Innospec

Innospec
“Ready to Accelerate”
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Sidoti & Company LLC
Sixteenth Annual
Emerging Growth Institutional Investor Forum
March 19, 2012
Forward-Looking Statements
This presentation contains certain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements of historical facts
included or incorporated herein may constitute forward-looking statements. Such forward-looking
statements include statements (covered by words like “expects”, “anticipates”, “may”, “believes”
or similar words or expressions), for example, which relate to operating performance, events or
developments that we expect or anticipate will or may occur in the future (including, without
limitation, any of the Company’s guidance in respect of sales, gross margins, pension liabilities and
charges, net income, growth potential and other measures of financial performance). Although
forward-looking statements are believed by management to be reasonable when made, they are
subject to certain risks, uncertainties and assumptions, and our actual performance or results may
differ materially from these forward-looking statements. Additional information regarding risks,
uncertainties and assumptions relating to the Company and affecting our business operations and
prospects are described in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2011, and other reports filed with the U.S. Securities and Exchange Commission.
You are urged to review our discussion of risks and uncertainties that could cause actual results to
differ from forward-looking statements under the heading "Risk Factors”. The Company
undertakes no obligation to publicly update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise.
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Use of Non-GAAP Financial Measures
The information presented in this presentation includes financial measures that are
not calculated or presented in accordance with Generally Accepted Accounting
Principles in the United States (GAAP). These non-GAAP financial measures include
EBITDA which is net income per our consolidated financial statements adjusted for
the exclusion of charges for interest expense (net), income taxes, depreciation,
amortization and impairment of Octane Additives business goodwill. The Company
believes that such non-GAAP financial measures provide useful information to
investors and may assist them in evaluating the Company’s underlying performance
and identifying operating trends. In addition, management uses these non-GAAP
financial measures internally to allocate resources and evaluate the performance of
the Company’s operations. While the Company believes that such measures are
useful in evaluating the Company’s performance, investors should not consider
them to be a substitute for financial measures prepared in accordance with GAAP.
In addition, these non-GAAP financial measures may differ from similarly-titled nonGAAP financial measures used by other companies and do not provide a comparable
view of the Company’s performance relative to other companies in similar
industries.
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Outline
Corporate Profile
Business Units
Market Quality
Market Drivers
Competitive Advantage
Strategy & Development
Organic Growth
Acquisitions
Capital Management and Innospec Stock
Conclusion
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Innospec – A NASDAQ Company which is :
Growing
In good quality markets
Highly cash generative
Net debt free
Innovative
Now covered by two analysts
Monness Crespi Hardt
Sidoti
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Innospec Inc. – Company profile
Innospec Inc. – NASDAQ (IOSP)
Corporate HQ in Littleton, CO
Regional offices in USA, UK,
continental Europe, Africa and Asia
Manufacturing sites in USA, UK,
France and Germany; global network
of offices and testing facilities
Revenue of $774 million (2011)
Approximately 850 employees in 20
countries
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Business Units
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Innospec’s business focus
Active
Chemicals
Fuel
Specialties
Innospec
(Oilfield Specialties)
Octane
Additives
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Innospec Fuel Specialties
We focus solely on fuel and fuel additive
technology
We develop and market products to
Improve cleanliness, efficiency and safety
Reduce emissions and maintenance costs of engines,
boilers and gas turbines
We will improve any fuel based on oil, coal,
or biofuel
“Focused on Fuel”
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Uniquely - We treat the Whole Barrel
Automotive Gasoil
& Middle Distillates
Jet Fuel
Light Heating Oil
Industrial Heavy Fuel Oil
Marine Bunker Fuel
Crude Oil
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Crude Oil
Automotive Gasoline
Consumer
Affluence
GDP
Fuel Price
Fuel Specialties
Attractive Business Drivers
Energy
Independence
Vehicles
on the road
Miles
driven
Underlying
Fuel Demand
(number of barrels)
Fuel Quality
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Refining
Investment
Air Quality
Legislation
Renewable
Fuels
Engine
Technology
(additives per
barrel)
Additive
Demand
CO2
Legislation
Fuel Economy
Legislation
Key Cost
Driver
- Crude Oil
Innospec’s Competitive Advantage in Fuel Specialties
Dedicated people to support customers
Best-in-class sales and technical teams
Focused and dedicated to fuel additives
Strong global presence, and still extending
New operations in Brazil and Russia underway
Good technology – focused on fuel
Dedicated R&D
High 35-40% of sales are from new products
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Oil Field Specialties
Natural Expansion into an
Adjacent Market
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Oil Field Specialties
Opportunity to expand into an adjacent market using
amendments to existing technology.
Good quality markets – higher growth rates in both
developed and developing countries.
Change in Exploration and Production – Unconventional
Shale, deepwater
Requires novel technology
Solutions to problems are allied to refinery issues
Prime opportunity for acquisitions
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Active
Chemicals
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Personal Care
Specialty surfactant manufacturing company
Focused on the personal care industry
Sun care, Hair conditioning,
Antiperspirant/Deodorant, Skin cleansing and
Skin care
Products in the market
L’OREAL, SEXY HAIR
CONCEPTS, L’OREAL
FINQUAT CT
QUATERNIUM 75
AVON, SCHRING PLOUGH,
UNILEVER, NEUTROGENA
FINSOLV TN
C12-15 Alkyl Benzoate
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COTY, UNILEVER
FINESTER EH-25
C12-15 Alkyl Ethylhexanoate
PAUL MITCHELL,
JOHN FREIDA
FINESTER DOM-R
Diethylhexyl maleate
Aroma Chemicals
Manufacturer of Fragrance Ingredients - Examples
Lilestralis® - lily of the valley
fragrances for fabric softeners, soaps
and other household and personal
care products
Osyrol® - Sandalwood
fragrance for fine
perfumes
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Polymers
EVA (ethylene – vinyl acetate) copolymers
Used in plastic injection moulding, hoses, films & foams
Polyethylene Waxes
Plastics processing, Candles, Adhesives
Also used as part of Personal Care portfolio
Relatively ‘commodity’ part of Active Chemicals
Subject to greater swings of demand and margins
Asset Optimization
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Active Chemicals Business Drivers
Sulfate-free
Improved
Performance
Concentrated
Delivery
Enhanced
Longevity
Parabens-free
1,4 dioxane
free
SLS/SLES
Free
Ingredient
Demand
GDP
“Natural”
Renewable
Resources
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Key Cost Drivers
Vegetable Oils
Crude Oil
Active Chemicals Market Quality
Very large global market, with good growth dynamics
Fragmented market – many different products and applications
Responsive to new technology – see drivers
Plenty space for smaller players to develop
Different consumer options for different economic times
Branded vs Store Brand - Provides some resilience
Innospec has a good competitive position
Very strong specialized technology portfolio
Continued innovation
Strong customer service ethos
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Efficient fit-for-purpose global network
Octane Additives
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TEL Phase-out
World’s only producer of tetra ethyl lead (TEL)
lead for leaded gasoline
TEL in Motor Gasoline in terminal decline
Countries still to convert to unleaded gasoline
North Africa and the Middle East
Customer Exits can be quick and with little warning
Aviation gasoline requires significant research and
development
Safety is paramount
Large legacy aircraft fleet
TEL is mandated by civil aviation regulations
Management focus on generating cash from remaining
volume
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Innospec
Strategy & Development
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Innospec in Good Shape to Expand
Solid base from which to expand
We have continued to expand throughout the downturn
Finances in good shape
Net debt free
Corporate services fit for purpose
Legacy compliance issues dealt with and behind us
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Innospec Strategy – Organic Growth
Fuel Specialties
Technology-driven ; Continued investment in R&D
Engine technology and fuel quality offers opportunities
Geographical expansion
New offices established in Brazil and Russia
Oilfield Specialties
Focus on a small number of key customer relationships
Existing organisation initially augmented by new hires
Low risk expansion into an adjacent market
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Innospec Strategy – Organic Growth
Active Chemicals
Technology Development
Improved Performance - Surfactants, Benzoate Esters
Customer drive for ‘natural’ green products
Octane Additives
Motor Gasoline
Understand Mogas Customer Demand
Ensure that customers who want to buy, can buy
Aviation Gasoline
Stay close to aviation fuel developments
Maximise value from the asset – supply/demand
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Acquisition Qualifications
Innospec has :
A strong balance sheet - Borrowing capability and bank support
Best-in-class management team with successful integration experience
Time is right to make acquisitions
Acquisition Profiles
Existing core markets (Personal Care, Oil Field Chemicals, Fuel Additives)
Smaller ‘technology’ acquisitions - $20m - $100m
Also looking for substantially larger opportunities
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Balanced Capital Management Program
Acquisitions remain a priority for growth
Share Repurchases or Dividend may also be used as
part of capital management.
2011 program repurchased almost 1 million shares
Retired 3% of the equity, at a cost of $26 million.
Further programs will be considered subject to cash
availability
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Ready to Accelerate
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Summary
Banks Continue to Support Innospec
Best-in-class management team
Organic Growth
Technology & Geographic Expansion
Adjacent market development – Oil Field Chemicals
Actively seeking acquisitions
Smaller technology bolt-ons
Major opportunities
Share Repurchase Program or Dividends as part of Capital
Management
Innospec is Ready to Accelerate
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