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Q3 2009 Earning Report of Cytec Industries Inc.
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Q3 2009 Earning Report of Cytec Industries Inc.

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  • 1. Third Quarter 2009 Earnings Review Shane Fleming – Chairman, President and CEO Dave Drillock – Vice President and CFO October 16, 2009
  • 2. Forward Looking Statement During the course of this meeting we may make forward-looking statements. All statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as “expects”, “anticipates,” “plans,” “intends,” “projects,” and “outlook.” Although they reflect our current expectations, these statements are not guarantees of future performance because they involve a number of risks, uncertainties, and assumptions. Included in this presentation are estimates for full year 2009 sales and earnings. These were included in our October 15, 2009 press release, which was also furnished as an exhibit to a current report on Form 8-K. These estimates set forth the Company’s assumptions and management’s best estimate of the full year 2009 sales and earnings at that time based on various assumptions set forth in the press release. There can be no assurance that sales or earnings will develop in the manner then projected or that the results for the year will be consistent with the results then projected. Actual results may differ materially. We recommend that you review Cytec’s SEC filings for a discussion of some of the factors which could cause actual results to differ materially from its expectations and projections. This and other Cytec information may be accessed at www.cytec.com. In sections of this presentation certain “non-GAAP” measures are provided and identified as such. We believe that the “non-GAAP” measures can more accurately reflect comparisons of year to year trends and is consistent with how we review the information. A reconciliation of “non-GAAP” measures to the applicable GAAP measure is provided in the appendix at the end of this presentation. 2
  • 3. Results Overview 3rd Quarter 2009: Cytec 2009 Sales by Month ($M) 275 Sales of $740 million 250 225 Net Earnings of $0.57 per diluted share 200 (excluding special items) 175 Jan Feb Mar Apr May Jun Jul Aug Sept • Volume growth across Specialty Chemicals businesses related to customer restocking and auto incentive programs • Benefits from cost reduction efforts being realized in Coating Resins • Destocking and lower build rates continue in Engineered Materials; additional structural and temporary cost reduction actions taken • Improved earnings in Building Block Chemicals 3 • Excellent progress continues on working capital initiative
  • 4. Business Segment Results Coating Resins $MM USD Q309 Q308 % chg ytd09 ytd08 % chg Sales 336 438 -23% 878 1,368 -36% Earnings 18.5 24.1 -23% (21.0) 64.0 -133% • Volume improvement of 12% in Q3 vs. Q2 Sales Comparison Q3 YOY • Maintained price in high-value Radcure Sales Growth -23% and Waterborne products Volume -16% • Price concessions in Powders & Solvent Price -5% products due to lower raw material costs Currency -2% • Restructuring efforts beginning to show benefit 4
  • 5. Coating Resins Monthly Sales Trend M$ 175 150 125 100 75 50 25 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 2008 2009 Positive demand trend continued into third quarter 5
  • 6. Business Segment Results Additive Technologies $MM USD Q309 Q308 % chg ytd09 ytd08 % chg Sales 64.9 81.2 -20% 178.7 251.6 -29% Earnings 3.1 6.1 -49% 6.8 18.2 -63% Sales Comparison Q3 YOY • Demand improvement due to customer restocking Sales Growth -20% • Year-to-year sales decline Volume -18% partially related to exit of certain Price -1% low-value products Currency -1% • Strong sales in Asia related to automotive 6
  • 7. Business Segment Results In Process Separation $MM USD Q309 Q308 % chg ytd09 ytd08 % chg Sales 71.2 83.1 -14% 185.1 225.0 -18% Earnings 12.5 19.0 -34% 19.4 36.2 -46% Sales Comparison Q3 YOY • Demand improved as copper and alumina industries strengthen Sales Growth -14% • Volumes increased 16% versus Volume -12% second quarter ‘09 Price -1% • New technologies continue to Currency -1% penetrate market 7
  • 8. Business Segment Results Engineered Materials $MM USD Q309 Q308 % chg ytd09 ytd08 % chg Sales 169.2 221.4 -24% 539.1 679.2 -21% Earnings 18.3 40.5 -55% 73.5 133.3 -45% • Significant decline in business jets vs. Sales Comparison Q3 YOY prior year due to reduced build rates Sales Growth -24% • Lower volumes in large commercial Volume -24% transport due to customer destocking Price 1% • Cost reduction program underway and on track Currency -1% • Maintained focus on research and customer collaboration for next generation composites 8
  • 9. Business Segment Results Building Block Chemicals $MM USD Q309 Q308 % chg ytd09 ytd08 % chg Sales 98.6 138.9 -29% 256.3 417.6 -39% Earnings 4.8 (1.3) 469% 9.9 11.1 -11% • Signs of demand improvement in Asia Sales Comparison Q3 YOY specific to acrylonitrile Sales Growth -29% • Lower propylene costs vs. prior year impacted acrylonitrile selling price Volume 22% Price -51% • Improved earnings due to last year’s hurricane which increased costs in Q308 Currency 0% by $3M 9
  • 10. Financial Results Third Quarter 2009 • Restructuring Charges totaling $22M in the quarter – Mostly related to Specialty Chemicals (Spain & Colombia) – Structural cost reduction actions expected to achieve approximately $125M in 2010, with approximately $50 million benefit in 2009 • Gross Margin (adjusted for special items) flat vs. prior year period – Lower raw material costs great than net price decreases – Cost improvement offset by low production rates plus inventory reduction • Operating Expenses down approximately $9M year on year 10
  • 11. Cash Flow • Cash flow from operations was $165M in Q309 vs. $89M in Q308 • Working Capital Improvement program demonstrating success 110 105 96 100 90 80 80 72 70 58 63 68 55 60 50 50 50 40 43 45 45 30 37 37 20 10 0 Sept '08 Dec '08 Mar '09 Jun '09 Sept '09 Inventory-DOS Acct Payable-DPO Acct Receivable-DSO 11
  • 12. Balance Sheet Capital Expenditures • Q309 was $43M and YTD 2009 was $159M • Outlook for Full Year 2009 is estimated to be $180 to $190M Enhancing Liquidity • Overall debt decreased by $43 million in the quarter, and $153 million year to date • Cash up approximately $90M from year end 12
  • 13. Debt Profile Enhanced Liquidity + Reduced Risk = Strong Balance Sheet • Amended Credit Agreement • Completed sale of $M250, 9% Debt due 2017 • Completed a tender offer for $M235 of 2010 Notes and $M15 of 2013 Notes • Paid down full amount of Credit Revolver balance Amount Outstanding Year Significantly improved debt maturity profile 13
  • 14. 2009 Outlook Full Year Outlook (Millions) Business Segment Operating Earnings Guidance Coating Resins $(10) to $(15) Additive Technologies $8 to $10 In Process Separation $30 to $35 Engineered Materials $85 to $90 Building Block Chemicals $12 Estimated full year adjusted EPS in a range of $0.80 to $1.00 per share 14
  • 15. Appendix Reconciliation of “Non-GAAP” Measures to GAAP Measures Management believes that net after-tax earnings and diluted earnings per share before special items, and gross margins adjusted for special items, which are non-GAAP measures, are meaningful to investors because they provide a view of the Company with respect to ongoing operations. Special items represent significant charges or credits that are important to an understanding of the Company’s overall operating results in the periods presented. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. The following table summarizes the net special items used to adjust reported net earnings and diluted earnings per share and gross margins for the quarters ended June 30, 2009 and 2008. Reported Non-GAAP Diluted (Loss) Diluted Reported Net Net Special Non-GAAP Net Special Earnings Per Earnings per (Loss)/Earnings Items Net Earnings Items Period Share Share Q309 $12.5 $15.1 $27.6 $0.26 $0.31 $0.57 Q308 $46.3 $ 4.9 $51.2 $0.96 $0.10 $1.06 Period Reported Net Special Adjusted Reported Net Special Adjusted Cost of Sales Items Cost of Sales Gross Margin Items Gross Margin Q309 605.4 21.0 584.4 18.2% 2.8% 21.0% Q308 765.8 2.9 762.9 20.5% 0.3% 20.8% 16