Investor Presentation€¦ · North America 31% Asia Pacific 35% EMEA 20% Latin America 14%...
Transcript of Investor Presentation€¦ · North America 31% Asia Pacific 35% EMEA 20% Latin America 14%...
Investor PresentationMarch 2020
Safe Harbor Statement and Other Matters
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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, 2019. 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
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Chemours Investment Thesis
The Chemours Company at a Glance
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Fluoropolymers24%
Fluorochemicals24%
Performance Chemicals & Intermediates
5%
Mining Solutions
5%
Titanium Dioxide
42%
Product1
North America 39%
Asia Pacific 28%
EMEA21%
Latin America12%
Geography1
See reconciliation of Non-GAAP measures in the appendix
Source: Company filings and data
1. Data represents net sales for the year ended December 31, 2019
Chemical Solutions Titanium Technologies
($ in millions)
$80
15%
0%
10%
20%
30%
40%
50%
60%
70%
0
50
100
150
200
250
300
2019
$533
0
100
200
300
400
500
600
700
800
900
2019
$505
22%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
200
400
600
800
1,000
1,200
1,400
2019
$2,345
0
500
1000
1500
2000
2500
3000
3500
2019
$578
22%0%
20%
40%
60%
80%
100%
120%
140%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2019
$2,648
0
500
1000
1500
2000
2500
3000
2019
Fluoroproducts
$ 1,020
18%
0%
10%
20%
30%
40%
50%
60%
-
500
1,000
1,500
2,000
2,500
3,000
2019
$5,526
0
1000
2000
3000
4000
5000
6000
7000
2019
Total Chemours
Adjusted EBITDAAdjusted EBITDA Margin
Net SalesAdjusted EBITDA Margin
Net SalesAdjusted EBITDA Margin
Net SalesAdjusted EBITDA Margin
Net Sales Adjusted EBITDA Adjusted EBITDAAdjusted EBITDA
Fluoroproducts
48%Chemical
Solutions
10%
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Fluoroproducts Business Summary
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BUSINESS OVERVIEW
• A 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 coatings
Fluorochemicals – refrigerants, propellants,
foam blowing agents, fire suppressants
Key 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 data
1. Segment net sales for the year ended December 31, 2019
Fluoropolymers
50%
Fluorochemicals
50%
Product1
$ Millions
2018 2019 % Δ
Revenue $2,862 $2,648 (7%)
Adjusted EBITDA $783 $578 (26%)
Adj. EBITDA
Margin27% 22% (500bps)
North America 42%
Asia Pacific 25%
EMEA25%
Latin America8%
Geography1
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Fluorochemicals Long-Term Market View
Chemours Is Well Positioned to Capture Market Growth and Value for Both HFOs and Non-HFOs
Stationary Market Breakdown
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Attractive Growth in Stationary Markets Expected over Next Decade
Source: Industry trade publications, company disclosures, and company estimates
Note: CAGRs are based upon non-rounded company estimates
REVENUE
$0.3B88% CAGR
5% 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% CAGR
6% 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
$1.1B
35% 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
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Opteon™ Offers Low GWP Alternatives that Meet Tightening Environmental Standards
Source: UN IPCC Fifth Assessment Report and Company estimates
Opteon™ Patent Estate
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• 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 - 2027
CAGR
2027
Market 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
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Strong Pipeline Build Since Announcing Application Development in December 2017
Energy
Automotive
Consumer Electronics & Communication
Recent Wins and Our Application Development Pipeline
DATA CENTERS
USB-C CABLES
MOBILE DEVICEANTENNAS
HYBRID VEHICLES
ENERGY STORAGE
* Quarterly numbers based on three month average
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Chemical Solutions Business Overview
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FINANCIAL SUMMARY
Mining Solutions – sodium cyanide, hydrogen
cyanide
Performance Chemicals & Intermediates –
methylamines, glycolic acid, Vazo™ products,
aniline, nitrobenzene
Mining Solutions
50%
Performance Chemicals & Intermediates
50%
Product1
North America 59% Asia Pacific
11%
EMEA4%
Latin America26%
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 data
1. Segment net sales for the year ended December 31, 2019
$ Millions
2018 2019 % Δ
Revenue $602 $533 (11%)
Adjusted
EBITDA$64 $80 25%
Adj. EBITDA
Margin11% 15% 400bps
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Titanium Technologies Business Overview
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FINANCIAL SUMMARYBUSINESS OVERVIEW
• A global leader1 in TiO2 with production capacity of 1.25 million
metric tons
– 4 TiO2 plants
– Packaging facility at Kallo, Belgium
– Mineral sands mine at Starke, FL and Folkston, GA
• Strong brand reputation
– Ti-Pure™ sold to approximately 600 customers globally
• Industry-leading manufacturing cost position
– Unique chloride technology
– Feedstock flexibility
Coatings – architectural, industrial, automotive
Plastics – rigid/flexible packaging, PVC
pipe/windows
Papers – laminate papers, coated
paper/paperboard, sheetLaminates &
Paper10%
Coatings67%
Plastics23%
Product2
North America 31%
Asia Pacific 35%
EMEA20%
Latin America14%
Geography3
See reconciliation of Non-GAAP measures in the appendix
Source: Company filings and data
1. TiO2 market share statistics based on production capacity per 2018 TZMI
2. Segment net sales for the three months ending September 30, 2019; excludes non-TiO2 sales
3. Segment net sales for the year ended December 31, 2019 ; excludes non-TiO2 sales
$ Millions
2018 2019 % Δ
Revenue $3,174 $2,345 (26%)
Adjusted EBITDA $1,055 $505 (52%)
Adj. EBITDA
Margin33% 22% (1100bps)
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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
Chemours
Ti-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
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2020 Outlook – Focus & Discipline in Low Growth Environment
Adjusted
EBITDA $1.05 - $1.25 Billion
Up 13% from 2019 at the mid-point
Up ~$0.54/share at the mid-point
More than doubling Free Cash Flow
Lowering CAPEX by approximately 20%
AdjustedEPS ~$2.60 - $3.55
1 Subject to risks, uncertainties and assumptions, all of which are described in our public filings and safe harbor statement
Key Factors and Assumptions1
See reconciliation of Non-GAAP measures in the Appendix
Free Cash Flow >$350 Million
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Capex ~$400 Million
Cash toShareholders The majority of our free cash
Improved earnings and free cash flow… …disciplined investment to drive shareholder value
Expect a gradual TiO2 market recovery in line with GDP and
share regain over the course of 2020
Continued Opteon™ adoption in the auto segment; adoption in
stationary segment slowed due to illegal imports
Improved operating performance & productivity across all three
segments
Adjusted effective tax rate for the full-year to be within a range of
19 to 20 percent
Outlook was provided on February 14, 2020 and is not being updated or confirmed at this time
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DuPont Lawsuit
• Chemours seeks judgment limiting DuPont’s indemnification to maximums DuPont itself established for
Chemours at spin or, in the alternative, return of the $4B extracted at spin
• Chemours is on solid financial footing, a result of hard choices made by management and the tireless
work of the 7,000 men and women of Chemours
• We remain committed to proactively addressing historical environmental issues handed to us at spin and
being a good partner to the communities we operate in
• We believe our future is bright. Our intention is to preserve and protect the rights of Chemours and all
of our stakeholders
Corporate Responsibility Commitment
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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.
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AFFF / Fire-Fighting Foams
• PFOS was the dominant chemistry in the Fire-fighting Foams industry for decades
• Neither Chemours, nor DuPont before it, made or sold PFOS
• Chemours’ potential contribution to PFOA in the environment from our ingredients used in fire-fighting foams is
negligible, if at all
• Chemours has never manufactured or formulated fire-fighting foams
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Reconciliations
Segment Net Sales and Adjusted EBITDA (Unaudited)
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($ in millions)
2019 2018
SEGMENT NET SALES
Fluoroproducts 2,648$ 2,862$
Chemical Solutions 533 602
Titanium Technologies 2,345 3,174
Total Company 5,526$ 6,638$
SEGMENT ADJUSTED EBITDA
Fluoroproducts 578$ 783$
Chemical Solutions 80 64
Titanium Technologies 505 1,055
Corporate and Other (143) (162)
Total Company 1,020$ 1,740$
SEGMENT ADJUSTED EBITDA MARGIN
Fluoroproducts 22% 27%
Chemical Solutions 15% 11%
Titanium Technologies 22% 33%
Corporate and Other — —
Total Company 18% 26%
Twelve Months Ended
December 31,
GAAP Net Income Attributable to Chemours to Adjusted Net Income, Adjusted
EBITDA, and Adjusted EPS Reconciliations (Unaudited)
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($ in millions except per share amounts)
$ amounts $ per share* $ amounts $ per share*
Net (loss) income attributable to Chemours (1) (52)$ (0.32)$ 995$ 5.45$
Non-operating pension and other post-retirement employee benefit cost (income) 368 2.20 (27) (0.15)
Exchange losses (gains), net 2 0.01 (1) (0.01)
Restructuring, asset-related, and other charges 87 0.52 49 0.27
Loss on extinguishment of debt — — 38 0.21
Gain on sale of assets and businesses (10) (0.06) (45) (0.24)
Transaction costs 3 0.02 9 0.05
Legal charges 175 1.05 82 0.45
Other charges — — 1 0.01
Adjustments made to income taxes — — (41) (0.22)
Benefit from income taxes relating to reconciling items (154) (0.92) (26) (0.14)
Adjusted Net Income (1) 419$ 2.51$ 1,034$ 5.67$
Net income attributable to non-controlling interests — 1
Interest expense, net 208 195
Depreciation and amortization 311 284
All remaining provision for income taxes 82 226
Adjusted EBITDA 1,020$ 1,740$
Weighted-average number of common shares outstanding - basic 164,816,839 176,968,554
Weighted-average number of common shares outstanding - diluted (1) 167,245,023 182,572,021
Basic (loss) earnings per share of common stock (0.32)$ 5.62$
Diluted (loss) earnings per share of common stock (1) (0.32) 5.45
Adjusted basic earnings per share of common stock 2.54 5.85
Adjusted diluted earnings per share of common stock (1) 2.51 5.67
* Note: $ per share columns may not sum due to rounding.
(1) In periods w here the Company incurs a net loss, the impact of potentially dilutiv e securities is ex cluded from the
calculation of EPS under U.S. GAAP, as their inclusion w ould hav e an anti-dilutiv e effect. As such, w ith respect to
the U.S. GAAP measure of diluted EPS, the impact of potentially dilutiv e securities is ex cluded from our calculation
for the tw elv e months ended December 31, 2019. With respect to the non-GAAP measure of adjusted diluted EPS, the
impact of potentially dilutiv e securities is included in our calculation for the tw elv e months ended December 31, 2019,
as Adjusted Net Income w as in a net income position. Based on our consistent application of this methodology , the
shared-based reconciliations as show n abov e for the tw elv e months ended December 31, 2019 may not sum.
2019 2018
Twelve Months Ended
December 31,
Estimated GAAP Net Income Attributable to Chemours to Adjusted Net
Income, Adjusted EBITDA and Adjusted EPS Reconciliations (Unaudited)
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($ in millions except per share amounts)
Low High
Net income attributable to Chemours 405$ 556$
Transaction costs 23 30
Adjusted Net Income 428 586
Interest expense, net 215 220
Depreciation and amortization 309 309
All remaining provision for income taxes 98 135
Adjusted EBITDA 1,050$ 1,250$
Weighted-average number of common shares outstanding - basic (1) 163.5 163.5
Dilutive effect of the Company's employee compensation plans (1,2) 1.4 1.4
Weighted-average number of common shares outstanding - diluted (1,2) 164.9 164.9
Basic earnings per share of common stock 2.48$ 3.40$
Diluted earnings per share of common stock (2) 2.46 3.37
Adjusted basic earnings per share of common stock 2.62 3.58
Adjusted diluted earnings per share of common stock (2) 2.60 3.55
The Company ’s estimates reflect its current v isibility and ex pectations of market factors; including, but not limited to: currency mov ements, titanium diox ide prices, and end-market
demand. Actual results could differ materially from the current estimates due to market factors and unknow n or uncertain other factors, such as the impact of currency mov ements on the
Company 's results, including ex change gains and losses, impacts of new accounting pronouncements, cost sav ings actions that may be taken in the future, in addition to employ ee
benefit activ ity w ith respect to the Company 's foreign pension plans, including settlements or curtailments.
(1) The Company ’s estimates for the w eighted-av erage number of common shares outstanding - basic and diluted reflect results for the three months ended December 31, 2019, w hich are
carried forw ard for the projection period.
Year Ended December 31, 2020
(Estimated)
(2) Diluted earnings per share is calculated using net income av ailable to common shareholders div ided by diluted w eighted-av erage common shares outstanding during each period,
w hich includes unv ested restricted shares. Diluted earnings per share considers the impact of potentially dilutiv e securities ex cept in periods in w hich there is a loss because the inclusion
of the potential common shares w ould hav e an anti-dilutiv e effect.
Estimated GAAP Cash Flows Provided by Operating Activities to Free Cash
Flows Reconciliations (Unaudited)
25
($ in millions unless otherwise noted) (Estimated)
Year Ended December 31,
2020
Cash provided by operating activities > $750
Less: Purchases of property, plant, and equipment ~ (400)
Free Cash Flows > $350
The Company ’s estimates reflect its current v isibility and ex pectations of market factors; including, but not limited to: currency mov ements, titanium diox ide
prices, and end-market demand. Actual results could differ materially from the current estimates due to market factors and unknow n or uncertain other factors,
such as the impact of currency mov ements on the Company 's results, including ex change gains and losses, impacts of new accounting pronouncements, cost
sav ings actions that may be taken in the future, in addition to employ ee benefit activ ity w ith respect to the Company 's foreign pension plans, including settlements
or curtailments.
26©2018 The Chemours Company. Chemours™ and the Chemours Logo are trademarks or registered trademarks of The Chemours Company