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NYSE: NP
March 2013
Neenah Paper Investor Presentation
Company Overview
Fine Paper
High-end textured and colored graphic papers
End markets: premium 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.
Net Sales $800+ million
2
Strategic Priorities
Lead in profitable, specialty niche markets
Increase participation in markets that can provide us with leading positions and value our core competencies in high performance media , coating and saturating
Expand in new geographies and market adjacencies
Increase our size, growth rate and portfolio diversification through organic initiatives and M&A
Invest to grow in our higher value performance and image-driven products (e.g. melt blown filtration premium label , luxury packaging)
Supplement organic growth with acquisitions that deliver value and expand our presence in growing specialty markets
Deliver consistent, attractive returns
Pricing power and ability to offset input cost variability
Sizeable cash flow generation and conservative balance sheet providing flexibility to pursue attractive opportunities
Cash deployment to shareholders via dividend and share buybacks
Return on Capital a key performance metric 3
$384
$420
$407
7.6%
8.0%
9.2%
0.055
0.065
0.075
0.085
0.095
0.105
0.115
0.125
0.135
0.145
360
370
380
390
400
410
420
430
440
2010 2011 2012
Net Sales $ millionOP%
Segment Financial Trends
Technical Products
Growth led by filtration, labels and abrasives
Margins expanding with higher value mix, sales growth, cost efficiencies and pricing
4
Businesses able to grow and increase margins despite rising input costs
Currency Impact
$273 $275
$373
13.6% 14.4%
15.0%
10.0%11.0%12.0%13.0%14.0%15.0%16.0%17.0%18.0%19.0%20.0%
2010 2011 2012
Net Sales $ millionsOP% Fine Paper
Segment providing consistent and attractive profits, cash flow and returns on capital
Three years of top-line growth, boosted in 2012 by acquisition of brands
$429
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
5
Key technologies
Multi-fiber forming capabilities
Saturation, coating and surface treatments
Polymer chemistries
Success Factors
Ability to Meet Specialized
Performance Requirements
Strong Barriers to Entry
6
Long-standing relationships
Global market-leading customers
Intricate qualification requirements
Ongoing joint product development
Innovative new products
Customer Intimacy
and Qualification
Filtration
Tape
Abrasives
Specialties
Europe
North America
Asia
RoW
A Diversified Global Portfolio
Strategic
Priorities
Key
Customers/
Competitors
Est.
Market
Growth
Filtration
Higher value melt
blown products
Internationalization
Market Adjacencies
Mann & Hummel,
Mahle, Hengst 2x
GDP Ahlstrom,
H&V
Specialties
Performance labels
High-end wall cover
Medical packaging
Avery Dennison,
3M, Saint-Gobain
GDP+
Multiple based on
markets
Industrial
Backing- Tape
Differentiation via
saturating/coating
Optimize costs
3M, Shurtape, IPG,
Alpha Beta, Tesa
GDP
Wausau, Ahlstrom
Industrial
Backing-
Abrasives
Enter new
adjacencies
Follow customers in
emerging markets
3M, St. Gobain,
Hangzhou Star,
Starcke
Ahlstrom, Munksjo
Sales by
Product Group
Sales by
Geography
7
Life Science
Process & Food
Water
Transpo/H. Duty
Gas Turbine
Dust Control
HVAC /Air
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Neenah Net Sales
Transp. Filtration
CAGR 8%
Filtration: A Platform for Growth
Asia NAFTA Europe RoW
OtherNPH&VAhlstrom
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) to OEMs and aftermarket
Growth in higher value products and new adjacencies requiring third melt blown line (2013 start-up)
Entry into New Adjacencies
Ability to leverage our technologies to enter into other attractive filtration markets
Recent entry in beverage filtration (coffee capsule) and industrial filter applications
Specialty
filtration
media markets
> $4 billion
Geographic Expansion Opportunities
Global engine filter requirements continue to become more demanding
Existing global customers desire for us to have an expanded geographic presence
8 Source: company estimates
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
Retail Branded specialty papers sold to consumers for school supplies, posters, crafting, business and resume papers, advertising and promotions
Graphic Imaging Unique colors, textures and finishes for identity, print collateral, invitations, advertising, and other high-end commercial printing
Fine Paper
9
Neenah
60
Mohawk 30
Others 10
Value Share- Premium Papers $650 million market
Powerful brands and tools
Brands known > 2:1 over competition, specified by printers and designers
Technology tools to drive demand and improve supply chain efficiencies
Success Factors
Leading Brands and Supply Chain
Capabilities
Clear Market Leadership
10
Efficient Manufacturing Platform
Purpose-built assets considered youngest in the industry
Redundant capabilities, unique in our category with a variety of texture and color
Superior Asset Base with a
Leading Cost Position
An Evolving Portfolio
Successful growth post spin-off by evolving mix and extending reach…
Expanding in growing niches (luxury packaging, premium label, scrapbooking)
Supply chain extension (Crane, envelopes, electronic consumer print applications)
New products (brights, digital)
New channels (retail, internet)
New geographies
Opportunistic brand acquisitions
….. while gaining share and driving consolidation in our core markets
11
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
2004 Today
Writing
Text & Cover
Pkg/Label/Oth
Retail
$221
$400
Fine Paper Sales Mix
$0
$10
$20
$30
$40
$50
$60
Brights Craft Business Stationary
NP SW Acquisition Oppty Areas
Platforms for Growth
Source: company estimates
Specialty retail papers (excl. copy paper)
is a market of ~$150 million. Neenah sells to customers like Office Max, Staples, Michaels, and Target.
On January 31, 2013 we acquired leading business paper brands from Southworth, increasing our presence and gaining distribution at Wal-Mart.
Retail Paper
Niche Markets
> $150 million
12
The global market for luxury packaging, premium labels and retail solutions is over $250 million and growing. Our current share in this market is less than 15%, anchored by labels in North America.
NP
Others
Global Luxury Pkg
& Premium Label
Markets
$250 million
Key Financial Objectives
Consistent profitable growth
16 consecutive quarters ahead of expectations
Increasing Return on Capital
Averaging over 150 bps per year since 2009
Efficient capital structure
Debt/EBITDA currently ~1.5x; ample financing availability
Attractive shareholder returns
Top quartile returns for Russell 2000 Value stocks 2010-2012
Competitive and growing dividend
13
Profitable Growth
$ millions 2010 2011 2012
Sales $ 658 $ 696 $ 809
Adj. EBIT1 52 59 80
Adj. E.P.S.1 $ 1.47 $ 1.91 $ 2.78
(1) Excludes one-time items for divestitures, integration and other costs as noted in GAAP table
Top line growth via share gains, new products, price/mix and 2012 acquisition
Faster bottom line growth with margin improvement and debt reduction
Cash deployed to support growth, reduce debt, increase dividend and buy shares
14
16%
36%
46%
Sales Adj. EBIT Adj. E.P.S.
% Change 2012 vs. 2011 Full Year
Return on Capital
8% 9%
11%
2010 2011 2012
% 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, brand acquisitions)
Exceeding double-digit levels
1.2 1.3
1.4
2010 2011 2012
Sales/Assets
15
$245
$186 $182 2.8x
2.0x
1.6x
1
1.35
1.7
2.05
2.4
2.75
3.1
3.45
3.8
30
80
130
180
230
Dec 10 Dec 11 Dec 12
Target Range
1.5 – 2.5x
Capital Structure
$ millions
Dec
2010
Dec
2011
Dec
2012
Bonds 7 3/8%
(due Nov. 2014) $ 223 $ 158 $ 90
ABL (due Nov. 2017)
- - 56
Term Loan (amortized 5 yrs)
- - 30
Germany 22 28 6
Debt $ 245 $ 186 $ 182
Interest Exp. $ 20 $ 16 $ 13
Debt restructuring and reductions lowering interest expense. 2013 projected to decline to $11 million, following Q4 2012 bond call
Debt well within targeted capital structure range
No short term liquidity events; ample flexibility and additional borrowing capacity
Credit rating Ba3/BB 16
$0.40
$0.44
$0.48
$0.60
0.3
0.4
0.5
0.6
0.7
2010 2011 2012 2013
Pro Forma Cash Flow $ millions
EBITDA $ 115
Interest Expense (10)
Other (tax, wkg cap, pension, etc..) (15-20)
Cash From Operations $ 85- 90
Capital Expenditures (25-30)
Free Cash Flow $ 55 – 65
FCF per share > $3.50
Cash Deployment & Returns
Cash Generation Pro forma free cash flow of ~ $ 60 million Moderate cap-ex needs (maint. of $10 mm/year)
with disciplined allocation process Favorable cash tax position (NOLs = $66 mm)
Cash Deployment Priority on organic growth and M&A; active
process to identify and evaluate opportunities Debt reduction $10 million stock repurchase plan Competitive dividend
17
Substantial cash flows resulting in double-digit yields
Annual Dividend per share
Investment Conclusions
Leading positions in profitable specialty markets
Track record of consistent momentum in sales and profits reflecting successful execution of plans
Sustainable, strong cash flows to support growth opportunities and provide attractive returns to investors
Sound capital structure and financial flexibility
Strategic focus on expanding in defensible and growing specialty markets, further from historical “pulp & paper” positioning
Attractive returns driven by organic growth, events and cash return to shareholders
$86
$93
$113
2010 2011 2012
Consolidated EBITDA (U$ millions)
18
Contact
For more information
visit our website: www.neenah.com
email: [email protected]
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: [email protected]
19
GAAP Reconciliation
Continuing Operations
$ millions 2010 2011 2012
EBIT (Operating Income) $ 55.1 $ 56.6 $ 70.4
Ripon Mill Close/(Gain on Sale) (3.4)
Acquisition integration costs 5.8
Other1 2.4 4.1
Adjusted EBIT $ 51.7 $ 59.0 $ 80.3
Depreciation & Amortization 29.7 30.0 28.0
Amort. Equity-Based Compensation 4.9 4.3 4.9
EBITDA $ 86.3 $ 93.3 $113.2
Earnings (Loss) per Share $ 1.61 $ 1.82 $ 2.41
Ripon Mill Close/(Gain on Sale) (0.14)
Acquisition integration costs 0.22
Other1 0.09 0.15
Adjusted Earnings per Share $ 1.47 $ 1.91 $2.78
20
1 Includes in 2011 ($0.09) and 2012 ($0.02) cost of early redemption of bonds, and in 2012 ($0.13) SERP settlement charge
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
21