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Page 1: BofA Merrill Lynch Global Agriculture & Materials Conference/media/Files/V/... · End Markets (4) FY17 Revenue (mm) (1) $2,209 Pro forma adj. EBITDA (mm) (2) $500 % margin 23% ...

BofA Merrill Lynch Global Agriculture & Materials ConferenceFebruary 28, 2018

Page 2: BofA Merrill Lynch Global Agriculture & Materials Conference/media/Files/V/... · End Markets (4) FY17 Revenue (mm) (1) $2,209 Pro forma adj. EBITDA (mm) (2) $500 % margin 23% ...

General Disclosure

This presentation includes “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S.

Securities Exchange Act of 1934, as amended. These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future

revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical

information. When used in this presentation, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” or future or conditional verbs,

such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking

statements, including, without limitation, management’s examination of historical operating trends and data, are based upon our current expectations of future events and

various assumptions which may not be realized or accurate. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis

for them. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved. We undertake no obligation to update or revise

forward-looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this presentation. Such

risks, uncertainties and other important factors include, among others: future global economic conditions, delays in reconstruction of our Pori, Finland manufacturing facility or

losses for business interruption or construction costs that exceed our coverage limit applicable to the fire at that facility, changes in raw material and energy prices, access to

capital markets, industry production capacity and operating rates, the supply demand balance for our products and that of competing products, pricing pressures, technological

developments, changes in government regulations, geopolitical events and other risk factors as discussed in our prospectus filed pursuant to Rule 424(b)(4) on December 1,

2017 and our annual report on Form 10-K filed on February 23, 2018.

This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the U.S. ("GAAP"), including EBITDA, adjusted

EBITDA, adjusted EBITDA margin, free cash flow and net debt and certain ratios and other metrics derived therefrom. We have provided reconciliations of non-GAAP financial

measures to the most directly comparable GAAP financial measures in the Appendix to this presentation.

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Architectural Coatings

14%

Industrial Coatings11%

Construction44%

Plastics15%

Personal Care, Food,

Pharmaceuticals & Active Materials

6%

Agriculture & Water4%

Other6%

Venator Snapshot

3

En

d M

ark

ets

(4)

FY17

Revenue (mm)(1) $2,209

Pro forma adj. EBITDA (mm)(2) $500

% margin 23%

FY17 4Q17 Run-rate(3)

Revenue (mm) $1,604

Adj. EBITDA (mm) $387 $476

% margin 24% 30%

FY17 4Q17 Run-rate(3)

Revenue (mm) $605

Adj. EBITDA (mm) $72 $60

% margin 12% 10%

Titanium Dioxide Performance Additives

Note: See Appendix for a reconciliation of pro forma Adj. EBITDA and Run-rate Adj. EBITDA.

(1) Excludes revenue from other businesses and entities not included in the separation of Venator from Huntsman; (2) Titanium Dioxide segment Adjusted EBITDA and Performance Additives segment Adjusted EBITDA adjusted to include estimated public company standalone costs of $40 million, pro forma for unrealized $66 million benefit from business improvement program, and excludes 1Q17 impact from Pori fire of $15 million; (3) Represents annualized segment 4Q17 adj. EBITDA, % margin based on FY17 revenue; not adjusted for seasonality; excludes allocation of standalone corporate costs and unrealized benefit from business improvement program; (4) FY17 revenues

Seg

men

t

Architectural Coatings

28%

Industrial Coatings15%

Plastics34%

Inks6%

Personal Care, Food,

Pharmaceuticals & Active Materials

6%

Fibers & Films 8%

Other3%

Rep

resen

tati

ve

Cu

sto

mers

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$306

$699

$449

$117 $134

($8)$61

$387 $476

17%

30%

22%

6% 7%N/A 4%

24%

30%

2010 2011 2012 2013 2014 2015 2016 2017 4Q17RunRate

(1) (1) (1) (1) (1)

Titanium DioxideSegment overview

4

Architectural Coatings

28%

Industrial Coatings15%

Plastics34%

Inks6%

Personal Care, Food,

Pharmaceuticals & Active Materials

6%

Fibers & Films8%

Other3%

Chemours17%

Cristal12%

Venator11%

Lomon Billions8%

Kronos8%

Tronox6%

Others38%

Europe50%

Asia Pacific22%

US & Canada

17%

Rest of World11%

FY17 Revenues Source: Management Estimates

Consumer 46%

Segment

Revenues

$1.6billion

Segment

Adjusted EBITDA

$387million

COATINGS

INKS

2016 Nameplate Capacity; Excludes VNTR South African facility

TiO2 Capacity

End Markets FY17

FY17 Revenues

$ in millions Adj. EBITDA Margin

Adjusted EBITDA History

Revenues

Note: See Appendix for a reconciliation of Adj. EBITDA and Run-rate Adj. EBITDA. Financial information prior to October 1, 2014 adjusted to include the acquisition of the Titanium Dioxide and Performance Additives businesses of Rockwood Holdings, based upon their management’s representation

(1) Adjusted to include the Oct. 1, 2014 acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood Holdings, Inc. as if consummated at the beginning of the period; excludes the related sale of our TR52 product line – used in printing inks – to Henan Billions Chemicals Co., Ltd. in December 2014; and excludes the allocation of general corporate overhead by Rockwood; (2) Represents annualized Titanium Dioxide 4Q17 adj. EBITDA, % margin based on FY17 LTM revenue; not adjusted for seasonality; excludes allocation of standalone corporate costs and unrealized benefit from business improvement program

(2)

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Market Leader in High-Value Specialty TiO2

Source: Management estimates5

Venator has more than half of its sales in high value TiO2 categories

1,000 2,000 3,000 4,000 5,000 6,000

Price

Low Quality

Functional

Differentiated

Sp

ecia

lties

9%17% 42% 32%

21%0% 49% 30%

Legend:

% Total global TiO2

industry demand

% Venator TiO2 sales

Venator Focus

Estimated World Demand (kmt)Indicative EBITDA

margins1x 2x 3x+

� Catalysts

� Food

� Pharma & Cosmetics

� Fibers & Films

� Solar

� Speciality Inks

� Industrial coatings

� Performance plastics

� Differentiated Inks

� Functional coatings (architectural)

� Functional plastics

� Paper

Applications

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$60$73 $78

$57

$17 $21$35

$5 $0$15

$31 $38 $46

$69

$114

$142 $134

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Adjusted EBITDA Commodity TiO2 Average Sales Price ($/ton)

Price Momentum Expected to Continue

Source: Company filings, management estimates and TZMI6

Quarterly TiO2 Average Sales Price ($/MT)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18F

Venator TZMI

4Q17 vs. 4Q13 – TiO2 sales price up $50/ton, Segment Operating Adjusted EBITDA up $74mm

$ in millions

Historical cyclical peak

Note: Financial information prior to October 1, 2014 adjusted to include the acquisition of the Titanium Dioxide and Performance Additives businesses of Rockwood Holdings, based upon their management’s representation

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Global TiO2 Operating Rate Outlook

Improving utilization rates through gradual demand improvement

Source: TZMI, management estimates7

0%

20%

40%

60%

80%

100%

0

2,000

4,000

6,000

8,000

2011 2012 2013 2014 2015 2016 2017E 2018P 2019P

Op

era

tin

g R

ate

Vo

lum

e (

kM

T)

Global Demand Global Effective Operating Rate ex. China (%) Global Effective Operating Rate (%)

Global TiO2 Effective Operating Rate Outlook

� Western producers operating at ~95%+ utilization rates, while Chinese operating rates continue to improve

� No new capacity expected:

– Neither greenfield nor brownfield economics are supported by current TiO2 prices

– Significant time for plants to come online (3-4 years)

� Differential between Western and Chinese product quality now transparent to all customers and producers

� Customers have moved beyond thrifting / substitution

� Chinese environmental enforcements idled estimated 250kMT-300kMT of annualized capacity in 3Q17 – trend

expected to continue in 2018

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Sulfate Production to Benefit from Sustained Sulfate Ore Advantage

Source: TZMI, Management estimates8

Principal Feedstock Types Sulfate Ore Prices Advantaged and Less Volatile

(TiO2 Ore Prices, $/MT)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2009 2014 2019P

Rutile (95% content) Chloride Slag (85% content)

Sulfate Slag (79% content) Ilmenite (52% content)

Favorable market structure for sulfate ores

Sulfate Chloride

Feedstock Ilmenite Chloride Slag

Capital Intensity Low High

Energy Usage Low High

Number of Producers

>20 <5

LargestProducer Share

<15% ~70%

Primary Sulfate Feedstock

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$69 $69$72

$103

$119

$89 $98

$91

15% 16%13%

15% 14%12% 12% 12%

2010 2011 2012 2013 2014 2015 2016 2017

Segment Adj. EBITDA Segment Adj. EBITDA Margin

Architectural Coatings

14%

Industrial Coatings11%

Construction44%

Plastics15%

Agriculture & Water

4%

Other6%

Performance AdditivesSegment overview

9

Consumer 25%

Europe32%

Asia Pacific16%

US & Canada50%

Rest of World2%

$ in millions

(1) (1) (1) (1) (1)

FY17 Revenues

End Markets

Segment Adjusted EBITDA History

Segment Revenues

Segment

Revenues

$0.6billion

Segment

Adjusted EBITDA

$72million

CONSTRUCTION

COATINGS

FY17

Source: Management Estimates FY17 Revenues

Personal Care, Food, Pharmaceuticals & Active

Materials6%

Note: See Appendix for a reconciliation of pro forma Adj. EBITDA and pro forma Run-rate Adj. EBITDA. Financial information prior to October 1, 2014 adjusted to include the acquisition of the Titanium Dioxide and Performance Additives businesses of Rockwood Holdings, based upon their management’s representation

(1) Adjusted to include the Oct. 1, 2014 acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood Holdings, Inc. as if consummated at the beginning of the period; excludes the related sale of our TR52 product line – used in printing inks – to Henan Billions Chemicals Co., Ltd. in December 2014; and excludes the allocation of general corporate overhead by Rockwood

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Functional Additives

Performance Additives

Source: Company filings10

Residential construction (ACQ, ECOLIFETM and Copper Azole)

� Protects wood from decay and

fungal or insect attack

Industrial construction (Chromated Copper Arsenate)

� Prolongs service life of wood

Polyaluminium chloride based flocculants

� Clarifies water by promoting the

sedimentation of particles

� Highly durable red, yellow, black

and tan pigments

� Colorants for paint, plastics and

concrete

Iron Oxides

� Unique blue-shade pigments

� Violet and pink variants

Ultramarines

Specialty Inorganics Chemicals

� Weather-resistant, chemically

stable pigments

� Distinct color shades

Driers � Controls the drying rate of a paint

or ink

Color Pigments

Timber and Water

Treatment

Barium and Zinc Additives � Fillers that enhance the gloss and flow of paints and the mechanical properties of plastics

� Specialty soft white pigments

Product Characteristics & Uses Competition Benefit

32%

32%

36%

‘17 EBITDA % split

Product overview

� Strong EBITDA margins

� Complementary and common process technology

� Similar customer base to TiO2

� High cash conversion margins

� Good geographic balance

� Similar customer base to TiO2

� Common process technology

� Limited number of major competitors

� Stable demand profile

� High cash conversion

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$90 Million EBITDA Improvement Program

11

Business Improvement Program

Expected Annual EBITDA Capture

Highlighted Activities

� Incremental EBITDA benefit to 2016

� Realized $9 million of incremental benefits in 4Q17

� $24 million of EBITDA benefit captured in 2017

� Full run-rate expected to be captured by 1Q19

� Total estimated cash restructuring costs of ~$100 million

$ in millions

Source: Management estimates

� Facility rationalization program completed

– Umbogintwini, South Africa (TiO2) – closed

– Calais, France (TiO2 white end) – closed

– Easton, PA. and St. Louis, MO. (color pigment) –closed

� Leverage position in higher value markets

� Launch of new TiO2 products

Expected Run-rate Improvement

$30

$90$30

$30

Facilities closures Fixed costs Volume EBITDAImprovement

$ in millions

$24

2017 2018F 2019F

Actual Forecast

$24 million of EBITDA benefit captured in FY17

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Financial Profile

(1) Net debt to LTM EBITDA; 3Q17 pro forma adjusted for corporate stand alone costs

12

Net Debt

$ in millions

Attractive Position

Comment

� Liquidity of $481mm as of December 31, 2017

– $238mm cash

– $243mm ABL borrowing base

� Net debt decreasing

� Attractive tax profile

– $1bn of Net Operating Losses

– No material change from U.S. tax reform

� Cross currency swaps executed in December 2017

– Annual interest savings of $5mm, $21mm by maturity in July 2022

– Weighted average cost of debt reduced to 4.4% from 5.0%

Cash tax rateAdjusted effective tax rate

DebtCash

Tax Rate

3Q17 4Q17

$(238)$(186)

$757$751

$519$565

1.6x(1)

1.3x(1)

0

0.5

1

1.5

2

2017 Expected

18%

9%

15-20%

10-15%

15-20%15-20%

10-15%

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Cash Uses

(1) Excluding Pori reconstruction costs

13

Cash Uses 2017 2018E

Capital expenditures(1) $(103) ~$(120)

Cash interest (28) ~(35)-(40)

Primary working capital change

35 ~(20)-(30)

Restructuring (33) ~(35)-(40)

Other (includes pension) (33) ~(40)-(50)

Subtotal Cash Uses Before Taxes and Pori

(162) ~(250)-(280)

Cash income taxes (21)9% 10 - 15%

We expect to generate > $200 million FCF in 2018 before Pori

$ in millions

Op

po

rtu

nis

tic S

trate

gic

Tra

nsacti

on

s

Priority of Cash Uses

1. Earnings Growth

Pori reconstruction

Capex projects targeting >20% IRR

2. Strengthen Balance Sheet

Debt reduction

3. Shareholder Actions

Share repurchases

Dividend consideration

Net debt target $350 million

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Why Venator?

14

Leader in Specialty TiO2

with Sulfate Ore

Advantage

� Significant EBITDA margin improvement over past three years

� Business improvement program underway with projected Adjusted EBITDA

improvement of $90 million

� $24mm of incremental EBITDA benefit realized by the end of 4Q17

Successful Business

Transformation

Strong Free Cash

Flow Generation

Complementary

Performance Additives

Business

� Market leader in high-value specialty TiO2

� Sulfate production to benefit from sustained sulfate ore advantage

� Global provider of performance additives, with market leading positions in attractive products

� Stable EBITDA and consistent cash flows, benefiting from improvement program

� Strong free cash flow generation will enable the rebuild of our Pori, Finland facility and debt reduction improving equity value

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Appendix

15

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Pro Forma Adj. EBITDA Reconciliation

16

$ in millions 2010 2011 2012 2013 2014 2015 2016 4Q16 4Q17 FY17

Net Income/(Loss) $ (162) $ (352) $ (77) $ (4) $ 70 $ 144

Net income attributable to noncontrolling interests (2) (7) (10) (2) (2) (10)

Net income of discontinued operations – (10) (8) – – (8)

Interest 2 30 44 13 11 40

Taxes (17) (34) (23) (9) 24 50

Depreciation and Amortization 93 100 114 30 32 127

EBITDA $ (86) $ (273) $ 40 $ 28 $ 135 $ 343

Acquisition and integration expense 45 44 11 – 3 5

Separation gain – – – – (27) (27)

Purchase accounting adjustments 13 – – – – –

(Gain) loss on disposition of business (1) 1 (22) 1 – –

Certain legal settlements and related expense 3 3 2 1 – 1

Amortization of pension and postretirement actuarial losses 11 9 10 2 4 17

Net plant incident costs – 4 1 3 – 4

Restructuring, impairment, and plant closing costs 62 220 35 4 3 52

Adjusted EBITDA $ 47 $ 8 $ 77 $ 39 $ 118 $ 395

Corporate and other 29 53 53 7 16 64

Operating Segment Adjusted EBITDA $ 76 $ 61 $ 130 $ 46 $ 134 $ 459

Historical Segment EBITDA as reported(1) 409 818 538 215 – – – – – –

Titanium Dioxide Segment EBITDA – – – – 62 (8) 61 34 119 387

Performance Additives Segment EBITDA – – – – 14 69 69 13 15 72

Pro forma adjusted EBITDA relating to Rockwood acquisition – – – – 149 – – – – –

Public company standalone costs (pro forma 2010-2017) (40) (40) (40) (40) (40) (40) (40) (10) (10) (40)

1Q 17 impact from Pori Fire – – – – – – – – – 15

Business improvement program unrealized – – – – – – – – 14 66

Pro forma Adjusted EBITDA $ 369 $ 778 $ 498 $ 175 $ 185 $ 21 $ 90 $ 37 $ 138 $ 500

(1) Adjusted to include Rockwood pro forma

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Pro Forma Financial Detail

17

$ in millions 2010(1)

2011(1)

2012(1)

2013(1)

2014(1)

2015 2016 4Q16 4Q17 FY17

Titanium Dioxide Revenue 1,773$ 2,305$ 2,083$ 2,105$ 2,009$ 1,584$ 1,554$ 357$ 387$ 1,604$

Performance Additives Revenue 686 727 673 656 664 578 585 134 141 605

Total Revenue 2,459$ 3,032$ 2,756$ 2,761$ 2,673$ 2,162$ 2,139$ 491$ 528$ 2,209$

Titanium Dioxide Adj. EBITDA 306$ 699$ 449$ 117$ 134$ (8)$ 61$ 33$ 119$ 387$

Performance Additives Adj. EBITDA 103 119 89 98 91 69 69 13 15 72

Operating Segment Adjusted EBITDA 409$ 818$ 538$ 215$ 225$ 61$ 130$ 46$ 134$ 459$

Note: Financial information prior to October 1, 2014 adjusted to include the acquisition of the Titanium Dioxide and Performance Additives businesses of Rockwood Holdings, based upon their management’s representation

(1) Adjusted to include the Oct. 1, 2014 acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood Holdings, Inc. as if consummated at the beginning of the period; excludes the related sale of our TR52 product line – used in printing inks – to Henan Billions Chemicals Co., Ltd. in December 2014; and excludes the allocation of general corporate overhead by Rockwood