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CREDIT SUISSE   NYSE : NPINVESTOR CONFERENCE     New York City                        February 2012
Forward Looking StatementsStatements in this presentation which are not statements of historical fact are “forward-looking...
Company OverviewNeenah is a leader in performance-based technical products and high-end printing papers used where image m...
A History of Strategic Execution Successful execution of transformation                                                  ...
Financial Momentum                                                                                                        ...
Technical ProductsFiltrationHigh-performance filtrationmedia for fuel, air, oil, cabin airin transportation, as well aspro...
A Diversified Global Portfolio                                                        Est.                   Selected     ...
Success Factors Ability to meet customer performance needs with specialized technologies:     Multi-fiber technologies a...
Key Priorities: Technical Products Grow share by developing and commercializing innovative new products Drive growth in ...
Filtration: A Platform for Growth  Neenah Net Sales  Transp. Filtration                                                   ...
Fine PaperGraphic ImagingUnique colors, textures andfinishes for identity, printcollateral, invitations,advertising, and e...
Extending our Reach                                                     Uncoated                                    Other ...
Success Factors Leading brands that are often specified by designersNP  and printers and that provide pricing power High...
Key Priorities: Fine Paper Gain share in a consolidating market with programs and information that  encourages growth wit...
Wausau Transaction  Transaction Overview                                        Premium WTC Market      Brights Market    ...
Generate Attractive Returns to Shareholders by:                Consolidated Strategy                                      ...
Financial ObjectivesDeliver consistent profitable growth while: Increasing Return on Capital through growth in operating ...
Profitable GrowthNet SalesOP%                          $421              $384                   Technical Products$318    ...
Return on Capital  % Return on             9%Invested Capital   8%                                   Primary metric used ...
Capital Structure                        Dec    Dec     Dec $ millions                                           $319     ...
Attractive cash flows and returns                                                               Annual Dividend        $0....
Investment Conclusions Leading positions in profitable specialty markets with barriers to entry Momentum in sales and pr...
ContactFor more information                 Investor Relationsvisit our website: www.neenah.com    Bill McCarthyemail: inv...
GAAP ReconciliationContinuing Operations$ millions                                2009       2010         2011EBIT (Operat...
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Neenah Paper Feb 2012 Investor Presentation

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Transcript of "Neenah Paper Feb 2012 Investor Presentation"

  1. 1. CREDIT SUISSE NYSE : NPINVESTOR CONFERENCE New York City February 2012
  2. 2. Forward Looking StatementsStatements in this presentation which are not statements of historical fact are “forward-looking statements” within the “safe harbor” provision of the Private Securities LitigationReform Act of 1995. These forward-looking statements are based on the informationavailable to, and the expectations and assumptions deemed reasonable by, Neenah Paper,Inc. at the time this presentation was made. Although Neenah Paper believes that theassumptions underlying such statements are reasonable, it can give no assurance that theywill be attained. Factors that could cause actual results to differ materially fromexpectations include the risks detailed in the section “Risk Factors” in the Company’s mostrecent 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 directlycomparable GAAP measures would be included as an appendix to this presentation andposted on the company’s web site at www.neenah.com 2
  3. 3. Company OverviewNeenah is a leader in performance-based technical products and high-end printing papers used where image matters. Technical Products  Specialized, performance-based products  End markets: filtration, industrial backings, labels, graphics & identification and others Technical Fine  Manufacturing in the U.S. and Germany Products Paper Fine Paper  Premium textured and colored papers  End markets: high-end communications and printing, packaging, crafting and labelsPro Forma  Manufacturing in the U.S. Net Sales 3$800 million
  4. 4. A History of Strategic Execution Successful execution of transformation Technical Products strategy following company formation in 2004 Leading positions in profitable specialty markets with meaningful barriers to entry Fine Sales Mix Paper Positioned to pursue new opportunities with Evolution Pulp sound capital structure and strong cash flows 2004 2005 2006 2007 2008 2009 2010 2011 Recent catalyst for growth and value creation following January 2012 purchase of premium brands from Wausau Paper Corp. Timeline 2005 2006 2007 2008 2009 2010 2011 2012 of Activities 4
  5. 5. Financial Momentum E.P.S.1 $ millions 2009-2011 $1.91 2009 2010 2011 $1.47 Revenue $574 $658 $696 $0.76 Operating Income1 34 52 59 2009 2010 2011 E.P.S.1 $0.76 $1.47 $1.91 % Change 2011 vs. 2010 30% EBITDA1 $73 $87 $93 14% Debt $319 $245 $186 6% Return on Capital 6% 8% 9% Sales EBIT E.P.S. Top line growth via share gains, new products and pricing power Bottom line reflecting sales growth, improving margins and lower debt costs Cash generation used for debt reduction and dividend increases Return on Capital approaching desired double-digit levels 5 (1) Excludes one-time items for closure/sale of Ripon mill, debt refinancing and tax adjustments
  6. 6. Technical ProductsFiltrationHigh-performance filtrationmedia for fuel, air, oil, cabin airin transportation, as well asproducts for other marketsSpecialtiesProducts for a variety of endmarkets including labels, non-woven wall cover, medicalpackaging, durable printmedia and other marketsIndustrial BackingsSaturated and coated papersused for backing of specialtyabrasives and tapes 6
  7. 7. A Diversified Global Portfolio Est. Selected Key Filtration Segment Market Competitors Customers Growth Specialties Tape Ahlstrom, Mann & 2x Filtration Hummel, H&V Mahle, Hengst GDP Abrasives Specialties Sales by(Label, Medical Variety of Avery Product Group Pkg, Image competitors with Dennison, 3M, GDP+ Transfer, limited Saint-Gobain Decorative, concentration Tag…) Industrial 3M, Shurtape, Europe Wausau, IPG, Tesa, GDPBacking- Tape Ahlstrom Alpha Beta, RoW Industrial 3M, St. Gobain, Ahlstrom, Backing- Hangzhou Star, GDP Asia North Munksjo Abrasives Starcke America Sales by Geography 7
  8. 8. Success Factors Ability to meet customer performance needs with specialized technologies:  Multi-fiber technologies and forming capabilities  Saturation, coating and surface treatments  Polymer chemistries Longstanding relationships and ongoing joint product development with global blue chip customers who are leaders in their markets Specialized know-how supported by R&D centers in Germany and the U.S. Strong Specialized Performance Customer Intimacy and Requirements Barriers Qualification to Entry 8
  9. 9. Key Priorities: Technical Products Grow share by developing and commercializing innovative new products Drive growth in higher value specialty products (e.g. melt blown filtration, super smooth abrasives, and specialized labels) Expand international presence in filtration and other areas by growing with and following our global customers Enter adjacent markets that are growing and profitable and value technical know-how and performance 9
  10. 10. Filtration: A Platform for Growth Neenah Net Sales Transp. Filtration Organic Growth CAGR 8% • Historically, Neenah has focused in the European auto filtration market (fuel, oil, engine & cabin air) • The business has grown at a compound annual rate of 8% from 2003-11 2003 2004 2005 2006 2007 2008 2009 2010 2011 Global Transportation Filtration Market Size and Share Global Market ~ US $1 billionInternationalization Global engine performance and filter Otherrequirements continue to become more demanding NP H&V Alignment with leading global filter customers can Ahlstromlead to an expanded geographic presence NAFTA Asia Europe So. Amer. RoW Life HVAC Science /Air Process & Food Market Adjacencies Dust  Other filter applications and markets share Specialty Control Water filtration similar technologies and represent areas of media markets potential growth > $4 billion Gas Transpo/ Turbine H. Duty 10 Source: company estimates
  11. 11. Fine PaperGraphic ImagingUnique colors, textures andfinishes for identity, printcollateral, invitations,advertising, and envelopesPackaging & LabelImage enhancing colors and texturesof premium folded cartons, box wrap,bags, premium wine, beverage, andspirit labels, food labels, hang tagsBrightsDeep , rich, vivid colors andtextures for flyers, posters,school supplies, crafting,direct mail advertising andpromotions 11
  12. 12. Extending our Reach Uncoated Other Free Sheet 5% Premium fine papers represents a sliver Finch 5% of the uncoated free sheet (UFS) market. Mohawk 30% Premium Value Share UFS has declined 3-4 percent per year over the past ten years Premium NP ~3% 60% Neenah is the clear leader in what is essentially a two-player market for Source: company estimates premium fine papers and has gained Where We What Compete We Sell share as the market consolidates Color Digital Brights Copy Papers 100% PCW Premium Packaging Luxury Labels Packaging Electronic We are successfully identifying and Crafts Scrapbooking Core Printing Applications Writing, pursuing new areas of growth to help Text & Cover offset market challenges Crane China Europe Envelopes South Durable America Papers Middle Retail East How Where 12 We Sell We Sell
  13. 13. Success Factors Leading brands that are often specified by designersNP and printers and that provide pricing power Highest quality papers with a wide palette of colors and textures to serve specialized high-end print needs Purpose-built assets providing an effective cost position and barrier to entry Selective distribution resulting in brand pull and encouraging strong merchant performance Technology and supply chain tools to help customers optimize performance and grow share with Neenah 13
  14. 14. Key Priorities: Fine Paper Gain share in a consolidating market with programs and information that encourages growth with Neenah Expand in targeted areas: luxury packaging, label, international, envelopes and national accounts Develop new revenue streams – including expansion in retail, photo cards and books, and digital papers Opportunistically consolidate- integrate recently acquired Wausau brands in 2012 14
  15. 15. Wausau Transaction Transaction Overview Premium WTC Market Brights Market (~$450 mm) (~$100 mm) $21million cash payment for: • Astrobright, Astroparche, and Royal brands Others • Perpetual license for Exact TM bright, index, tag, and 25% Others bristol papers 43% NP WP • One-month finished inventory and selected assets 50% 75% Acquired sales of over $100 million/yr WP One-time integration costs of $10 million in 2012 7% Strategic Rationale Expands market participation with entry into new category (brights) Increases share in core writing, text & cover Others Fills existing asset base with minimal added costs NP 40% and no dilution in EBIT margins 60% Provides presence in new channel (retail) with future growth opportunities Delivers substantial value and compelling returns Bigger share of a bigger market! 15
  16. 16. Generate Attractive Returns to Shareholders by: Consolidated Strategy  Grow size of business through:  Geographic expansion with global customers Technical  New products/innovation Products  Entry into market adjacencies  Improve margins to double digit levels  Counter challenging market through:  Growing share in consolidating market Fine Paper  Expanding in targeted growth areas  Maintain attractive financial returns  Deliver value by successful integration of acquired Wausau brands in 2012  Allocate cash flows effectively to:  Increase Return on Capital  Maintain prudent capital structure Corporate  Provide attractive shareholder returns  Ensure scalability of corporate costs  Pursue M&As where strategic fit and financial returns are compelling 16
  17. 17. Financial ObjectivesDeliver consistent profitable growth while: Increasing Return on Capital through growth in operating income, margin expansion and asset efficiencies Maintaining a prudent capital structure Rewarding shareholders through cash generation and meaningful dividend yield 17
  18. 18. Profitable GrowthNet SalesOP% $421 $384 Technical Products$318  Volume growth focused on filtration, labels 7.6% 8.0% and higher growth categories4.6%  Margins expanding with higher value mix, sales growth, cost efficiency and pricing  Targeting sustainable double-digit margins2009 2010 2011Net SalesOP % $273 $275 Fine Paper$256  Delivering consistent and attractive profits , 13.6% 14.4% cash flows and return on capital14.2%  Growing share and in targeted niches to offset challenging market conditions2009 2010 2011 Pricing power and cost control in both businesses has offset almost 18 $50 million of input cost increases since 2009
  19. 19. Return on Capital % Return on 9%Invested Capital 8%  Primary metric used to measure 6% business performance and evaluate investment opportunities  Increasing ROIC a primary component of management compensation plans 2009 2010 2011  Improving with Sales/Assets 1.3  Profitable growth 1.1  Careful control of assets and 0.9 capital investments  Divestiture of pulp  Nearing desired double-digit levels 2009 2010 2011 19
  20. 20. Capital Structure Dec Dec Dec $ millions $319 Debt and 2009 2010 2011 Debt/EBITDA Bonds 7 3/8% $225 $223 $158 (due Nov. 2014) $245 ABL 28 0 0 (due Nov. 2015) 4.4x Other U.S. 41 0 0 $186 2.8x Germany 25 22 28 2.0x Total Debt $319 $245 $186 Total Cash $5 $48 $20 Dec 09 Dec 10 Dec 11 $95 million North American revolving credit facility expires in late 2015 Completed call of $65 million bonds in March 2011 (saving $5 million/year in interest) Credit rating upgraded to Ba3/BB- in 2010 Recent $21 million purchase of Wausau brands funded by low cost ABL borrowing 20
  21. 21. Attractive cash flows and returns Annual Dividend $0.48 Pro Forma (excl. WP purchase) $ millions per share $0.44 EBITDA $95 Interest Expense (14) $0.40 Other (tax, wkg cap, pension, etc..) (21) Cash From Operations $60 2010 2011 2012 Capital Expenditures (25)  Strong cash flow base Free Cash Flow $35  Ability to grow efficiently with scalable FCF/share $2.35 infrastructure  Moderate capital spending with capacity FCF Yield 1 9% available for growth  Efficient N. America cash tax position Attractive cash flows and yield (NOLs = $80 million) even before including returns from  Competitive dividend yield (approx. 2%), Wausau brand purchase with consecutive annual increases 21(1) Based on $27 NP stock price
  22. 22. Investment Conclusions Leading positions in profitable specialty markets with barriers to entry Momentum in sales and profits reflecting successful execution of plans Deleveraging has resulting in sound capital structure and financial flexibility Sustainable, strong cash flows helping to support $93 growth and provide attractive investor returns Consolidated EBITDA $87 (U$ millions) Recent Wausau brand acquisition expected to provide compelling value creation $73 $69 Strategic focus on continued expansion in specialty markets and evolution away from historical “pulp & paper” positioning 2008 2009 2010 2011 22
  23. 23. ContactFor more information Investor Relationsvisit our website: www.neenah.com Bill McCarthyemail: investor@neenahpaper.com VP, Financial Planning and Analysis & Investor Relations 5460 Preston Ridge Rd. Suite 600 Alpharetta, GA 30005 Phone: (678) 518-3278 Email: bill.mccarthy@neenahpaper.com 23
  24. 24. GAAP ReconciliationContinuing Operations$ millions 2009 2010 2011EBIT (Operating Income) $ 16 $ 55 $57 Ripon Mill Closure/(Gain on Sale) 17 (3) Loss on retirement of bonds - - 2Adjusted EBIT $ 34 $ 52 $ 59Depreciation & Amortization 34 32 31Amort. Equity-Based Compensation 5 3 3EBITDA $ 73 $ 87 $ 93Earnings (Loss) per Share $ (0.12) $ 1.61 $1.82 Ripon Closure/(Gain on Sale) 0.75 (0.14) Refinancing Costs/Tax Items 0.13 0.09Adjusted Earnings per Share $ 0.76 $ 1.47 $1.91 24
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