with water systems Increasing Environmental Pressure Leads To To New New Eco-Friendly Opportunities

8 Surface Specialties: Significant Earnings Growth Potential Earnings Growth Target 10-15% Year on Year Growth Actions Organization Integration / Restructure Asset Optimization Dijon shutdown Hamburg SB WB Wallingford aminos restructure Value Pricing Initiatives Operations Improvement Global ERP rollout Lean / Six Sigma / Best Practice Yield / Energy / Waste savings Investment for Growth WB Phase 1 USA Oligomers China WB Phase 2 USA Aminos Japan Product Mix Improvement Strengthened Innovation Process Product Line Rationalization (SB WB) Favorable Market Trends + On On Track With Margin Improvement Actions

9 Cytec Performance Chemicals 2007 Sales M$736 Operating Margin 10% Sales by Segment Sales by Geography Pressure Sensitive Adhesives Mining Asia Pacific North America Specialty Additives 18% 14% 32% Latin America 17% 18% 35% Specialty Urethanes 11% 6% 19% Phosphines 30% Polymer Additives Europe Global Leader In Mining Chemicals For Copper And Alumina Processing

10 Cytec Performance Chemicals Mining Chemicals Almost 100 year history in mining industry Industries include Copper, Alumina, Complex Sulfides, etc. Market production growth: Copper > 3.5% p.a. Alumina > 5.0% p.a. Phosphine Chemicals Cytec is the pioneer in phosphine research, and operates the largest, most advanced manufacturing facility More than 50 years of experience in phosphorus specialties Pressure Sensitive Adhesives Technology leader in emulsion-based and solvent-based systems Applications include medical tapes and bandages, drug delivery patches, food and beverage labels, etc. Target growth in high-value segments in tapes and graphics Staying The The Course: Focus On On Technology And And Manufacturing Improvements

11 Cytec Building Block Chemicals 2007 Sales M$457 Operating Margin 5% EBITDA M$48 Major Products Acrylonitrile* Melamine Sulfuric Acid Markets Served Acrylic Fiber, ABS Plastic, Acrylamide Merchant Market, Cytec Surface Specialties Evonik (on-site facility), Merchant Market Input Costs Propylene Ammonia Natural Gas End Uses Acrylonitrile Acrylonitrile, Melamine Energy Continued Focus On On Plant Plant Reliability Is Is Key Key To To Benefit From From Tight Tight Supply Conditions

12 Cytec Engineered Materials 2007 Sales M$670 Operating Margin 20% Sales by Segment Sales by Geography Satellite & Launch High Perf Large Europe 9% North Commercial America 4% Transport Biz & Reg Jet 17% 43% 30% 62% 27% Asia Pacific 8% Military Long-Term Growth Opportunities In In Aerospace Markets

13 Typical Composite Applications Large Commercial Transport Interiors: sidewall, ceiling and floor panels; storage and cargo bins; lavatories and galleys Cockpit components Radome Doors Pylon fairings Ailerons Leading edge slats Air conditioning ductwork Exteriors: Wing to body fairings Fin boxes and rudders Flaps, spoilers and deflectors Engine components and cowlings Tail planes and elevators F/A-22 = Composites Including skins not shown Rotorcraft Military High Performance Auto

14 Commercial Aerospace Annual Demand Forecast Delayed Replacement Cycle Total Historical Deliveries Historical Trend Forecast Trend 20% 15% Deliveries as % of fleet European % of Fleet US % of Fleet % Long term growth ( ) % 0% Normal Level of Replacement Year forecasts indicate strong long-term growth GDP = 3.1% Passenger = 5.0% Cargo = 6.1% Source: Industry Looming Replacement Requirement For US And European Network Carriers Looming Replacement Requirement For US And European Network Source: Carriers Industry

15 Business Jet and Military Business/Regional Jets Business Jet sector remains strong Orders are driven through leasing and new product introductions Emerging economies creating additional demand and local production Regional Jet builds starting to grow Military Expect reset of military equipment will positively impact sales after Iraq draw down New defense budget is delaying decisions on the more advanced fleet, Lockheed Martin s F-22, in order to pay for fixes to the F-15 fleet. Manufacturers continue to signal that composites will figure prominently in next-generation aircraft Joint Strike Fighter continues to offer growth potential over next five years Source: Industry

16 Cash Flow and Investments Uses of Cash Maintenance of business capital Capital projects to support the growth businesses Radcure Waterborne Engineered Materials Mining Pay down debt M$100 of notes due in March Total debt to EBITDA is 1.9* Total debt to capital is 30.5%* Bolt-on acquisitions (stock buyback hurdle rate) Stock buyback Initiated a new $100 million buyback program Dividends Increased annual dividends by 25% to $ CapEx Estimate is $ million * At 12/31/07 Strong Balance Sheet, Cash Flow, And And Investment Grade Rated

17 Earnings Per Share Growth Est Reported $4.20 "Normalized" $3.90 $ % Growth 13% 6% - 11% Risks to plan include: Economic conditions in U.S. and Europe Continued escalation of raw material costs Our Focus for Success: Passing on raw material increases through price increases Driving growth of new technologies and eco-friendly products Operational excellence initiatives Our Our Target: Annual Double-Digit EPS EPS Growth

18 2008 Outlook Estimates by Business Sales Growth Earnings Growth Surface Specialties 6% 10-15% Performance Chemicals 4% 10% Engineered Materials 10% 10% Comments - Modest growth in Europe, continued growth in Asia Pacific and Latin America; benefit from Radcure capacity expansion in China and new waterborne capacity in the U.S. both in 2H08. - Volume growth across all product lines except Polymer Additives due to exit of commodity lines. - Demand growth from higher aircraft production and higher usage of composite materials; most growth will come from commercial aircraft and modest growth from military and regional jets. Investing in 2008 for sustainable growth in 2009 and beyond. Building Blocks $18-20M - Estimate a balanced acrylonitrile market and favorable melamine pricing; planned four week maintenance outage in Q2. Assumptions: Crude oil between $85-95 per barrel We will seek to raise selling price to offset escalating raw material prices Good Outlook For For 2008 Despite Challenging Economic Conditions

19 The Cytec Investment Thesis Diverse portfolio with overall good growth prospects - Advanced composites for aerospace - Environmentally friendly coating resins - Mining and phosphine chemicals - Expansions projects in the growth products Significant operational excellence opportunities - Continuous improvement mindset - Good track record on delivering results Strong balance sheet and good cash flow generation - disciplined use of capital - focused on improving returns Sustainable Technology Franchises = Sustainable Growth = Increasing Shareholder Value

20 Cytec Industries Inc. (NYSE : CYT) Your Questions?

21 Appendix Reconciliation of Non-GAAP Measures to GAAP Measures Management believes that net after-tax earnings and diluted earnings per share before special items, non-gaap measures, are meaningful to investors because they provide a view of the Company with respect to ongoing operations. Special items represent significant charges or credits that are important to an understanding of the Company s overall operating results in the periods presented. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. The following table lists the net special items used to adjust reported net earnings and diluted earnings per share for the years 1996 through The excluded net special items are explained in the Management s Discussion and Analysis Section of the annual report on Form 10-K and in the Company s year end financial press releases both of which can be found on the Company s website, Year Reported Net Earnings Net Special Items Non-GAAP Net Earnings Reported Diluted Earnings per Share Net Special Items Non-GAAP Diluted Earnings per Share (27.1) (0.56) (14.6) (0.30) 3.90