Jefferies Industrials Conference August 11, 2016

Transcription

1 Jefferies Industrials Conference August 11, 2016 Trademark of Trinseo S.A. or its affiliates

2 Introductions & Disclosure Rules Introductions Chris Pappas, President & CEO Barry Niziolek, Executive Vice President & CFO David Stasse, Vice President, Treasury & Corporate Finance Disclosure Rules Cautionary Note on Forward-Looking Statements. This presentation contains forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts or guarantees or assurances of future performance. Forward- looking statements may be identified by the use of words like expect, anticipate, intend, forecast, outlook, will, may, might, potential, likely, target, plan, contemplate, seek, attempt, should, could, would or expressions of similar meaning. Forward-looking statements reflect management s evaluation of information currently available and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Factors that might cause such a difference include, but are not limited to, those discussed in our Annual Report on Form 10-K, under Part I, Item 1A Risk Factors and elsewhere in that report. As a result of these or other factors, our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you against relying on any of these forward-looking statements. The forward-looking statements included in this presentation are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the US ( GAAP ) including Adjusted EBITDA, Adjusted EBITDA excluding inventory revaluation, Adjusted Net Income (loss), and Adjusted EPS - Diluted. We believe these measures provide relevant and meaningful information to investors and lenders about the ongoing operating results of the Company. Such measures when referenced herein should not be viewed as an alternative to GAAP measures of performance. We have provided a reconciliation of these measures in the Appendix section of this presentation. 2

3 Trinseo Overview 2015 Revenue by Geography Leading producer of synthetic rubber, latex, and plastics Carved out of Dow Chemical in 2010 Global headquarters in Berwyn, PA Diverse geographic and end market exposure 1.3x net leverage North America 22% Asia Pacific 14% Other 4% EMEA 60% EBITDA ex Inventory Revaluation ($MM) 2015 Revenue by End Market Other 16% Appliances 9% Automotive 14% Building & Construction / Sheet 14% Tires / Rubber Goods 12% Carpet & Turf 5% Q2 '16 LTM Paper & Paperboard 17% Packaging 8% Consumer Electronics 5% 3

4 Trinseo Overview Q Net Sales: $970MM Adj EBITDA: $182MM Adj EBITDA ex Reval: $169MM Adj EPS: $2.30 Performance Materials Net Sales: $528MM Adj EBITDA: $83MM Adj EBITDA ex Reval: $76MM Basic Plastics & Feedstocks Net Sales: $442MM Adj EBITDA: $121MM Adj EBITDA ex Reval: $115MM Latex Net Sales: $232MM Adj EBITDA: $21MM Synthetic Rubber Net Sales: $111MM Adj EBITDA: $30MM Performance Plastics Net Sales: $184MM Adj EBITDA: $31MM Styrenic Polymers / Americas Styrenics Polycarbonate / Sumika Styron PC Feedstocks Strategic Intent: Grow EBITDA via technology leadership in focused markets Stable and consistent cash generation Organic growth and possible bolt-on acquisitions Strategic Intent: Generate cash via cost control and margin improvement Manage JVs for cash generation No organic investment Note: Division and Segment Adjusted EBITDA and Adjusted EBITDA excluding inventory revaluation exclude Corporate Segment Adjusted EBITDA of $(21)MM. Totals may not sum due to rounding. 4

5 Basic Plastics & Feedstocks Styrene Margins (a) Americas Styrenics JV ($MM) $700 $283 $280 $600 $250 $500 USD/MT $400 $300 $106 $200 $78 $70 $100 $45 $- Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Polycarbonate Margins & Operating Rates (a) Q2'16 LTM Distributions EBITDA Key Highlights W Europe Margin USD/MT $776 78% 76% $173 75% 77% $265 $228 80% $520 82% $546 Global Operating Rates Leverage to styrenics 1,400kt exposure to styrene 600kT of European production 300kT of Asian purchases w/ cost-based economics 500kT of AmSty N American production (TSE s 50% share) 1,300kt of exposure to styrenic polymers 950kT of TSE production 350kT of AmSty N American production (TSE s 50% share) Leverage to polycarbonate 150kT of European production Q2'16 LTM Source: IHS/Trinseo (a) Margins for Western Europe. 5

6 Balance Sheet and Cash Flow Free Cash Flow ($MM) (1) Liquidity ($MM) $904 Call premium related to refinancing $316 $69 $344 $439 Unused Borrowing Facilities (2) $170 $81 $56 $25 $247 $465 Cash & Cash Equivalents Q2'16 LTM Q2'16 Summary Q2 cash from operating activities of $95 million and free cash flow of $68 million 4.1x Net Leverage (3) 3.8x Q2 dividends of $30 million from Americas Styrenics 1.6x 1.3x Net leverage of 1.3x at quarter end Q2'16 LTM (1) Free Cash Flow = cash from operating activities + cash from investing activities change in restricted cash value of $316MM excludes a call premium of approximately $69MM value of $81MM excludes approximately $56MM of termination fees for Latex JV Option and Bain Advisory Agreement. (2) A/R Securitization facility commitment of $200MM ($130MM available at Q2 16) and Revolving Credit facility commitment of $325MM ($309MM available at Q2 16). NOTE: Totals may not sum due to rounding. (3) Net Leverage = (Total Debt Cash & Cash Equivalents) / LTM Adjusted EBITDA 6

7 Q&A Trademark of Trinseo S.A. or its affiliates

8 Appendix Trademark of Trinseo S.A. or its affiliates

9 Trinseo Sales by Region 2015 Net Sales by Geography 2015 EMEA* Sales by Country 1 Other, 4% Austria, 3% Belgium, 5% Czech Republic, 4% United States, 14% United Kingdom, 5% Other, 19% Finland, 3% France, 6% Asia Pacific, 22% EMEA*, 60% Turkey, 6% Netherlands, 4% Germany, 28% Switzerland, 3% Sweden, 6% Poland, 3% Italy, 7% * EMEA includes Europe, Middle East, and Africa 1) Sales on destination basis 9

10 Trinseo Sales by Market Segment Global Sales by End Market Europe Sales by End Market Other 16% Appliances 9% Automotive 14% Building & Construction / Sheet 14% Other, 19% Appliances, 7% Automotive, 12% Building & Construction / Sheet, 18% Tires / Rubber Goods 12% Paper & Paperboard 17% Packaging 8% Carpet & Turf 5% Consumer Electronics 5% Tires / Rubber Goods, 14% Paper & Paperboard, 14% Packaging, 11% Carpet & Turf, 4% Consumer Electronics, 2% 10

11 Bridging to 2016 Guidance Adj EBITDA excl Inventory Revaluation ($MM) +$100 +$20 ($60) $550 $ Adj EBITDA excl Inv Revaluation 2015 Fly-up Styrene Margin Performance Materials >5% Growth BP&F Structural Improvement 2016 Adj EBITDA excl Inv Revaluation (Guidance Midpoint) Basic Plastics & Feedstocks Structural Improvement Market improvement approximately $55 million styrene monomer and $25 million styrenic polymers About $20 million from lower utility cost, improved yield 11

12 Latex Business Overview Deliver consistent results Strategy Grow Asia, carpet, performance latex Leverage cost-advantaged position to minimize coated paper volume declines in North America / Europe Volume / EBITDA Margin Key Highlights MMlbs 1,300 1,200 1,100 1, ,210 1,193 8% 8% 1,233 8% 12% 10% 8% 6% 4% 2% Adjusted EBITDA Margin 3% year-over-year volume growth $5 million annual cost savings initiative achieved 1 st half 2016, others ongoing Evaluating asset footprint North America Gales Ferry, CT plant closure end of 2015 Increased utilization rates Improving margins via price increases % Trade Volume Adjusted EBITDA Margin 12

13 SB Latex Capacity Europe Asia BASF SE 26% Synthomer 19% Trinseo 4% Kumho Petrochemical 4% Rizhao Kumho Jinma 4% Asahi Kasei Chem. 3% Shin Foong 3% Others 42% Other 25% LG Chem 5% Gao Qiao BASF Dispersion 6% Trinseo 30% JSR 8% Nippon A & L 10% BASF SE 10% Total Capacity: 898kMT Total Capacity: 1,710kMT North America OMNOVA Solutions 44% BASF Corp. 14% Other 7% Trinseo 35% Total Capacity: 477kMT Source: IHS. Europe: Western Europe + Central Europe; Asia: Northeast Asia + Southeast Asia. Note: Totals may not sum due to rounding. 13

14 Synthetic Rubber Financial Overview MMlbs % % % 30% 25% 20% 15% 10% 5% Adjusted EBITDA Margin % 100% 75% 50% 25% 0% Trade Volume Adjusted EBITDA Margin Shifting Volume Mix 30% 38% 45% 48% ESBR PBR-Li PBR-Ni SSBR Key Highlights Focused on high performance tire market Growing 2-3 times standard tire market Mix shift toward premium products Enhanced SSBR as % of SSBR 38% % 2015 Record sales volume in % year-over-year growth in enhanced SSBR Completed conversion of nickel to neodymium-pbr 14

15 Synthetic Rubber Focus on SSBR Global Premium Passenger Car Tires Trinseo Synthetic Rubber Volume Mix Shift MM 1, CAGR Higher Margin 1, % 1,200 1, , % SSBR Target Endmarket Enhanced SSBR Base SSBR Enhanced SSBR Base SSBR Being converted to higher margin Nd-PBR 600 Ni-PBR Li-PBR Ni-PBR Li-PBR % ESBR ESBR 200 Lower margin A 2015E 2020E 2012A 2015A Standard (<=16") Premium (>=17") Well Positioned to Benefit from Premium Tire Growth Doubled SSBR Capacity Since 2012 Source: Global Insight, LMC Automotive. 15

16 SSBR Capacity Europe Asia Versalis S.p.A. 11% Asahi Kasei Chem. 19% Lanxess 14% Others 46% Nippon Zeon 11% Synthos S.A. 16% Trinseo 60% LG Chem 7% JSR 7% Kumho Petrochemi cal 10% Total Capacity: 285kMT Total Capacity: 840kMT North America Lanxess 16% ASRC 13% Bridg/Fires tn 56% DYNASOL 13% Source: IHS. Europe: Western Europe + Central Europe; Asia: Northeast Asia + Southeast Asia. Note: Europe excludes 170kMT of Michelin captive capacity. Totals may not sum due to rounding. Goodyear 3% Total Capacity: 320kMT 16

17 Performance Plastics Business Overview Strategy Compounds and blends business focused on automotive and consumer electronics, lighting, and medical applications (CEM) Differentiated products in line with key industry trends such as auto light-weighting, aesthetics, recycled material content Volume / EBITDA Margin Key Highlights MMlbs % 7% 8% 25% 20% 15% 10% 5% Adjusted EBITDA Margin Sustainable, long-standing relationships with automotive, consumer electronics, lighting, and medical industry leaders Production on four continents drives OEM platform design wins Record 2015 Adjusted EBITDA 4% year-over-year segment volume growth in 2015 excluding Latin America CEM volume up 9% in % Trade Volume Adjusted EBITDA Margin 17

18 Performance Plastics Global Growth Trends in Consumer Essential Markets 3, CAGR Weight Reduction in Automotive Design and Manufacture 2, % 9.2% Average Plastic Content per Vehicle Ktons 2,000 1,500 1, , % 6.6% Kg ,015 1, % E Avg. Car Plastic Components 2020E E 2015E 2016E 2017E 2018E 2019E Electrical Medical Connected Devices LED Situated to Capitalize on Consumer Essential Markets and Vehicle Light Weighting Initiatives Source: Roland Berger; IHS. 18

19 Basic Plastics & Feedstocks Styrene Margins (a) Americas Styrenics JV $250 $283 USD/MT $MM $68 $40 $45 $78 $70 $ Distributions EBITDA W Europe Margin USD/MT Polycarbonate Margins & Operating Rates (a) $776 78% Source: IHS/Trinseo (a) Margins for Western Europe. 76% $174 75% $265 77% $227 80%+ $ Western Europe Margin Global Op Rates Global Operating Rates Key Highlights Longer term trend toward higher styrene operating rates and margins Aging industry asset base Demand growth forecasted to be higher than supply growth over next five years Global operating rates in mid 80s Polycarbonate Full-year impact of restructuring savings in 2015 Market improvement Operating rates have increased to over 80% Significant margin expansion 2014 to 2016 $100 / MT margin = $15MM EBITDA 19

20 Western Europe and Asia Styrene Margin Trends Western Europe Margin USD/MT 2,200 2,000 1,800 1,600 1,400 1,200 1, Styrene Ethylene Benzene SM Margin Q2 to Q3-125$/MT Styrene Margin - USD/MT Asia Margin 2,000 USD/MT 1,800 1,600 1,400 1,200 1, Styrene Benzene Ethylene SM Margin Q2 to Q3 -$25/MT Styrene Margin - USD/MT Source: IHS/Trinseo. (1) Styrene: W. Europe Contract Monthly Market (Delivered W. Europe); Benzene: 50% W. Europe Spot Avg (CIF NW Europe / Basis ARA) and 50% W. Europe Contract Market (FOB/CIF W. Europe); Ethylene: W. Europe Contract Market Pipeline (Delivered W. Europe). (2) Styrene: NE Asia Avg Spot Posting (CFR China); Benzene: NE Asia Spot Avg (FOB S. Korea); Ethylene: NE Asia Spot Avg (CFR NE Asia). Margin: Styrene less 80% * Benzene less 30% * Ethylene. 20

21 Styrene Monomer Capacity Styrolution 9% Europe Capacity by Region (1) North America Trinseo Other Other 22% 15% 14% Styrolution 28% Lyondell/B ayer 12% Americas Styrenics 18% BASF SE 10% Ellba 10% Total PC 11% Versalis S.p.A. 11% Cosmar 19% Lyondell Basell 21% Total Capacity: 5,455kMT Total Capacity: 6,022kMT Asia FCFC 7% Asahi Kasei Chem. 4% LG Chem 4% Secco 4% Hanwha Total PC 4% Other 69% CNOOC & Shell PC 4% ZRCC/Lyondell JV 4% Total Capacity: 16,628kMT Source: IHS/Trinseo. Europe: Western Europe + Central Europe; Asia: Northeast Asia + Southeast Asia. Note: Totals may not sum due to rounding. (a) 50% / 50% joint venture between Trinseo and Chevron Phillips Chemical Company. 21

22 Styrene Plant Ages 28% 9,110kt's Global Styrene Capacity (33,122kt's) 25% 8,396kt's 20% 6,699kt's 27% 8,917kt's 30+ Years Years Years Less than 10 Years Western Europe Styrene Capacity (5,175kt's) 39% 39% 2,035kt's 2,040kt's Northeast Asia Styrene Capacity (15,211kt's) 46% 7,042kt's 21% 1,100kt's 27% 4,074kt's 20% 3,055kt's 7% 1,040kt's 30+ Years Years Years 30+ Years Years Years Less than 10 Years Source: IHS/Trinseo 22

23 Styrene Demand Demand by Product Demand by Region S.B. Rubber 4% Unsat. PE Resins 5% S.B. Latex 5% Other 12% Polystyrene 37% Southeast Asia 5% North America 14% Other 12% Northeast Asia 53% ABS Resins 16% Expandable PS 21% Western Europe 16% Source: IHS. Note: Totals many not sum due to rounding. 23

24 Global Styrene Trade Flows , kta North America 4,000 5,200 1, kta South America Approx 3.2MM mt intercontinental flow 11% SM demand 300kta ,200 5,400 5,000 Europe 100kta Middle East Africa ,100 1,000 2,800 1,800 Based on 2015 Forecast 17,200 16,700 14,400 Asia Pacific 1,700kta Global SM Capacity: 33 MM MT Global SM Demand: 28 MM MT Average Operating Rate: 84% -2,300 From U.S. Nameplate Capacity Demand Actual Production Balance Major SM Flow ME to Asia/Pacific ME raw material advantaged proxy production base for China 24

25 Polystyrene Global Supply / Demand Global Demand Supply vs Demand 100% CAGR 0.1% Supply CAGR 1.2% Demand CAGR Demand by Market 75% 50% 25% 0% Packaging Electronics/ Appliances Consumer Products Bldg & Construction Other CAGR 0.5% 2.0% 1.0% 1.8% 0.8% 1.2% Capacity by Region Other 25% Europe Styrolution 29% Asia FCFC 7% Jiangsu Laidun 6% Zhenjiang ChiMei 6% Rentai Chemical 5% Versalis S.p.A. 13% Total PC 13% Trinseo 20% Total Capacity: 2,192kMT Source: IHS. Europe: Western Europe + Central Europe; Asia: Northeast Asia + Southeast Asia. Note: Totals may not sum due to rounding. Other 56% Secco 4% Total Capacity: 7,921kMT Trinseo 4% Toyo Styrene 4% PS Japan 4% Huizhou Renxin PS 4% 25

26 Americas Styrenics JV Business Overview North America Polystyrene Capacity (a) 50% / 50% JV with CP Chem formed in 2008 $1.6 billion revenue in 2015 Leading N.A. producer of styrene and polystyrene Second largest polystyrene producer in N.A. Fourth largest styrene producer in N.A. Also produces HIPS and GPPS products Styrolution 29% Total PC 26% Other 16% Americas Styrenics 29% EBITDA / Distributions Key Highlights 2014 Summary $MM $68 $40 $45 $78 $70 $106 $250 $283 EBITDA margins increased by 160bps over prior year 2014 record EBITDA $87MM of free cash flow $70MM of distributions to owners $50MM of JV equity income 2015 Summary $250MM of distributions to owners $135MM of JV equity income for TSE Distributions EBITDA Source: IHS. Note: Totals may not sum due to rounding. (a) Polystyrene Capacity for North America Total Capacity: 2,579kMT. 26

27 Polystyrene Demand Demand by Market Demand by Region Building / Construction 8% Other 10% Packaging - one time use 38% South America 6% Southeast Asia 5% Other 11% Northeast Asia 38% Consumer Products 13% Middle East 6% Western Europe 14% Electronics / Appliances 30% North America 20% Source: IHS. Note: Totals many not sum due to rounding. 27

28 Polycarbonate Increasing Margins with Operating Rate (1) Increasing Operating Rate W Europe Margin USD/MT $776 78% 76% $174 75% $265 77% $227 80%+ $521 Global Operating Rates Rising Operating Rate from 2014 to % 5% Western Europe Margin Global Op Rates Capacity by Region (1) Supply CAGR(1) Demand CAGR(2) Trinseo 13% Covestro 47% Europe SABIC Plastics 40% Total Capacity: 1,210kMT Bayer Poly Shanghai 5% Chi Mei-Asahi 6% Teijin Polycarb 6% LG Polycarbonate 7% Thai Polycarbonate 7% Sumika Styron PCB (SSPC) 3% Asia Others 26% Samsung SDI 7% Total Capacity: 2,413kMT Teijin 11% Formosa Idemitsu 8% Covestro 14% North America Covestro 30% SABIC Plastics 70% Total Capacity: 858kMT Europe: Western Europe + Central Europe; Asia: Northeast Asia + Southeast Asia.; (1) IHS/Trinseo; (2) Frost & Sullivan. SSPC is a 50% / 50% venture with Sumika; NOTE: Totals may not sum due to rounding. 28

29 Polycarbonate Demand Demand by Market Demand by Region Packaging 5% Other 16% Electronics/Electrical 21% Southeast Asia 6% Other 14% Optical Media 12% Sheet/Film 20% Western Europe 13% Northeast Asia 53% Automotive (Non-Window) 13% Appliances/Housewares 13% North America 14% Source: IHS. Note: Totals many not sum due to rounding. 29

30 Historical Polycarbonate Margins 3,000 Polycarbonate GP Western Europe Margin 2,500 2,000 1,500 USD/MT 1, (500) Source: IHS 30

31 Historical Styrene Margins 700 Styrene Western Europe Margin USD/MT Source: IHS 31

32 Connected Across the Value Chain with End-Market Diversification Cracker % sales (a) Paper/Carpet 22% Ethylene Styrene Polystyrene Automotive 14% Propylene ABS/SAN Tires 12% Crude C4 Butadiene Synthetic Rubber Appliances 9% Pygas Benzene Latex Construction 14% Polyprop. Compounds & Blends Packaging 8% ACN Polycarbonate Consumer electronics 5% Other Raw Materials Trinseo Products Feedstocks Cumene Bisphenol A Trinseo End-Markets Other Purchased Raw Materials Ability to Capture Margins Throughout the Value Chain (a) 2015 net sales by end market; excludes other end markets representing 16% of business. 32

33 US GAAP to Non-GAAP Reconciliation Third Quarter and Full Year 2016 (In millions, except per share data) Three Months Ended September 30, 2016 Year Ended December 31, 2016 Adjusted EBITDA excluding inventory revaluation $ $ Interest expense, net (20) (76) Provision for income taxes (21) (24) (94) (97) Depreciation and amortization (26) (102) Reconciling items to Adjusted EBITDA (17) Net Income Reconciling items to Adjusted Net Income 17 Adjusted Net Income Weighted average shares- diluted Adjusted EPS $ $ NOTE: Totals may not sum due to rounding. 33

34 US GAAP to Non-GAAP Reconciliation (in $millions, unless noted) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2' Net Income (Loss) 17.1 (44.6) (10.1) (29.7) (22.2) (67.3) Interest expense, net Provision for (benefit from) income taxes (2.1) Depreciation and amortization EBITDA Loss on extinguishment of long-term debt Other items Restructuring and other charges (0.1) Net (gains) / losses on dispositions of businesses and assets (0.6) (0.6) - Fees paid pursuant to advisory agreement Asset impairment charges or write-offs Adjusted EBITDA Inventory Revaluation (5.6) (2.6) (29.4) (12.9) Adjusted EBITDA Ex Inv Reval Adjusted EBITDA to Adjusted Net Income Adjusted EBITDA Interest expense, net Provision for (benefit from) income taxes - Adjusted Depreciation and amortization - Adjusted Adjusted Net Income (23.3) Wtd Avg Shares - Diluted (000) 37,270 38,912 50,063 48,770 48,851 48,907 48,989 49,067 49,086 47,857 37,270 43,476 48,970 Adjusted EPS - Diluted ($) (0.48) Adjustments by Statement of Operations Caption Loss on extinguishment of long-term debt Selling, general and administrative expenses Other expense (income), net (0.6) Total EBITDA Adjustments NOTE: Totals may not sum due to rounding. 34

35 Selected Segment Information (in $millions, unless noted) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2' Q2'16 LTM Latex ,210 1,193 1,233 1,225 Synthetic Rubber Performance Plastics Performance Materials ,312 2,342 2,423 2,392 Basic Plastics & Feedstocks ,810 2,867 2,915 2,911 Trade Volume (MMLbs) 1,344 1,327 1,315 1,223 1,411 1,323 1,327 1,277 1,352 1,347 5,122 5,210 5,339 5,303 Latex ,341 1, Synthetic Rubber Performance Plastics Performance Materials ,771 2,716 2,184 2,079 Basic Plastics & Feedstocks ,536 2,412 1,788 1,710 Net Sales 1,359 1,341 1,305 1,122 1,018 1,029 1, ,307 5,128 3,972 3,789 Latex Synthetic Rubber Performance Plastics Performance Materials Basic Plastics & Feedstocks (12) Corporate (21) (17) (15) (20) (23) (25) (21) (20) (25) (21) (107) (73) (90) (87) Adjusted EBITDA Performance Materials Basic Plastics & Feedstocks Corporate (21) (17) (15) (20) (23) (26) (21) (20) (25) (21) (107) (73) (90) (87) Adjusted EBITDA excl Inv Reval Basic Plastics & Feedstocks Equity in earnings (losses) of affiliates NOTE: Totals may not sum due to rounding. 35