Oilfield Technologies and Industrial Specialties · Business Overview –Oilfield Technologies...

Oilfield Technologies and Industrial Specialties

June 11, 2020

Mike Smith, EVP & President, Performance Chemicals

Nick Kob, VP, Oilfield and Lubricant Technologies

Rich White, VP, Industrial Specialties

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Disclaimer: This presentation contains “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements generally include the words “will,” “plans,” “intends,” “targets,” “expects,” “outlook,” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; impact of COVID-19; synergies and the potential benefits of the acquisition of Perstorp Holding AB’s Capa® caprolactone business (the “acquisition”); capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; markets for securities and expected future repurchases of shares, including statements about the manner, amount and timing of repurchases. Actual results could differ materially from the views expressed. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, adverse effects from the COVID-19 pandemic; risks that the expected benefits from the acquisition may not be realized or will not be realized in the expected time period, the risk that the acquired business will not be integrated successfully and the risk of significant transaction costs and unknown or understated liabilities; adverse effects of general economic and financial conditions; risks related to international sales and operations; impacts of currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations concerning our operations outside the U.S.; changes in trade policy, including the imposition of tariffs; the impact of the United Kingdom’s withdrawal from the European Union; attracting and retaining key personnel; adverse conditions in the global automotive market or adoption of alternative and new technologies; competition from producers of alternative products and new technologies, and new or emerging competitors; competition from infringing intellectual property activity; worldwide air quality standards; a decrease in government infrastructure spending; declining volumes and downward pricing in the printing inks market; the limited supply of or lack of access to sufficient crude tall oil; a prolonged period of low energy prices; the provision of services by third parties at several facilities; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, tornados, floods, fires; other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance and repair; protection of intellectual property and proprietary information; information technology security breaches and other disruptions; complications with designing and implementing our new enterprise resource planning system; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in our Annual Report on Form 10-K and other periodic filings. These forward-looking statements speak only as of the date of this presentation. Ingevity assumes no obligation to provide any revisions to, or update, any projections and forward-looking statements contained in this presentation.

Non-GAAP Financial Measures: This presentation includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided within the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided.

▪ Joined Ingevity in 2016

▪ 23 years at FMC Corporation, positions included:▪ Vice President, Health and Nutrition

▪ Division General Manager Hydrogen Peroxide and Active Oxidants

▪ Director of Business Planning and Strategy

▪ Global Business Director, Process Additives, Manchester, England

▪ Technical Sales Positions at Hercules in Paper Chemicals and Resins

▪ Bachelor of Arts degree in chemistry from the University of Virginia

▪ Master of Business Administration degree from the University of Michigan

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Mike Smith

Executive Vice President and President, Performance Chemicals

Strong, Experienced Business Leadership

Rich White

Vice President, Industrial Specialties


▪ 10 years at Huntsman, positions included:▪ Business Manager, Americas, Agrochem

▪ Business Development Manager, Bio-Based Products and Sustainability

▪ Technology Manager, Coatings, Polymers and Resins

▪ Seven years at DuPont, various R&D and chemist positions

▪ Bachelor of Arts degree in chemistry from California State University, Fullerton

▪ Master of Business Administration from Grand Canyon University

▪ Doctorate in chemistry from the University of Florida


▪ Vice President of Global Accounts, DuPont Nutrition & Health, Copenhagen, Denmark

▪ 18 years at FMC Corporation, positions included:▪ General Manager, Health & Nutrition -

EMEA

▪ Global Sales Director, Health & Nutrition

▪ Global Procurement Director

▪ Marketing and Sales Director, Specialty Alkali and Lithium

▪ Bachelor of Arts degree in chemistry from Morgan State University

▪ Master of Business Administration degree from the University of Pittsburgh

Nick Kob

Vice President, Oilfield & Lubricant Technologies

Company Overview

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1) We acquired the Engineered Polymers division via the acquisition of the Capa Caprolactone business from Perstorp Holdings AB on February 13, 2019. This

amount represents Ingevity’s as-reported 2019 for the remainder of the year.

2) Not disclosed due to NDAs and confidentiality.

Performance Materials

Performance Chemicals

Carbon Technologies

Pavement Technologies

Oilfield Technologies

Industrial Specialties

Engineered Polymers

2019 Sales $491 million $183 million $111 million $386 million $122 million(1)

2019 Segment EBITDA

$213 million $183 million

Market Position

#1 in automotive#1 in preservation, recycling and warm

mix

#1 or #2 in oil-based muds

#1 or #2 #1

Applications▪ Automotive

▪ Process purification

▪ Pavement preservation

▪ Recycling

▪ Evotherm® technologies

▪ Well service additives

▪ Production and downstream

▪ Adhesives

▪ Agrochemicals

▪ Lubricants

▪ Inks

▪ Intermediates

▪ Coatings

▪ Resins

▪ Elastomers

▪ Adhesives

▪ Bioplastics

Select Competitors

Select Customers

(2)

Biorefinery

DerivativesEnd Uses

Renewable forests

Intermediates

(CTO)

Pine Chemicals Value ChainEnhancing Value Through Derivatization

Biorefinery

Tall Oil Rosin

Biofractions

Tall Oil Fatty Acid

▪ Pavement

▪ Oilfield

▪ Lubricants

▪ Adhesives

▪ Inks

▪ Paper size

▪ Rubber

▪ Oilfield

▪ Pavement

▪ Sterols

▪ Pavement

▪ Agchem

▪ Dyes

Lignin

Derivatization

Specialty

Specialty

Derivatization

Derivatization

Specialty

Derivatization

Specialty

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Strategic Focus on High Value-Added Products and Markets

Basic materials Essential ingredients Technology partner

Ingevity Business Models Across the Value Chain

Margin profile

Low Med - High High

Strategic intent to move revenues downstream

Ingevity’s products

▪ Tall oil fatty acid (TOFA)▪ Tall oil rosin (TOR)

▪ Oil well service additives

▪ Oil production, downstream chemicals

▪ Activated carbon ▪ Pavement technologies▪ Agricultural chemicals▪ Engineered polymers

▪ Lubricants▪ Adhesives▪ Inks▪ Paper size▪ Rubber

emulsifiers

48%

14%

23%

15%

2019 | $802 M▪ Pavement Technologies and Engineered Polymers

now a significant part of Performance Chemicals

▪ Increased exposure to higher growth applications

▪ Growth in higher margin segments and products was a key driver to increasing from 13% segment

EBITDA margin in 2016 to 23% segment EBITDA

margin in 2019

Industrial Specialties Oilfield Technologies

Engineered PolymersPavement Technologies

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Performance Chemicals Revenue

68%11%

21%

2015 | $702 M

Oilfield Technologies

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Business Overview – Oilfield Technologies

Specialty intermediates and TOFA used in drilling, production and transportation of crude oil

▪ Emulsifiers for manufacture of oil-based muds▪ Rheology modifiers and wetting agents for

used muds ▪ Specialty derivatives for corrosion inhibition▪ TOFA and dimers part of lubricant packages in

water-based muds

▪ Global customer base

▪ Ingevity provides dedicated technical service support

▪ Ingevity technology provides competitive advantage

Business Description Sales ($M)

2019 Sales

By Application By Region

Production30%

Drilling66%

Stimulation4% APAC

3%

N. America87%

EMEA9%

Customers Competitors

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S. America1%

$78

$59

$78

$114 $111

-

25

50

75

100

125

2015 2016 2017 2018 2019

Relationships Across the Value ChainFocused Upstream With Strong Relationships Throughout

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DRILLING STIMULATION PRODUCTION FUEL ADDITIVE

UPSTREAM DOWNSTREAM

Our drilling and production chemical additive products are used in each step of the value chain to help customers develop tailored, better-performing drilling fluids and production chemical formulations.

▪ Minimize fluid loss

▪ Extend mud life

▪ Reduce equipment damage

▪ Improve well productivity

Products for Every Step in the Value ChainAdding Value From Drilling to Transportation

DRILLING

STIMULATION

PRODUCTION

FUEL ADDITIVE

EnvaMul® ▪Drilling fluid emulsifier▪Extends mud life▪Minimizes fluid loss

EnvaMod®▪Rheology modifier▪ Increases suspension▪Aids in cuttings removal

EnvaWet® ▪Wetting agent▪Enhances dispersion of mud solids

Rosin derivative▪Proppant coating (used in fracking)

▪ Improves well productivity▪Reduces equipment damage

EnvaCor® ▪Corrosion inhibitor▪Protects metal

TOFA▪Lubricity additive ▪Easy to handle▪Cost effective

Tenax®▪Corrosion inhibitor▪Reduces treatment frequency▪Protects downhole casing and production tubing

UPSTREA

MD

OW

NSTREA

M

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Oilfield Technologies Strategies

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▪ Grow specialty additives based on performance and cost

▪ Partner with service companies

▪ Leverage technical service to guarantee product success

Market

Development

▪ Continue to drive growth in production chemicals

▪ Accelerate growth in stimulation

▪ Pull through Ingevity chemistry across value chain

Innovation

▪ Establish relationships globally with service companies

▪ Product development to fit local needs

▪ Global registrations for pine chemistries for oilfield use

Geographic

Expansion


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Market

Development




Innovation




Geographic

Expansion

Market DevelopmentTenax® Specialty TOFA Derivative to Enable Enhanced Corrosion Protection

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Challenge

Shale wells deplete quickly and as such, the produced water-to-oil ratio increases, driving the need for corrosion protection that is also water dispersible.

Benefits

▪ Performs at lower dosages

▪ Increases corrosion protection

▪ Reduces treatment frequency

Tenax

Water

Oil

Alkyl chain package

Metal Surface


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Market

Development




Innovation




Geographic

Expansion

InnovationNovel Powder Emulsifier Additive to Improve Drilling Performance in Difficult Conditions

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Challenge

Liquid emulsifiers often pose challenges for offshore and cold-weather oil drilling and production locations due to their susceptibility to freezing temperatures and harsh conditions.

Benefits

▪ Facilitates easier use in cold climates

▪ Reduces drum cleaning and disposal

▪ Requires no diluent, enhancing safety and environmental friendliness

▪ Reduces storage costs


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Market

Development




Innovation




Geographic

Expansion

National strategic intent to diversify energy source

▪ Drive towards less dependence on coal

▪ Reduce oil imports

Chinese government initiatives

▪ National oil companies (NOC) upgraded 7-year drilling plan

Established less cyclical oil market

▪ Large production in region

▪ Low cost to produce

▪ Strategic importance to government

Saudi Arabian government initiatives

▪ In-Kingdom Total Value Add (IKTVA) program

Geographic Expansion

China Saudi Arabia

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Opportunity for growth in production and stimulation chemicals

Further growth in global markets

Sustainably profitable oilfield business through the market cycles

Deep customer relationships based on technical service and product performance

Leader in drilling mud emulsifiers

Oilfield TechnologiesMoving to Higher-Value, Cycle-Sustainable Portfolio

Industrial Specialties

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Business Overview – Industrial SpecialtiesBusiness Description Sales ($M)

2019 Sales – $386 M

Driving value from pine-based chemistry

▪ TOR: ink resins, adhesives – tackifiers, paper sizing, rubber emulsifiers

▪ TOFA: coatings, mining, emulsifiers

▪ Lignin: agricultural chemical dispersants, dyes dispersants, batteries

▪ Biofractions: sterols, renewable energy, phosphate mining

Customers Competitors

▪ 500 customers in 45 countries

▪ Top 20 customers represent 55% of business

$476 $400 $382

$440 $386

-

100

200

300

400

500

2015 2016 2017 2018 2019

*rosin markets20

TOFA

18%

Dispersants

13%

Paper

Chem*

9%Adhesives*

18%

Pub Inks*

14%

Rubber* 4%

Merch

Rosin*

3%Biofractions

11%

Lubricants

9%

By Segment

48%

APAC

15%

S. America

2%

N. Amercia

69%

EMEA

14%

By Region

Product Foundations Refinery Produces Rosin and TOFA in Fixed Proportion

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▪ Recent gum rosin price improvement

▪ Growing consumer focus on sustainability

▪ Adhesive growth in packaged goods and hygiene products

▪ Digital, electronic media replacing print media

▪ <1% of annual TOFA tonnage of fats and oils

▪ Critical raw material for specialty applications

▪ Merchant TOFA serves all geographies

▪ Increased TOFA demand due to growth in low-sulfur fuels in emerging countries

Global Rosin Market

Gum rosin

TOR

TOR

TOFA

TOR

Printing InksContinued Commitment to Innovation in a Dynamic Environment

Strategic Focus

Improve margins by moving away from less profitable business

▪ Exited low-margin European market

Drive sustainable, environmentally friendly alternatives

▪ Introduced new lower-cost, more environmentally friendly resin product line

▪ Continue developing new lower-cost, flexible packaging inks that are also easier to handle

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Increasing industry shift towards digital media continues

A global leader in rosin-based tackifiers for pavement marking and packaging adhesive applications

AdhesivesEnhancing Performance and Bio-Content in Key Applications

Pavement Marking Packaging Adhesives

▪ Improves driver safety through increased retro-reflectivity of road striping

▪ Longer lasting than hydrocarbon resins due to better resistance to residue from vehicles and oil in asphalt

▪ Easier and more efficient to use compared to rosin ester alternatives

▪ Improves adhesion to highly recycled corrugated board used in rigid packaging

▪ New low-color, low-odor product line is more environmentally friendly than alternatives

▪ Trends favor bio-based offerings

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Since 2016, adhesives has increased from 28% to 38% of Ingevity’s rosin sales

Industrial Other56%

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The leading global manufacturer of kraft lignosulfonate dispersants and bio-based adjuvants used:

▪ In crop protection applications

▪ To enhance the performance of active ingredients in plant health

Agricultural ChemicalsProviding Eco-Friendly, Multifunctional Formulation Alternatives

Crop Protection Plant Health

▪ Improves the effectiveness of pesticides, insecticides and herbicides, enabling lower treatment frequency

▪ Highest quality, differentiated dispersants

▪ Conventional protection

▪ Biologicals

▪ Seed treatment

▪ Helps fertilizer coatings last longer

▪ Extends nutrient absorption time

▪ Has the ability to slow, remediate leaf damage

▪ Expand portfolio via adjuvants, green solvents

▪ Continue to leverage unique customer focus

▪ Increase geographic presence

Industry Trends Strategic Focus

▪ High-growth global market in crop protection, micronutrients and seed treatment

▪ Customer base consolidation

▪ Safer and more complex formulations

Ingevity’s Environmentally Friendly Product Offerings

Industrial Specialties Strategies

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▪Continue to leverage synergies from acquisition of Georgia-

Pacific’s pine chemicals business

▪ Enhance low cost producer position

▪Optimize manufacturing flexibility and refinery balance

Drive

Operational

Excellence

▪Continue to expand derivative demand

▪Drive improved margins with continued mix optimization

▪ Leverage diversified end markets

Higher-Margin

Growth

▪ Strong global reputation for customer-centric approach

▪Continued strategic new product development though “customer

pull” philosophy

▪ Strengthen utilization of technical service for greater customer

collaboration

Innovation


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Drive

Operational

Excellence




Higher-Margin

Growth



pull” philosophy


collaboration

Innovation

Higher-Margin Products and ApplicationsDiacid 1550®, a Bio-Based, Multifunctional Additive for Demanding Metalworking Fluid Applications

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Challenge

The growing use of super alloy metals in jet and rocket engine production means metalworking fluid manufacturers need innovative, multifunctional machining coolants that protect equipment and perform in demanding conditions.

Benefits

▪ Maintains stability in formulation, increasing overall fluid life

▪ Enables the use of less additives, saving formulators money and producing less waste

▪ Is multifunctional in nature, making it useful in a variety of fluid formulations


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Drive

Operational

Excellence




Higher-Margin

Growth



pull” philosophy


collaboration

Innovation

InnovationAltaHance® and AltaSolv™, Higher-Performing, Multifunctional Formulations for Plant Health and Crop Protection

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Challenge

Stringent environmental requirements have led commercial farmers to seek formulations that combine multiple active ingredients in one product, enhance performance and produce a lower carbon footprint.

Benefits

▪ Increases pesticide performance

▪ Enables easier handling

▪ Designed to improve plant nutrition and crop yield

▪ Lowers environmental impact


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Drive

Operational

Excellence




Higher-Margin

Growth



pull” philosophy


collaboration

Innovation

Driving Operational ExcellenceSuccessful Integration of Georgia-Pacific’s Pine Chemicals Business

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▪ Strengthened Ingevity’s leading position in Performance Chemicals

▪ Added scale through a combination of highly complementary technologies and product offerings

▪ Provided long-term CTO supply security at market price

▪ Delivered >$11 million per year in synergies from manufacturing optimization, lower logistics and SG&A costs

▪ Completed customer product qualifications across plant network to improve efficiency and supply security

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Industrial SpecialtiesOptimizing Product Mix to Maximize Earnings

Innovation focused on agricultural chemicals, adhesives and new uses for rosin

Leverage global position in higher-margin applications

Drive lower-cost/improved efficiency

Strong reputation for technical expertise and delivering customer solutions

Number 1 or 2 position across all segments

Strategic Focus on High Value-Added Products and Markets

Basic materials Essential ingredients Technology partner

Ingevity Business Models Across the Value Chain

Margin profile

Low Med - High High

Strategic intent to move revenues downstream

Ingevity’s products

▪ Tall oil fatty acid (TOFA)▪ Tall oil rosin (TOR)

▪ Oil well service additives

▪ Oil production, downstream chemicals

▪ Activated carbon ▪ Pavement technologies▪ Agricultural chemicals▪ Engineered polymers

▪ Lubricants▪ Adhesives▪ Inks▪ Paper size▪ Rubber

emulsifiers

48%

14%

23%

15%

2019 | $802 M▪ Pavement Technologies and Engineered Polymers

now a significant part of Performance Chemicals

▪ Increased exposure to higher growth applications

▪ Growth in higher margin segments and products was a key driver to increasing from 13% segment

EBITDA margin in 2016 to 23% segment EBITDA

margin in 2019

Industrial Specialties Oilfield Technologies

Engineered PolymersPavement Technologies

33

Performance Chemicals Revenue

68%11%

21%

2015 | $702 M

Oilfield Technologies and Industrial Specialties · Business Overview –Oilfield Technologies...

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