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Forward‐Looking StatementsThis presentation contains certain "forward‐looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward‐looking statements. Such forward‐looking statements include statements (covered by words like “expects”, “anticipates”, “may”, “believes” or similar words or expressions), for example, which relate to operating performance, events or developments that we expect or anticipate will or may occur in the future (including, without limitation, any of the Company’s guidance in respect of sales, gross margins, net income, growth potential and other measures of financial performance). Although forward‐looking statements are believed by management to be reasonable when made, caution should be exercised not to place undue reliance on such statements because they are subject to certain risks, uncertainties and assumptions, including in respect of the general business environment, regulatory actions or changes. If the risks or uncertainties materialize or assumptions prove incorrect or change, our actual performance or results may differ materially from those expressed or implied by such forward‐looking statements and assumptions. Additional information regarding risks, uncertainties and assumptions relating to the Company and affecting our business operations and prospects are described in the Company's Annual Report on Form 10‐K for the year ended December 31, 2009, and other reports filed with the U.S. Securities and Exchange Commission. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors”. The Company undertakes no obligation to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise.
Use of Non‐GAAP Financial Measures
The information presented in this presentation includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP). These non‐GAAP financial measures include EBITDA which is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense (net), income taxes, depreciation, amortization and impairment of Octane Additives business goodwill. The Company believes that such non‐GAAP financial measures provide useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses these non‐GAAP financial measures internally to allocate resources and evaluate the performance of the Company’s operations. While the Company believes that such measures are useful in evaluating the Company’s performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, these non‐GAAP financial measures may differ from similarly‐titled non‐GAAP financial measures used by other companies and do not provide a comparable view of the Company’s performance relative to other companies in similar industries.
Agenda
Attractiveness of Innospec
Corporate Profile
Sales Growth
Transformation of Innospec
Business Units
Strategy & Development
Acquisitions
Equity
Why Have IOSP been hidden ?
Conclusion
Innospec – A NASDAQ Company which is :
Growing
In good quality markets
Highly cash generative
Net debt free
Innovative
Not currently covered by any analyst
Trading below the multiple of its peers
Innospec Inc. – Company profile
Innospec Inc. – NASDAQ (IOSP)
Corporate and regional offices in USA, UK, continental Europe, Africa and Asia
Manufacturing sites in USA, UK, France and Germany; global network of offices and testing facilities
Revenue of $599 million (2009)
Over 730 employees in more than 20 countries
Innospec Inc. – Sales Growth
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010 YTDQ3
Octane Additives
Active Chemicals
Fuel Specialties
Innospec’s Transformation
Since inception as a public company in 1998, Innospec has transformed itself.
88%
$114m
$331m
$506m
YTD Q3 2010
$130m$32mSales – Active Chemicals
21%
$64m
$465m
1998
92%% of Sales in Growth Businesses
$432mSales – Fuel Specialties
$599mSales ‐ Total
2009
Innospec is focussed on three business areas
ActiveChemicals
Octane Additives
FuelSpecialties
Innospec
Operating model – Keeping It Simple
Global activitiesStrategyLegal & ComplianceKey accountsR&DCo‐producer salesLeverage purchasingAcquisitionsFinance & IT
AmericasEurope,
Middle East & Africa
Asia‐Pacific
Integrated regional businessesP&L responsibility
Sales, Marketing, Supply chain, Manufacturing
Customers
Innospec Fuel Specialties
We focus solely on fuel and fuel additive technology
We develop and market products to
Improve cleanliness, efficiency and safety
Reduce emissions and maintenance costs of engines, boilers and gas turbines
We will improve any fuel based on oil, coal, or biofuel
“Focused on Fuel”
Transformation – Fuel Specialties
20.4%
$64m
34.8%
$423m
2009
$48m$49mSAR
11.4%
33.6%
$209m
2004
18.6%EBITDA (%)
32.6%Gross Profit %
$ 331mSales
YTD Q3 2010
BusinessDrivers
Energy Prices
Energy Security
Climate Change
ConsumerAffluence
Mobility
Comfort, Status& Driveability
Air QualityLegislation
Human Health
Fuel QualityLegislation
Fuel Economy
Fuel Additive
Technology
Engine Technology
Crude Quality& Availability
Renewable Fuels
Electric Vehicles& Hybrids
Refinery Investment
GDP Growth
Uniquely ‐We treat the Whole Barrel
Automotive Gasoline
Automotive Gasoil & Middle Distillates
Jet Fuel
Light Heating Oil
Industrial Heavy Fuel Oil
Marine Bunker Fuel
With the widest range of products…………………Antioxidants and metal deactivators
Corrosion inhibitors
Petroleum dyes and markers
Lubricity improvers
Cetane improvers
Fuel oil stabilisers
Gasoline detergent formulations
Diesel detergent formulations
Cold flow improvers
Diesel/LHO combustion improvers
Light heating oil formulations
Antistatic additives
Aviation fuel additives
Industrial fuel oil additives
Marine fuel oil additives
Asphaltene dispersant
Heavy fuel oil combustion improvers
DPF regeneration additives
Gasoline antiknock
Valve seat recession additives
“Not Much We Can’t Do”
Commitment to the Market
Dedicated people
Best‐in‐class sales and technical teams
Focused and dedicated to fuel additives
Strong global presence, and still extending
New operations in Brazil and Russia underway
Dedicated technology (previous slide)
Dedicated R&D
36% of sales are from new products (target 50%)
Our Active Chemicals Business
Provides effective technology‐based solutions for our customers processes or products. We focus on Personal Care; Household, Industrial & Institutional & Fragrance Ingredients
Transformation – Active Chemicals
11.7%
$17m
20.6%
$130m
2009
$12m$16mSAR
1.0%
9.0%
$138m
2008
14.5%EBITDA (%)
21.8%Gross Profit %
$ 114mSales
YTD Q3 2010
Drivers 2008‐2009•Change of management•Exit from unprofitable business
Specialty surfactant manufacturing company
Focused on the personal care industry
Sun care, Hair conditioning, Antiperspirant/Deodorant, Skin cleansing and Skin care
Products in the market
AVON, SCHRING PLOUGH, UNILEVER, NEUTROGENA
FINSOLV TNC12‐15 Alkyl Benzoate
L’OREAL, SEXY HAIR CONCEPTS, L’OREAL
FINQUAT CTQUATERNIUM 75
COTY, UNILEVERFINESTER EH‐25
C12‐15 Alkyl Ethylhexanoate
PAUL MITCHELL, JOHN FREIDAFINESTER DOM‐R
Diethylhexyl maleate
Personal Care
The Luxurious Global RevolutionP&G – Olay (USA)ProX Facial cleanser
Boots (UK), Harvey Nichols (UK)Soap & GloryFacial wash
Kirkland (CostCo)Professional Salon Shampoo
USA
David BabiiProfessional Shampoo
Asia Pacific
Manufacturer of Fragrance Ingredients ‐ Examples
Lilestralis® ‐ lily of the valleyfragrances for fabric softeners, soaps and other household and personal care products
Osyrol® ‐ Sandalwood fragrance for fine perfumes
Aroma Chemicals
Active ChemicalsOur markets: Household, Industrial & Institutional
Flexible solutions to improve performance
Expertise to create a competitive edge
Widely used technologies for manufacturing laundry detergent
Our Octane Additives Business
We are the world’s only producer of tetra ethyl lead (TEL), an octane enhancer used in automotive gasoline for vehicles that run on leaded fuel
Innospec’s Tetraethyl Lead (TEL) Business
Innospec is now the only manufacturer of TEL in the worldOnly plant left is at Ellesmere Port, UK
The market has gone on longer and stronger than we expected
TEL products have two distinct uses/markets
automotive gasoline for vehicles that run on leaded fuel)
aviation gasoline (avgas) used by aircraft with spark ignition, piston engines (AvTEL)
Key objective is to manage decline of TEL use and maximise revenue
Committed to manufacture & supply the product for as long as ourcustomers require it, despite the decline in its use for mogas
Strong Product Stewardship Program
Demolition and Decontamination services ‐ Innospec Environmental
The World Market ‐ TEL
0
10,000
20,000
30,000
40,000
50,000
60,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Tonn
age
(MT)
All Mogas Avtel
TEL Phase‐out
Factors in a country’s mogas TEL phase‐out Availability & Pricing of Alternative Products
Crude Oil / Refinery Processes / Refinery InvestmentMTBE & EthanolAdditives ‐MMT & Plutocen
Vehicle population change & supply infrastructureGovernmental legislative and tax policy
Avgas requires significant research and developmentSafety is paramountTEL is mandated by civil aviation regulations
Corporate Development 2006‐2010
Remarkable organic growth of Fuel Specialties and Active Chemicals
Fuel Specialties developed into global leader in fuel additives
Active Chemicals in substantial turnaround since 2008 – now profitable
Development of Innospec has been paralysed by the FCPA investigation
Huge soak of management time
Liabilities impossible to quantify during that period
All of this is now firmly behind us
Costs quantified and fully provided for
Management time freed up to focus on expansion
Innospec in Good Shape to Expand
Solid base from which to expand
Finances in good shape
Net debt free
But some significant cash calls in the future
All business units on sound footing
Recruiting to fill vacancies
Corporate services fit for purpose
What’s Next for Fuel Specialties ?
Twin Acquisition Strategy
Technology Bolt‐On’s
Major industry‐rationalisation opportunities
Geographical Expansion
Russia and FSU (former Soviet Union)
Brazil and Latin America
Continued New Product Development
New engines demand new, higher performance fuels
Adjacent Market Expansion
Oil Field Chemicals
Use Existing Fuel Specialties Infrastructure
Focus on four distinct product lines
Pour Point Depressants
Drag Reducers
Corrosion Inhibitors
H2S Scavengers
Focus on a small number of key customer relationships
Existing organisation initially
Potential Acquisitions
What’s Next for Active Chemicals ?
Organic Growth
Technology Development
Surfactants, Benzoate Esters,
Fragrances
Customer Relationships
Establish major relationships, globally
Acquisitions
What’s Next for Octane Additives ?
Motor Gasoline
Understand Mogas Customer Demand
Ensure that customers who want to buy, can buy
Aviation Gasoline
Stay close to aviation fuel developments
Maximise value from the asset
Make manufacturing fit the demand
Corporate Structure
Now fit for purpose
First class management team
Keep it agile
Fast enough to respond to market dynamics
Compliance will remain a key topic
Key business team responsibilities to continue
Board Regeneration already underway
Acquisition Qualifications
Innospec has :
A strong balance sheet
Borrowing capability and bank support
Best‐in‐class management team
Successful integration experience
Time is right to make a substantial acquisition
Acquisition Profiles
Within existing core markets
Fuel Additives
Personal Care
Or adjacent markets
Oil Field Chemicals
Smaller ‘technology’ acquisitions ‐ $20m ‐ $50m
Larger opportunities – funding up to $350m
Innospec Equity
Market Cap ca $385m
24m shares @ $16
Thinly traded
Typical daily is 70‐100,000 (0.2% of shares)
Good holdings by all Directors & Officers
Approx 50% of employees hold stock
We trade at lower multiples than our peers
Equity
Two stage share buy‐back process
Short‐Term
Limited buy‐backs to offset option dilution
Protect shareholders interests
Medium‐Term
Stronger buy‐back program under consideration
Requirement for additional options as part of normal cycle
Essential part of long‐term compensation
Seeking investor support
Why have IOSP been hidden ?
Seen as only Octane Additives business
Legacy image
Underlying financials have been complex
Sales growth complicated by decline in Octane Additives
Exceptional costs cloud true earnings
Small market capitalization for some analysts
Management Team Unable to Promote IOSP
FCPA behind us
New management team installed
Compliance culture in place
Summary
Innospec poised to expand after strategic lull
Fuel Specialties focus
Organic growth – technology & geographic expansion
Adjacent market development – Oil Field Chemicals
Active Chemicals focus
Technology development
Create and leverage global customer relationships
Octane Additives – follow market; optimise assets
Corporate
Fit for purpose – keep agile
Summary (continued)
Banks Continue to Support Innospec
Best‐in‐class management team
Actively seeking acquisitions
Smaller technology bolt‐ons
Major opportunities
Buy Back & Option Programs
Innospec is Poised for the Next Chapter