Post on 18-Dec-2014
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NYSE: NP
Boston September 12, 2012
2012 KEYBANC Basic Materials & Packaging Conference
Company Overview
Fine Paper
Premium textured and colored papers
End markets: high-end print communications,
luxury packaging, crafting and premium labels
Manufacturing in the U.S.
Technical Products
Specialty, performance-based products
End markets: filtration, industrial
backings, labels, and other specialties
Manufacturing in Germany and the U.S.
Pro Forma Net Sales $800 million
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Strategy Summary
Grow business platform with filtration as an important foundation
Improve margins to double digit levels
Pursue growth in niches that value image:
Premium label, luxury packaging, retail, international
Maintain superior financial returns
Technical Products
Fine Paper
Lead in profitable, specialty niche markets
Increase portfolio growth rate & diversification
Deliver consistent attractive returns
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Investment/Value Drivers
Leading positions in profitable markets with opportunity to expand into new geographies and adjacencies
Pricing power to counter input cost variability
Recent brand acquisition providing step change in returns and a catalyst for future growth
Sizeable cash flow generation and financial strength to pursue new opportunities and deliver shareholder returns
Successful track record of execution
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Financial Momentum
$ millions 2010 2011 2011 2012
Sales $ 658 $ 696 $ 356 $ 410
EBIT1 52 59 33 46
E.P.S.1 $ 1.47 $ 1.91 $ 1.03 $ 1.62
Return on Capital 8% 9% 8% 11%
(1) Excludes one-time items for divestitures, integration and other costs as noted in appendix
Top line growth via share gains, new products, price/mix and 2012 acquisition
Faster bottom line growth with margin improvement and lower debt costs
Return on Capital now surpassing double-digit levels
Cash deployed to support growth, reduce debt, increase dividends and buy shares
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6%
13%
30%
Sales EBIT E.P.S.
% Change 2011 vs. 2010
15%
40%
57%
Sales EBIT E.P.S.
% Change 1H 11 vs.12
First Half
Industrial Backings Saturated and coated papers used for backing of specialty abrasives and tapes
Filtration High-performance filtration media for fuel, air, oil, cabin air in transportation, as well as products for other markets
Technical Products
Specialties Products for a variety of end markets including labels, non-woven wall cover, medical packaging, durable print media and other markets
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Filtration
Tape
Abrasives
Specialties
Europe
North America
Asia
RoW
A Diversified Global Portfolio
Strategic
Priorities
Key
Customers/
Competitors
Est.
Market
Growth
Filtration
• Higher value products
• Internationalization
• New Adjacencies
• Lead in innovation
Mann & Hummel,
Mahle, Hengst 2x
GDP Ahlstrom,
H&V
Specialties
• Grow in performance
labels
• Focus on high end
NW wall cover
Avery Dennison,
3M, Saint-Gobain
GDP+
Multiple based on
markets
Industrial
Backing- Tape
• Differentiate in tape
via saturating/coating
• Optimize costs
3M, Shurtape, IPG,
Alpha Beta, Tesa GDP
Wausau, Ahlstrom
Industrial
Backing-
Abrasives
• New adjacencies
• Emerging markets
3M, St. Gobain,
Hangzhou Star,
Starcke GDP
Ahlstrom, Munksjo
Sales by
Product Group
Sales by
Geography
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Key NP technologies :
Multi-fiber forming capabilities
Saturation, coating and surface treatments
Polymer chemistries
Success Factors
Specialized Performance
Requirements
Strong Barriers to Entry
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Customer Intimacy
and Qualification
Long-standing relationships
Global market-leading customers
Intricate qualification requirements
Ongoing joint product development
Innovative new products
Life Science
Process & Food
Water
Transpo/H. Duty
Gas Turbine
Dust Control
HVAC /Air
2003 2004 2005 2006 2007 2008 2009 2010 2011
Neenah Net Sales
Transp. Filtration
CAGR 8%
Filtration: A Key Platform for Growth
NAFTA Asia Europe So. Amer. RoW
Other
NP
H&V
Ahlstrom
Global Transportation Filtration
Market Size and Share
Global Market ~ US $1 billion
Source: company estimates
Transportation Filtration Core Growth
Historically focused only in European auto filtration (fuel, oil, engine & cabin air)
Known for innovation, quality and customer support
Growth in higher value products and new adjacencies supporting recently approved third melt blown line
Entry into New Adjacencies
Ability to leverage our technologies and assets to enter into other attractive filtration markets
Recent entry into beverage filtration (coffee capsule)
Specialty
filtration
media markets
> $4 billion
Geographic Expansion Opportunities
Global engine filter requirements continue to become more demanding
Existing global customers would like us to have an expanded geographic presence
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Luxury Packaging & Premium Label Image enhancing colors and textures of premium folded cartons, box wrap, bags, premium wine, beverage and spirit labels, food labels, hang tags
Brights Deep , rich, vivid colors and textures for flyers, posters, school supplies, crafting, direct mail advertising and promotions
Graphic Imaging Unique colors, textures and finishes for identity, print collateral, invitations, advertising, and envelopes
Fine Paper
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Success Factors
NP Leading brands specified by designers and printers with selective distribution and strong pricing power
Highest quality with a wide palette of colors and textures to serve specialized high-end print needs
Supply chain and technology tools to help customers optimize performance and grow share with Neenah
Leading cost position with purpose-built assets that are efficiently utilized
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Neenah 60
Mohawk 30
Others 10
Value Share- Premium Papers $650 million market
Clear leader in a consolidated market
Source: company estimates
Evolving & Extending Portfolio
Neenah has outperformed the market by evolving our mix and extending our reach…
Leading industry consolidation
Entry into growing niches (luxury packaging, premium label, scrapbooking)
Supply chain extension (Crane, envelopes, electronic consumer print applications)
New products (brights, digital)
New channels (retail)
New geographies
…..while continuing to gain share in our core markets
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Customers/ Supply Chain
Geographies Technology
Products
Premium Labels
Envelopes
Core
Writing,
Text &
Cover
Retail
Middle East
Europe
China
South America
Luxury Packaging
Brights
Digital Papers
Electronic Printing
Applications
Crane
Crafts Scrapbooking
100% PCW Packaging
Durable Papers
NP Fine Paper Sales Mix Evolution
1996 2004 Today
Writing Text & Cover Pkg/Label/Oth
$292
$221
$375
Creating Value Wausau Brand Purchase (Jan-12)
Increased share in core markets and provided entry into new category (brights) and channel (retail)
Ability to utilize existing assets/infrastructure to drive manufacturing and SG&A efficiencies
Future growth opportunities through retail
Compelling financial returns
Strategic Rationale and Value Drivers
Transaction Summary
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Paid ~$20 million for selected brands Acquired sales of over $100 million/yr
No dilution in attractive mid-teen EBIT margins
One-time 2012 cash integration costs of $7 million
NP WTC 40%
Other WTC 35%
Other Brights 5%
WP
Brights
14%
WP
WTC
6%
Premium Fine Papers Market Size & Shares
(~$650 mm)
New Category (Brights)
Source: company estimates
$0
$10
$20
$30
$40
$50
$60
Brights Craft Resume Stationary
Other NP
Retail: A New Platform for Growth
Source: company estimates
Represents only 15% of sales, with meaningful positions at large customers like Office Max, Staples, Michaels and Target
Specialty retail papers (excluding
copy paper) represents a market of approximately $150 million
Neenah today sells primarily brights, but has capability to produce other specialty retail paper products
Retail Paper
Niche Markets
> $150 million
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Merchant Direct
Retail
NP Sales By Channel
Key Financial Objectives
Consistent profitable growth
14 consecutive quarters ahead of expectations
Increasing Return on Capital
Averaging over 150 bps per year since 2009
Efficient capital structure
Debt/EBITDA of approximately 2x
Attractive shareholder returns
NP returns in top quartile of Russell 2000 Value in 2010 and 2011
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$318 $384
$421 $415
4.6%
7.6% 8.0% 9.3%
2009 2010 2011 TTM Q2
Net Sales
OP%$425
Profitable Growth
Fine Paper
Third consecutive year of sales growth; with boost in 2012 from acquisition
Consistent and attractive profits, cash flow and return on capital
Delivering promised value from WP purchase
Technical Products
Growth led by filtration, labels and other higher growth categories
Margins expanding with higher value mix, sales growth, cost efficiency and pricing
Moving to targeted double-digit margins
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$256 $273 $275
$322
14.2% 13.7% 14.4% 14.7%
2009 2010 2011 TTM Q2
Net Sales
OP%
Pricing power in both business to mitigate input cost variations and deliver consistent returns
Currency Impact
Return on Capital
6%
8% 9%
11%
2009 2010 2011 Q212TTM
% Return on Invested Capital
Primary measure to evaluate investment opportunities and judge business performance
Key metric in compensation plans
Delivering improvement through:
Profitable growth/margin expansion
Carefully managed assets/investments
Strategic moves (divest pulp, WP purchase)
Exceeding double-digit levels
0.9
1.2 1.3 1.3
2009 2010 2011 TTM Q2
Sales/Assets
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$245
$186
$203 4.6x
2.8x 1.9x
Dec 10 Dec 11 June 12
Debt and Debt/EBITDA
Target Range
1.5 – 2.5x
Capital Structure
$ millions
Dec
2010
Dec
2011
June
2012
Bonds 7 3/8%
(due Nov. 2014) $ 223 $ 158 $ 148
ABL (due Nov. 2015)
- - 43
Germany 22 28 12
Debt $ 245 $ 186 $ 203
Bond calls in Mar-11 and Apr-12 reducing debt and interest expense
Now well within targeted capital structure range
No short term liquidity events; adequate flexibility for additional borrowing
Credit rating Ba3/BB
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Pro Forma Cash Flow $ millions
EBITDA (pre WP brand purchase) $ 95
Addtl w/brands ($100 mm x 15%) 15
Interest Expense (15)
Other (tax, wkg cap, pension, etc..) (20)
Cash From Operations $ 75
Capital Expenditures (30)
Free Cash Flow $ 45
FCF per share ~ $3.00
Cash Deployment & Shareholder Returns
Substantial free cash flow generation
Moderate capital spending with available capacity for growth
Favorable cash tax position (NOLs = $80 mm)
$10 million stock repurchase plan (May 2012)
Competitive dividend with room to grow
$0.40
$0.44
$0.48
2010 2011 2012
Annual Dividend per share
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Double-digit cash flow yields
Investment Conclusions
Leading positions in profitable specialty markets with barriers to entry
Momentum in sales and profits reflecting successful execution of plans
Sustainable, strong cash flows to support growth and provide attractive investor returns
$68 $70
$86
$93
$107
2008 2009 2010 2011 2012TTM
Sound capital structure and financial flexibility
Wausau brand acquisition increasing results and providing opportunities for future growth
Strategic focus on continued expansion in defensible specialty markets further from historical “pulp & paper” positioning
Consolidated EBITDA (U$ millions)
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Contact
For more information
visit our website: www.neenah.com
email: investor@neenahpaper.com
Investor Relations Bill McCarthy
VP, Financial Planning and Analysis & Investor Relations
3460 Preston Ridge Rd. Suite 600
Alpharetta, GA 30005
Phone: (678) 518-3278
Email: bill.mccarthy@neenahpaper.com
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GAAP Reconciliation
Continuing Operations
$ millions 2009 2010 2011 1H 2012
EBIT (Operating Income) $ 16.4 $ 55.1 $ 56.6 $ 38.2
Ripon Mill Closure/(Gain on Sale) 17.1 (3.4)
Integration Costs 4.4
Other1 2.4 3.5
Adjusted EBIT $ 33.5 $ 51.7 $ 59.0 $ 46.1
Depreciation & Amortization 31.9 29.7 30.0
14.6
Amort. Equity-Based Compensation 4.7 4.9 4.3 3.0
EBITDA $ 70.1 $ 86.3 $ 93.3 $ 63.7
Earnings (Loss) per Share $ (0.12) $ 1.61 $ 1.82 $ 1.32
Ripon Mill Closure/(Gain on Sale) 0.76 (0.14) - -
Integration Costs - - - 0.17
Other1 0.12 - 0.09 0.14
Adjusted Earnings per Share $ 0.76 $ 1.47 $ 1.91 $ 1.63
22 1 Includes refinancing and tax costs in 2009-11 and pension settlement charge in 2012
Statements in this presentation which are not statements of historical fact are “forward-looking statements” within the “safe harbor”' provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Neenah Paper, Inc. at the time this presentation was made. Although Neenah Paper believes that the assumptions underlying such statements are reasonable, it can give no assurance that they will be attained. Factors that could cause actual results to differ materially from expectations include the risks detailed in the section “Risk Factors” in the Company’s most recent Form 10-K and SEC filings.
In addition, the company may use certain figures in this presentation that include non-GAAP financial measures as defined by SEC regulations. As required by those regulations, a reconciliation of these measures to what management believes are the most directly comparable GAAP measures would be included as an appendix to this presentation and posted on the company’s web site at www.neenah.com
Forward Looking Statements
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