Investor Presentation · 2019. 6. 27. · Safe Harbor Statement and Other Matters 2 This...

23
Investor Presentation June 2019

Transcript of Investor Presentation · 2019. 6. 27. · Safe Harbor Statement and Other Matters 2 This...

  • Investor PresentationJune 2019

  • Safe Harbor Statement and Other Matters

    2

    This presentation contains forward-looking statements, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of1995, which involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions andinclude any statement that does not directly relate to a historical or current fact. The words "believe," "expect," “will,” "anticipate," "plan," "estimate," "target,""project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date such statements were made.These forward-looking statements may address, among other things, the outcome or resolution of any pending or future environmental liabilities, thecommencement, outcome or resolution of any regulatory inquiry, investigation or proceeding, the initiation, outcome or settlement of any litigation, changes inenvironmental regulations in the U.S. or other jurisdictions that affect demand for or adoption of our products, anticipated future operating and financialperformance, business plans, prospects, targets, goals and commitments, capital investments and projects, plans for dividends or share repurchases,sufficiency or longevity of intellectual property protection, cost savings targets, plans to increase profitability and growth, our ability to make acquisitions,integrate acquired businesses or assets into our operations, and achieve anticipated synergies or cost savings, and our outlook for net sales, AdjustedEBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow, Adjusted Effective Tax Rate, and Return on Invested Capital (ROIC), all of which are subjectto substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-lookingstatements are based on certain assumptions and expectations of future events that may not be accurate or realized. These statements are not guarantees offuture performance. Forward-looking statements also involve risks and uncertainties that are beyond Chemours' control. Additionally, there may be other risksand uncertainties that Chemours is unable to identify at this time or that Chemours does not currently expect to have a material impact on its business.Factors that could cause or contribute to these differences include the risks, uncertainties and other factors discussed in our filings with the U.S. Securitiesand Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2018. Chemours assumes no obligation to reviseor update any forward-looking statement for any reason, except as required by law.

    We prepare our financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Within this presentation we may make referenceto Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Effective Tax Rate, Free Cash Flow, ROIC and Net LeverageRatio which are non-GAAP financial measures. The company includes these non-GAAP financial measures because management believes they are useful toinvestors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decisionmaking. Further information with respect to and reconciliations of such measures to the nearest GAAP measure can be found in the appendix hereto.

    Management uses Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Effective Tax Rate, Free Cash Flow, ROIC andNet Leverage Ratio to evaluate the company’s performance excluding the impact of certain noncash charges and other special items which we expect to beinfrequent in occurrence in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.

    Additional information for investors is available on the company’s website at investors.chemours.com.

  • industry-leading positions to drive top-line growth of 1x-2x GDP

    in our core businesses with high ROIC (+30%) projects to drive sustainable competitive advantage

    our existing businesses through targeted M&A

    the majority of our Free Cash Flow to shareholders over time through a growing dividend and meaningful share repurchases

    the energy of the organization, generated through the transformation, to move at high velocity

    Leveraging

    Investing

    Strengthening

    Returning

    Harnessing

    3

    Chemours Investment Thesis

  • The Chemours Company at a Glance

    4

    Fluoropolymers22%

    Fluorochemicals23%Performance Chemicals &

    Intermediates5%

    Mining Solutions4%

    Titanium Dioxide46%

    Product1

    North America 37%

    Asia Pacific 26%

    EMEA24%

    Latin America13%

    Geography1

    See reconciliation of Non-GAAP measures in the appendix

    Source: Company filings and data1. Data represents net sales for the trailing twelve months ending March 31st, 2019

    Chemical Solutions Titanium Technologies($ in millions)

    $69

    12%0

    0.1

    0.2

    0.3

    0.4

    0.5

    0.6

    0.7

    0

    50

    100

    150

    200

    250

    300

    20180

    100200300400500600700800900

    2018

    31%

    00.10.20.30.40.50.60.70.8

    - 200 400 600 800

    1,000 1,200 1,400

    2018

    $888

    0

    500

    1000

    1500

    2000

    2500

    3000

    3500

    2018

    $735

    26%0

    0.2

    0.4

    0.6

    0.8

    1

    1.2

    1.4

    0200400600800

    100012001400160018002000

    2018

    $2,819

    0

    500

    1000

    1500

    2000

    2500

    3000

    2018

    Fluoroproducts

    24%

    0

    0.1

    0.2

    0.3

    0.4

    0.5

    0.6

    -

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    2018

    $6,284

    0

    1000

    2000

    3000

    4000

    5000

    6000

    7000

    2018

    Total ChemoursAdjusted EBITDA

    Adjusted EBITDA MarginNet Sales

    Adjusted EBITDA MarginNet Sales

    Adjusted EBITDA MarginNet Sales

    Adjusted EBITDA MarginNet Sales

    $1,535

    $591

    $2,874

    Adjusted EBITDA Adjusted EBITDAAdjusted EBITDA

    Fluoroproducts45%

    Chemical Solutions

    9%

    Adjusted EBITDA Growth

    $573

    $822

    $1,422

    $1,740

    2015 2016 2017 2018

    +204%

    TTM 1Q19 TTM 1Q19 TTM 1Q19 TTM 1Q19 TTM 1Q19 TTM 1Q19 TTM 1Q19 TTM 1Q19

  • 5

    Fluoroproducts Business Summary

    5

    BUSINESS OVERVIEW• Global market leader in Fluoroproducts• Supplies fluoropolymer products for high performance

    applications across broad array of industries• Supplies fluorochemical products for air conditioning, refrigeration

    and foam blowing agent markets• Brands: Teflon™, Freon™, Opteon™, Krytox™, Nafion™, Viton™

    Fluoropolymers – industrial resins and specialty products and coatingsFluorochemicals – refrigerants, propellants, foam blowing agents, fire suppressantsKey end markets – air conditioning, refrigeration, automotive, electronics, communications, wire & cable, energy, consumer, oil & gas, aerospace

    FINANCIAL SUMMARY

    See reconciliation of Non-GAAP measures in the appendix

    Source: Company filings and data1. Segment net sales on a trailing twelve-month basis ending March 31, 2019

    Fluoropolymers49%

    Fluorochemicals51%

    Product1North

    America 40%

    Asia Pacific 24%

    EMEA28%

    Latin America8%

    Geography1

    $ Millions TTM1Q18

    TTM1Q19 % Δ

    Revenue $2,735 $2,819 3%

    Adjusted EBITDA $720 $735 2%

    Adj. EBITDA Margin 26% 26% 0bps

  • 6

    Fluorochemicals Long-Term Market View

    Chemours Is Well Positioned to Capture Market Growth and Value for Both HFOs and Non-HFOs

  • Stationary Market Breakdown

    7

    Attractive Growth in Stationary Markets Expected over Next Decade

    Source: Industry trade publications, company disclosures, and company estimatesNote: CAGRs are based upon non-rounded company estimates

    REVENUE

    $0.3B 88% CAGR5% CAGR $0.8B

    C H I L L E R S ~$0.0B

    ~$0.3B~$XM

    A I R C O N D I T I O N I N G

    133% CAGR6% CAGR

    $4.1B$2.3B~$0.0B

    ~$0.7B

    ~$1.05B

    ~$0.5B

    2016 2025

    Non-HFOs HFOs

    C O M M E R C I A L R E F R I G E R AT I O N

    $1.1B35% CAGR(8%) CAGR $1.2B

    ~$2.3B

    ~$0.05B

    ~$0.2B

    ~$4.0B~$0.3B

    ~$0.5B

    ~$1.05B

    ~$3.9B

  • Opteon™ Advantage - CO2 Equivalent Basis

    8

    Opteon™ Offers Low GWP Alternatives that Meet Tightening Environmental Standards

    Source: UN IPCC Fifth Assessment Report and Company estimates

  • Opteon™ Patent Estate

    9

    • Our multinational portfolio includes nearly 900 patents and pending applications on HFO technology, including compositions, uses and processes of manufacture

    • The earliest patents on HFO technology are expected to expire in the mid-2020’s– We continue to add to our patent

    application estate• Chemours actively monitors for patent

    infringement and will vigorously assert its rights under these patents, including seeking damages and injunctions to stop infringement

    The Size and Scope of Our Portfolio Means Loss of Coverage from Any One Single Patent Will Not Significantly Affect Our Market Position

    First Opteon™ patent expirations expected2026

    2030sHundreds of Opteon™ patents remain in full force

    First HFO patent expirations expected2023

  • Fluoropolymers Target Markets for Application Development

    10Sources: McKinsey; Bain; IHS BCC, US Department of Energy, Chemours sales data and market forecasting* $ Millions; Addressable market size based on current applications, ingredient sales only

    2016 Market Size*

    2016 - 2027CAGR

    2027Market Size* Trends and Fluoropolymer Opportunities

    $1,100

    $105

    $910

    5%

    21%

    9%

    $1,900

    $850

    $2,300

    • Emission standards and fuel efficiency with internal combustion engines

    • Decarbonization of transportation via alternative energy

    • Active safety and infotainment

    • Development of smart grid with increasing amount of renewable energy and energy storage

    • Government and OEM driven alternative energy vehicles

    • Growth and innovation in smart phones, wearables, IoT, artificial intelligence, etc.

    • Next generation connectivity (5G), advances in circuit boards, LAN, antennas, thermal and electrical shielding

  • Recent Wins and Our Application Development Pipeline

    11

    Strong Pipeline Build Since Announcing Application Development in December 2017

    DATA CENTERS

    USB-C CABLES

    MOBILE DEVICEANTENNAS

    HYBRID VEHICLES

    ENERGY STORAGE

    Jan'18 Mar'18 Jun'18 Sep'18 Dec'18 Mar'19

    Energy

    Automotive

    Consumer Electronics & Communication

  • 12

    Chemical Solutions Business Overview

    12

    FINANCIAL SUMMARY

    Mining Solutions – sodium cyanide, hydrogen cyanidePerformance Chemicals & Intermediates –methylamines, glycolic acid, Vazo™ products, aniline, nitrobenzene

    Mining Solutions

    49%

    Performance Chemicals & Intermediates

    51%

    Product1North

    America 56%

    Asia Pacific 13%

    EMEA3%

    Latin America28%

    Geography1

    BUSINESS OVERVIEW• Portfolio of industrial businesses primarily operating in the

    Americas• Reputation for safety, reliability and stewardship• Three production facilities located in North America

    – Memphis, TN: Mining Solutions– Belle, WV: PC&I– Pascagoula, MS: PC&I

    See reconciliation of Non-GAAP measures in the appendix

    Source: Company filings and data1. Segment net sales for the trailing twelve months ending March 31, 2019

    $ Millions TTM 1Q18

    TTM 1Q19 % Δ

    Revenue $575 $591 3%

    Adjusted EBITDA $56 $69 23%

    Adj. EBITDA Margin 10% 12% 200bps

  • 13

    Titanium Technologies Business Overview

    13

    FINANCIAL SUMMARYBUSINESS OVERVIEW• A global leader1 in TiO2 with production capacity of 1.25 million

    metric tons– 4 TiO2 plants with 7 production lines– Packaging facility at Kallo, Belgium– Mineral sands mine at Starke, FL

    • Strong brand reputation– Ti-Pure™ sold to approximately 600 customers globally

    • Industry-leading manufacturing cost position– Unique chloride technology – Feedstock flexibility

    Coatings – architectural, industrial, automotivePlastics – rigid/flexible packaging, PVC pipe/windows

    Papers – laminate papers, coated paper/paperboard, sheet

    Paper12%

    Coatings63%

    Plastics25%

    Product2

    North America 30%

    Asia Pacific 31%

    EMEA24%

    Latin America15%

    Geography3

    See reconciliation of Non-GAAP measures in the appendix

    Source: Company filings and data1. TiO2 market share statistics based on production capacity per 2017 TZMI

    2. Segment net sales for the trailing twelve months ending December 31, 2018; excludes non-TiO2 sale3. Segment net sales for the trailing twelve months ending March 31, 2019; excludes non-TiO2 sales

    $ Millions TTM 1Q18

    TTM 1Q19 % Δ

    Revenue $3,167 $2,874 (9%)

    Adjusted EBITDA $997 $888 (11%)

    Adj. EBITDA Margin 31% 31% 0bps

  • 14

    Ti-Pure™ Value Stabilization

    CHEMOURS’ VISION• We absorb the demand variance in our

    customers’ marketplace, while holding value-based pricing for Ti-Pure™ products

    • Reduced business volatility stabilizes Chemours’ cash generation and enables more consistent capacity planning to serve our customers

    • We can support and grow our investment in new offerings over time, enhancing growth option for our customers

    • Our customers can focus their efforts on market growth and avoid the distracting seesaw of “can I get the TiO2 I need?” or “how high will the price go?”

    CHEMOURS’ APPROACH• Create contractual relationships which support a more

    stable customer-Chemours relationship• Improve our manufacturing flexibility and capacity to

    economically respond to both decreases and increases in our customers’ sales which vary their requirements for Ti-Pure™ TiO2

    • Deliver value from a sustained investment in market insights and new offering development

    Manufacturing& Supply

    Assurance New

    Ti-Pure™ Commercial Framework(AVA + Flex)

    New Offerings

    ChemoursTi-Pure™

    Value Stabilization

    (TVS)

    Ti-Pure™ Value Stabilization is Expected to Reduce Volatility for Chemours and Provide More Predictability for our Customers

  • Value to Customers

    • Predictable pricing enables improved supply chain planning

    • Reduces need to build and hold excess inventory

    • Provides volume certainty over time

    Value to Chemours

    • Provides more stable earnings• Enhances ability to plan for

    capacity adds to meet growing customer demand

    • Allows for investments in new offerings to better support customers’ needs

    Ti-Pure™ Value Stabilization is a Win-Win

    15

  • Corporate Responsibility Commitment

    16

  • Clarifying Fluorine Chemistry

    PFAS is a broad term encompassing a number of substances produced for a variety of industries and products. Two of these substances, which have been the subject of study and frequent media and public discussion, are PFOS and PFOA

    • PFOS and PFOA are the subject of Drinking Water Health Advisories issued by the EPA

    • PFOS: Neither Chemours nor DuPont has made or sold PFOS as a commercial product or used PFOS as a processing aid

    • PFOA: • Chemours understands that DuPont made PFOA, from 2002-2013, for use at its own fluoropolymer sites• Chemours understands that DuPont did not manufacture PFOA as a commercial product• Chemours has never made or sold PFOA as a commercial product, or used PFOA as a processing aid

    • GenX: A processing aid used in the manufacture of some fluoropolymers where PFOA was used previously. Manufactured and recycled at Chemours’ Fayetteville, North Carolina site pursuant to Consent Order with EPA and used to manufacture fluoropolymers. Studies have shown that GenX is not biopersistent in the body

    17

  • Our Proactive Approach

    Fayetteville

    • Chemours negotiated a Consent Order which was approved by the court in February 2019

    • Under the Consent Order, Chemours continues to capture process water

    • >$100m capital commitment to reduce GenX and other facility-wide PFAS air emissions by 99% by end of 2019

    • Treatment to be provided for numerous offsite water users

    Washington Works and Chambers Works

    • Offsite treatment at Chemours Washington Works, West Virginia and Chambers Works, New Jersey manufacturing sites have been in place for many years

    Ongoing Work Priorities

    Moving Forward

    CRC Commitments

    • Reduce air and water process emissions of fluorinated organic chemicals by 99% or greater

    • Our 2030 Corporate Responsibility Commitment Goals are built upon three pillars, divided into eight areas of focus, each with their own 2030 goals: safety excellence, vibrant communities, empowered employees, climate, water, waste, sustainable offerings, and sustainable supply chain

    • Chemours supports scientifically-based regulatory action• Chemours will continue to take actions to proactively

    address issues in the interests of its stakeholders

    18

  • 19

    Reconciliations

  • Segment Net Sales and Adjusted EBITDA (Unaudited)

    20

    ($ in millions) Year EndedDecember 31,

    2019 2018 2018

    SEGMENT NET SALESFluoroproducts 2,819$ 2,735$ 2,862$ Chemical Solutions 591 575 602 Titanium Technologies 2,874 3,167 3,174

    Total Company 6,284$ 6,477$ 6,638$

    SEGMENT ADJUSTED EBITDAFluoroproducts 735$ 720$ 783$ Chemical Solutions 69 56 64 Titanium Technologies 888 997 1,055 Corporate and Other (157) (169) (162)

    Total Company 1,535$ 1,604$ 1,740$

    SEGMENT ADJUSTED EBITDA MARGINFluoroproducts 26.1% 26.3% 27.4%Chemical Solutions 11.7% 9.7% 10.6%Titanium Technologies 30.9% 31.5% 33.2%Corporate and Other 0.0% 0.0% 0.0%

    Total Company 24.4% 24.8% 26.2%

    Twelve Months Ended March 31,

  • Adjusted EBITDA to GAAP Income (Loss) Before Income Taxes Reconciliation (Unaudited)

    21

    ($ in millions)2018 2017 2016 2015

    Income (loss) before income taxes 1,155$ 912$ (11)$ (188)$ Interest expense, net 195 214 219 132 Depreciation and amortization 284 273 284 267 Non-operating pension and other post-retirement employee benefit income (27) (34) (20) (3) Exchange (gains) losses, net (1) (3) 57 (19) Restructuring, asset-related, and other charges 49 57 170 333 Loss (gain) on extinguishment of debt 38 1 (6) — (Gain) loss on sales of assets and businesses (45) (22) (254) 9 Transaction costs 9 3 19 9 Legal charges 82 9 343 8 Other charges 1 12 21 25Adjusted EBITDA 1,740$ 1,422$ 822$ 573$

    Year Ended December 31,

  • Adjusted EBITDA to GAAP Income (Loss) Before Income Taxes Reconciliation (Unaudited)

    22

    ($ in millions)2019 2018

    Income (loss) before income taxes 881$ 1,119$ Interest expense, net 193 215 Depreciation and amortization 289 272 Non-operating pension and other post-retirement employee benefit income (23) (34) Exchange (gains) losses, net (7) 2 Restructuring, asset-related, and other charges 48 50 Loss (gain) on extinguishment of debt 38 1 (Gain) loss on sales of assets and businesses (3) (48) Transaction costs 9 3 Legal charges 107 9 Other charges 3 15 Adjusted EBITDA 1,535$ 1,604$

    Twelve Months Ended March 31,

  • 23©2018 The Chemours Company. Chemours™ and the Chemours Logo are trademarks or registered trademarks of The Chemours Company

    Investor Presentation�June 2019Safe Harbor Statement and Other MattersChemours Investment ThesisThe Chemours Company at a GlanceFluoroproducts Business SummaryFluorochemicals Long-Term Market ViewStationary Market BreakdownOpteon™ Advantage - CO2 Equivalent BasisOpteon™ Patent EstateFluoropolymers Target Markets for Application DevelopmentRecent Wins and Our Application Development PipelineChemical Solutions Business OverviewTitanium Technologies Business OverviewSlide Number 14Ti-Pure™ Value Stabilization is a Win-WinSlide Number 16Slide Number 17Slide Number 18Slide Number 19 Segment Net Sales and Adjusted EBITDA (Unaudited)Adjusted EBITDA to GAAP Income (Loss) Before Income Taxes Reconciliation (Unaudited)Adjusted EBITDA to GAAP Income (Loss) Before Income Taxes Reconciliation (Unaudited)Slide Number 23