Innophos Holdings, Inc.

Transcription

1 Innophos Holdings, Inc. Jefferies Industrials Conference August 12, 2015

2 Safe Harbor During the course of this presentation, management may make forward-looking statements regarding financial performance and future events. We will attempt to identify these statements by use of words such as expect, believe, anticipate, intend, and other words that denote future events. You should understand that, even though our forward looking statements are based on assumptions we believe are reasonable when made, they are still subject to uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk and other factors as set forth in the forwardlooking statements section and in Item 1A risk factors in our Annual Reports on Form 10-K as filed with the U.S. Securities and Exchange Commission that could cause actual results to differ from those in the forward-looking statements as contained in this presentation. Forward looking statements made herein are summaries of previous public disclosures, do not represent revised guidance, and we do not undertake to revise or update them from the date or dates of previous disclosure. 2

3 Overview Of Innophos Leading international producer of performance-critical and nutritional Specialty Ingredients for Food, Beverage, Nutritional Supplements and Industrial end markets (NASDAQ: IPHS) Listed in 2006, 100% free float > 400% Total Shareholder Return since IPO Total cash returned to shareholders of $68 million in 2014 and $106 million in 1H15 (> 4x net income) Over a century of phosphates experience with a growing capability in other nutritional ingredients; formerly a division of Rhodia, taken private by Bain Capital in 2004 Annual revenues $839 million (FY 2014) Total assets $728 million (FY 2014) Headquartered in Cranbury, NJ with operations in U.S., Mexico, Canada and China Innovate with Phosphate 3

4 Our Transformation > 400% TSR since going public 2006 Step change and sustained improvement in profitability Deleveraged balance sheet 2009 Nearly tripled the quarterly dividend rate to $0.48/share; implemented 2015 share repurchase program for $125 million, ~ 10% of market cap Diversified raw material supply and substantially reduced margin volatility Primarily focused on specialty ingredients for food & beverage Award winning innovation; Sales to emerging markets more than doubled Added >$50 million minerals/botanicals nutritional ingredients business 4

5 Our Market Position Sustainable Strategic Advantage Excellent product & market position in North America Repositioned Mexico business Industry leading supply chain Demonstrated long-term ability to maintain operating income in inflationary raw material environment Above-Market Performance High barriers to entry with few competitors in target markets Relatively stable end markets Long-term growth opportunities, organically (innovation, geographic expansion) and through M&A Excellent Financial Track Record Specialty Phosphates 2014 operating income margin of 15%, up 310 basis points against the prior year ROIC of 14-16% on core Specialty Phosphates business over the last 3 years Improved balance sheet and strong cash flows support future growth 5

6 Our Products & End-Markets Product Groups % 17% 9% Food Grade PPA GTSP & Other Detergent Grade PPA & STPP 65% Specialty Ingredients Specialty Phosphates (91% of Revenue) Core focus of the business, with an emphasis on Specialty Ingredients GTSP (9% of Revenue) Focused on reducing earnings volatility Evaluating a number of options both internally and externally 6 Nearly Two-Thirds Of Sales To Consumer Oriented Applications Total Sales 714 CAGR 4% 4% -5% 1% Total Sales % 8% Specialty Ingredients Pharma, Food, Beverage, Oral Care Industrial Detergents Fertilizer & Horticulture

7 Specialty Ingredients Overview Specialty Ingredients Applications Bakery Leavening Deli Meat Ingredients Seafood Innophos Ingredients Are Typically: key to end product performance low % of end product cost Toothpaste Abrasives Pharmaceutical Tablet Excipients Mineral Fortification We Are North American Market Leader In Phosphate Ingredients Building Growing Position In Mineral & Botanical Ingredients Water Treatment Asphalt Modifiers Fire Suppressant Primary Focus Is On Consumer Oriented Applications Consumer Markets Targeted Industrial Applications Also High Value And Growing 7

8 2Q15 Specialty Phosphates Highlights Mexico manufacturing operations continue to perform well Mexico Specialty Phosphates operating income margins strong at 17% for 2Q15 and for the last 6 quarters on average Similar to 1Q15, Specialty Phosphates 2Q15 overall revenue down 3% YOY on 2% lower selling prices and 1% lower volumes Weak firefighting market demand, reduced sales to specialty horticulture markets and continued headwinds on processed foods market demand overshadowed strong YOY performance for Cal-Rise (+34%), INNOVALT (+28%) and PPA (+19%) Continued pressures on selling prices due to the strength of the US Dollar and Chinese competition in Latin America Already implemented price increases expected to improve 2H15 margins from 2Q15 level of 11% and maintain full year operating income margin target in the 12-13% range Management targeting cost reduction initiatives to at least cover the 100 basis points cost component of the 2015 margin compression for Board approval by end of 3Q15 8

9 KEY INDUSTRY TRENDS: Product Innovation Low Sodium Active Lifestyle Fortification Digestive Health Product Industry Product Description Cal-Rise Textur-Melt LS-50 INNOVALT SuperBind & So-Lo 93 VersaCAL Clear Nutra-Tab Baked Goods Dairy Asphalt Meat & Seafood Beverage Nutrition Calcium leavening allowing for up to a 30% reduction in sodium Launched Regal Leavening Products to meet requirements in Europe Low sodium texture and melt control of cheese products Launched new Textur-Melt product targeting emerging markets Expand product line with the L-Vis product (low viscosity); also launching another new asphalt additive to improve safety/handling Low sodium/high potassium meat phosphate to reduce sodium while extending yield; Winner of Industry Innovation Award Calcium fortification for clear beverages; Winner of 2010 Health Ingredients Europe Excellence Award New blend of calcium phosphates offering greater compressibility and a higher calcium content per tablet 9

10 Geographic Expansion Export sales remain a pillar for future growth despite some short-term headwinds encountered in late 2014 and early 2015 EMEA Growth to be driven by focus on food and beverage markets Added commercial resources to support sales efforts Latin America 14 recovery in LatAm following improved operations in Mexico Added commercial resources and established a legal entity presence in Brazil Asia Pacific Resolved registration delays for nutrition customers sales to China Hired new GM to improve commercial focus of China blending operation 1H15 sales from Taicang, China facility already exceeded full year

11 GTSP Overview % US & Canada Specialty Phosphates 20% 9% Mexico Specialty Phosphates 9% Of The Innophos Portfolio Granular Triple Super Phosphate (GTSP) Market Update GTSP & Other primarily includes revenue on sales of fertilizer co-product that is generated from the Coatzacoalcos, Mexico acid purification process Closely linked to overall phosphate fertilizer market conditions; end fourth quarter and beginning first quarter usually weaker seasonally Innophos margins typically advantaged (disadvantaged) in inflationary (deflationary) market conditions with raw material cost changes lagging fertilizer market prices by 3+ months 11

12 Capital Allocation Priority Capital Expenditures M&A Shareholder Returns Details $28 million in 2014; ~ 70% maintenance and 30% growth Growth capex focused on increasing Specialty Ingredients capacities and improving Coatzacoalcos capabilities Expect $30-35 million per year through 2016 Four acquisitions added > $50 million in revenue at EBITDA margins greater than the overall Specialty Phosphates business Bolt-on acquisitions targeted to double organic growth rate Strategic fit and multiples key to any future acquisitions Dividend rate up nearly 3x on 5 increases in 4 years; payout ratio of 66% in 2013 and 61% in 2014; current yield of ~ 3.5% Expect to grow dividend with earnings improvements Announced in December 2014 a $125 million share buyback program for 15 after completing $50 million program from 11 12

13 Acquisition Strategy 1 Core Acquisitions 2 Adjacent Acquisitions Accelerate Growth In Specialty Phosphates Extending Product Range In Higher Growth Market Niches Kelatron (Oct 2011), AMT (July 2012), Triarco (Dec 2012) and CMI (Oct 2013) adjacent acquisitions give Innophos a strong position in the attractive nutritional ingredients market Market growth longer-term expected to be in the high single digits, with key applications including food, beverage and dietary supplements 13

14 Balance Sheet ($ in millions) Q15 Gross Debt $149 $152 $176 $163 $136 $244 Net Debt $85 $117 $149 $130 $100 $164 Stockholders Equity $331 $393 $444 $463 $463 $385 ROIC (1) 18% 19% 13% 10% 13% 12% ROIC (Core Specialty Phosphates) 14% 16% 14% $246 million of notes redeemed in 2010 with on hand cash and new $225 million five year bank credit facility; annualized interest expense improved by $17 million ($.47 per share) as of 4Q10 Bank credit facility amended and restated in 4Q12 to reduce interest rates by 75 basis points, increase capacity by $100 million and extend term an additional 2 years to 2017; $100 million of LIBOR exposure swapped for 5 years at % (1) calculations adjusted for the effects of the P&L adjustments noted in the Appendix; invested capital based on rolling 5 quarter average 14

15 Our Focus Going Forward We are targeting to exceed market growth rates through product innovation & geographic expansion, organically and through acquisition We aim to maintain and improve our operating income through the value of our products and the strength of our business mix We will further strengthen our already attractive strategic position particularly by continuing to enhance our industry leading supply chain We remain committed to generating strong cash flow to support growth investment as well as cash returns to shareholders All Of Which We Believe Leads To A Strong Future For Innophos 15

16 Appendix 16

17 Our Supply Chain Phosphate Rock & Sulfur Merchant Grade Acid (MGA) (fertilizer) Purified Phosphoric Acid (PPA) Specialty Ingredients & Sodium Tripolyphosphate (STPP) Product Groups Rock Supply Merchant Grade Acid Food Grade PPA Specialty Phosphate Salts & Acids Specialty Ingredients Food Grade PPA Detergent Grade PPA Detergent Grade STPP Detergent Grade STPP & PPA Co-Product GTSP & Other 17

18 Operating Income And Margins IPHS ($ in millions, except EPS) 2010 (1) Adjusted 2011 (2) Adjusted 2012 (3) Adjusted 2013 (4) Adjusted H15 Net Sales $714 $810 $862 $844 $839 $419 EBITDA % Margin Operating Income % Margin $165 23% $116 16% $178 22% $134 16% $150 17% $105 12% $127 15% $92 11% $137 16% $107 13% $61 15% $43 10% Diluted EPS $2.90 $3.81 $3.08 $2.59 $2.91 $1.20 SPECIALTY PHOSPHATES (4) Adjusted H15 EBITDA % Margin $155 24% $154 22% $148 20% $134 17% $140 18% $61 16% Operating Income % Margin $111 17% $116 16% $108 14% $101 13% $111 15% $44 12% $ millions pretax adjustments: (1) $21.0 Mexican water duties, $10.8 call premiums & deferred financing (2) $(1.5) EBITDA and $(3.4) Operating Income for Mexican water duties and translation (3) $(3.9) EBITDA and $(4.7) OI for Mexican water duties, Rhodia settlement & out of period, $0.5 deferred financing and interest rate premiums (4) $10.4 EBITDA and $8.2 OI for Mexican water duties, translation, first half elevated costs from production issues caused by premature equipment failures in Mexico and first quarter one-off cost issues in US & Canada. Specialty Phosphates portion of these adjustments are $14.4 EBITDA and $12.8 OI. 18

19 Jefferies Industrials Conference August 12, 2015