Jim ChirumboleCommercial Director, Environmental Technologies

CDMA 2005 Fall Meeting

Leveraging Core Competencies toGenerate New Revenues

September 29, 2005

Who is Engelhard

• World’s leading surface and materials science company

• A global, Fortune 500 company

• $4.2 billion revenue in 2004

• Over 7,000 employees

We Start Small…..

Core competencies

KaolinAluminaSilicaMicaZeolites

SizeShapeHardnessPorosityPore sizeHydrophobicity

Engineered materials

Materials science

PlatinumPalladiumRhodiumCobaltNickelTitanium

Thermal stabilityAcidityChargeTransparencyActivityGloss

Specialized chemicalformulations

Surface chemistry

PigmentsCatalystsAdsorbentsAdditivesetc…

Automotive ● Petrochemical ● Agriculture ● Oil Refining ● Fine Chemicals ● Paper Plastics ● Cosmetics ● Air Quality ●Construction● Packaging Coatings

Delivering Technology to A Wide Range of Customers

•We work with the leading companies in a wide range of industries and markets.•Many of these customers are served by more than one Engelhard technology.

Appearance & Performance Technologies– Effect pigments

– Color pigments

– Specialty effect films– Personal care materials

– Performance minerals

Environmental Technologies– Automotive emission systems

– Emission and performance systems

– Engineered materials and systems

Process Technologies– Chemical catalysts– Petroleum catalysts– Polyolefin catalysts

Materials Services Group– Metals management services

for Engelhard and customers

Ventures– New business development

– Separation systems

And Operate as a Seamlessly Integrated Enterprise…

Creating Profitable New Revenue Streams

• To sustain growth, need:– Extensions: new products to existing customers

And– Expansions: New Markets - beyond current products & customers

• Ideas.…Action….Execution

Goal: quickly kill or move ideas to actionable plans

EC Strategy – “Knowing Who You Are”

• Core competencies in surface and materials science• Leveraged by a strategic focus: technology based, market driven

• Enabled by ingenuity

• Enhanced by a passion for productivity

• Managed as a seamlessly integrated, decentralized enterprise

Driving Growth…Finding Adjacencies

Strategic Direction for Growth

Senior management commitment

Not “or” Both!

Properly Resourced Structure/Staffing

– Sponsor

– Full time project leader (strong business development skills) with multi-functional team

– Steering/advisory group

Personal CareMaterials

Nanomaterials forSpecific Markets

Energy-RelatedMaterials

Broad market/technology platforms: beyond core businesses

Growth Platform Opportunity Criteria

• Key Attributes– Surface and materials science based

– Fit with EC’s current technology base

– Strong product differentiation

• Achieving…– “Specialty” Margins – High income growth potential (10% + per annum)

• Other Factors– Relatively short (1 to 3 years) time to market horizon– Little cyclicality and long product life cycles

Stage 2PreliminaryAssessment

Stage 4OpportunityDevelopment

Stage 3In-depthAnalysis Stage 5

Market Validation &Commercialization

Fuel Cells

Photovoltaic Ink

Aseptrol® - Life Sciences

PremAir® Stationary

ARM Arsenic

Aseptrol® Water

Molecular Gate®

Chromatography Bio Seps

Battery Materials

PersonalCare

Nano-technology

Energy

Future Growth Markets

PerovskiteSupports

AlkaneOxidation

PaperPigments

LLDPECatalyst

HydrocarbonTrap

High SilicaZeolites

Kaolin Processing

Laser mkg. additives

Stag

e 1

- Ide

a ge

nera

tion

and

fram

ing

BusinessUnits

4

Managing the Growth Process

Skin Care

Stage 2PreliminaryAssessment

Stage 4OpportunityDevelopment

Stage 3In-depthAnalysis Stage 5

Market Validation &Commercialization

Fuel Cells

Photovoltaic Ink

Aseptrol® - Life Sciences

PremAir® Stationary

ARM Arsenic

Aseptrol® Water

Molecular Gate®

Chromatography Bio Seps

BatteryMaterials

PersonalCare

Nano-technology

Energy

Future Growth Markets

PerovskiteSupports

AlkaneOxidation

PaperPigments

LLDPECatalyst

HydrocarbonTrap

High SilicaZeolites

Kaolin Processing

Laser mkg. additives

Stag

e 1

- Ide

a ge

nera

tion

and

fram

ing

BusinessUnits

4

Managing the Growth Process

Skin Care

Personal Care Materials

• $100 Million Challenge from Senior Management

• Existing Cosmetic Effect Pigment Business

• Engelhard Strategic Context

• Actions Steps:1) Assign full-time staff (marketing, business development)

2) Charter a market attack team

Phase 1Preparations

Phase 2 1st Deep Dive

Phase 32nd Deep Dive

Phase 4Business Plan

Understand market trends and unmet needs

Business concept and plan development

Kickoff Bus Concept Meeting

Workshop Challenge

2-3 months

Decision

Overall Market Attack Team Schedule

Charter Team

4-6 wks

•Assign core team members

•Market studies

•Select segments to research

• Industry experts/consultants

• Interview lead users and customers

•Fill in knowledge gaps

•Review with senior management

New Product Development Stage

Commercialization

Front End of Innovation

Traditional Stage Gate

Market Attack Teams

Market Attack Teams Don’t Replace Stage Gate Process

16

• Business Plan:

– Confirmed attractiveness of the market– Defined where Engelhard should play

– Entry strategy• Strategic Objective: Create a market and technology position in the

performance skin care market via acquisition:

– exploit the demographics of an aging global population.– target market segments: anti-aging active ingredients and

delivery systems.

• Execution: hired a full time business development professional with industry experience to execute:– list of potential targets

– proactive M&A

Personal Care Market Attack Team

Personal Care Project Status

• EC Strategy Well Received By The Marketplace– Building on Material and Surface Science

Skills and Cosmetic Market Channel

• Two Acquisitions Successfully Completed in 18 months– Collaborative Group (US-based)– Colectica, S.A. (Europe-based)

• Revenue Growth Achieved– Gained leading market position in 18 months

Color Cosmetic Formulator

InorganicProducts Skin Care Performance P.C.

Products Inc.

Product Type

Skin Care Formulator Proprietary Formulations

ECSurface Science

EC Effect

Pigments

Collaborative

Labs

Personal Care Materials “Stepping Stones”

Coletica

Energy Related Materials

• Growth challenge from senior management • Engelhard plays in the energy value chain

– FCC catalysts (oil refining)– NG purification– Syngas– Fuel Additives– Fuel Cells

Action Steps:1. Full time business development person to lead the effort2. Cross-functional team

Team Workflow & Process

Workflow Resources

• Market Studies• Industry Experts/Consultant

Define Market MatrixPhase 1

Phase 2

Phase 3

Phase 4

Phase 5

PrelimScreen

• External Interviews• Industry Experts/Consultant• Personal Networks• Market Studies

Prioritized segments

Review & Gap filling

Data gathering & analysis

Strategy Challenge WorkshopsBusiness Plan & Roadmap

Implementation

• Growth counsel & team

• Assign Business Leader & Owner

Attractive Opportunities Along Entire Energy Value Chain

Source & Supply

Conversion, Storage & Use

Efficiency & Conservation

• Gas Economy• Natural gas production

• E&P materials

• Natural gas treating

• Alternative Energy• Wind Power

• Solar• Photovoltaic• Thermal management

• Bio Derived Fuels &chemicals

• Energy Conversion• Clean fuels (GTL)

• Fuel Additives

• Energy Storage• Batteries Technology &

Manufacturing Linkage

• Super-capacitors

• Gas absorption & storage

• Distributed Power• Fuel Cells

• Hydrogen Economy Infrastructure

Coatings & Films• Thermal barrier

materials and technologies

• IR/UV barrier materials and technologies

Screening Parameters

Information DevelopedInformation Developed

1 Market size $ (material market & application market) (<$100, 100-$500, $500+)

2 Market growth rates (0-3%, 3-7%, 7+%)

3 EC Competency Fit (L, M, H)

4 Market concentration (top 3 >60% mkt share, top 3 have 40-60% mkt share, top 3 <40% mkt share)

5 Value add opportunity? (L, M, H)

6 List of value add materials

7 3-5 names of material supply companies

8 Technology Maturity (L = product lifecycle <1yrs, M=product lifecycle 1-5yrs, H=product lifecycle >5+)

Battery Materials Hypothesis

Market Attractiveness

Opportunity Size: $900M (excludes Pb/acid)

Market Growth: 7-8%

Industry Concentration: Low/High

Technology: Cathode materials, separator materials, electrolyte materials

Team Ranking

Strategic Options– Acquire Lithium platform

– Acquire separator/membrane platform

– Partner with battery supplier and manufacture active cathode/electrolyte materials

Engelhard Fit– Familiar manufacturing (cathode materials)– Diverse market applications (Li platform)– Tracks automotive industry evolution– Pharma, polymer, catalyst markets– Synergies with thin films and fuel cell

capabilities– Global asset management

Market Size 3

Growth Rate 3

Engelhard Fit 1

Overall 7

Data Gathering & Analysis

• Sub-team formed – Primary and Secondary Market Research

• Identified:

– Products

– Customers Needs

• Validated Fit

Business Plan Developed

Battery Materials Opportunity

• Strategic Intent

– Position Engelhard as leading supplier of advanced cathode materials for high-power rechargeable lithium-ion batteries

– Leverage EC custom manufacturing capabilities to enter market and acquire key emerging technologies to build a sustainable growth oriented business

High Drain Applications• Aerospace/military

• HEVs and EVs

• Backup power

• Power tools

Battery Materials Program Status

• Identified Partners and Licensing Opportunities

• Qualify Materials with Customers

• Commercial Products

• Forecast significant revenue in ‘06

PremAir Ozone Distruction Technology

Coatings applied to heat exchangers

Family of technologies that destroy pollutionin ambient air

Takes advantageof massive air movement & breakthrough catalyst technologies

Leveraging existing technology for new market needs

You may already have heard of PremAir from press reports

It is basically a coating, much like a paint, that can be applied to heat exchangers such as car radiators. As air passes through the radiator, the pollution in the air is converted to harmless materials.

The elegance of the technology is that the radiator and the fan that pulls air over the radiator are already part of the car, so the technology is very cost effective.

PremAir® Coated Inserts

Sharper Image Air conditioners

Building a Niche Business

• Offer cost effective Ozone Destruction inserts

• Potential to fit a variety of applications

• Multi-million $ business on ‘06

Conclusions and Recommendations

• “Know who you are” – Senior Management Direction

• Look for Adjacencies – Technology/Market Channel

• Assign full-time people

• Consultants with domain expertise – Market knowledge/access

• Set aggressive time lines

• Use tools that fit your company culture