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KeyBanc Basic Materials & Packaging Conference

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  • 1. NYSE: NP2012 KEYBANCBasic Materials & Packaging Conference Boston September 12, 2012
  • 2. Company Overview Technical Products  Specialty, performance-based products  End markets: filtration, industrial backings, labels, and other specialties  Manufacturing in Germany and the U.S. Fine Paper  Premium textured and colored papers  End markets: high-end print communications, luxury packaging, crafting and premium labelsPro Forma Net Sales $800 million  Manufacturing in the U.S. 2
  • 3. Strategy Summary  Lead in profitable, specialty niche markets  Increase portfolio growth rate & diversification  Deliver consistent attractive returns  Grow business platform with filtration as anTechnical important foundationProducts  Improve margins to double digit levels  Pursue growth in niches that value image:Fine Paper Premium label, luxury packaging, retail, international  Maintain superior financial returns 3
  • 4. Investment/Value Drivers Leading positions in profitable markets with opportunity to expand into new geographies and adjacencies Pricing power to counter input cost variability Recent brand acquisition providing step change in returns and a catalyst for future growth Sizeable cash flow generation and financial strength to pursue new opportunities and deliver shareholder returns Successful track record of execution 4
  • 5. Financial Momentum First Half % Change % Change 57% $ millions 2010 2011 2011 vs. 2010 2011 2012 1H 11 vs.12 30% 40% Sales $ 658 $ 696 $ 356 $ 410 EBIT1 52 59 13% 33 46 15% E.P.S.1 $ 1.47 $ 1.91 6% $ 1.03 $ 1.62 Return on Sales EBIT E.P.S. Sales EBIT E.P.S. Capital 8% 9% 8% 11%  Top line growth via share gains, new products, price/mix and 2012 acquisition  Faster bottom line growth with margin improvement and lower debt costs  Return on Capital now surpassing double-digit levels  Cash deployed to support growth, reduce debt, increase dividends and buy shares(1) Excludes one-time items for divestitures, integration and other costs as noted in appendix 5
  • 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. A Diversified Global Portfolio Key Est. Strategic Customers/ Market Priorities Growth Filtration Competitors Mann & Hummel, • Higher value products Specialties Tape Mahle, Hengst • Internationalization 2x Filtration • New Adjacencies Ahlstrom, Abrasives GDP • Lead in innovation H&V Sales by • Grow in performance Avery Dennison, Product Group labels 3M, Saint-Gobain Specialties • Focus on high end GDP+ NW wall cover Multiple based on markets 3M, Shurtape, IPG, • Differentiate in tape Alpha Beta, Tesa Europe Industrial via saturating/coating GDPBacking- Tape • Optimize costs Wausau, Ahlstrom RoW Asia North 3M, St. Gobain, America Industrial Hangzhou Star, • New adjacencies Starcke Backing- • Emerging markets GDP Abrasives Ahlstrom, Munksjo Sales by Geography 7
  • 8. Success Factors Specialized Strong Customer Performance Barriers Intimacy Requirements to Entry and QualificationKey NP technologies : Long-standing relationships Multi-fiber forming capabilities  Global market-leading customers Saturation, coating and surface treatments  Intricate qualification requirements Polymer chemistries  Ongoing joint product development  Innovative new products 8
  • 9. Filtration: A Key Platform for Growth Neenah Net Sales Transportation Filtration Core Growth Transp. Filtration  Historically focused only in European auto filtration CAGR 8% (fuel, oil, engine & cabin air)  Known for innovation, quality and customer support  Growth in higher value products and new adjacencies supporting recently approved third melt blown line2003 2004 2005 2006 2007 2008 2009 2010 2011 Global Transportation Filtration Market Size and Share Geographic Expansion Opportunities Global Market ~ US $1 billion  Global engine filter requirements Other continue to become more demanding NP  Existing global customers would like us to H&V Ahlstrom have an expanded geographic presence NAFTA Asia Europe So. Amer. RoW Source: company estimates Life HVAC Science Specialty /Air Process & Food Entry into New Adjacencies filtration media markets Dust  Ability to leverage our technologies and assets to > $4 billion Water Control enter into other attractive filtration markets Gas Transpo/  Recent entry into beverage filtration (coffee capsule) Turbine H. Duty 9
  • 10. Fine PaperGraphic ImagingUnique colors, textures andfinishes for identity, printcollateral, invitations,advertising, and envelopesLuxury Packaging& Premium 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 10
  • 11. Success Factors Others 10 Leading brands specified by designers and printers NP Mohawk with selective distribution and strong pricing power 30 Neenah 60 Highest quality with a wide palette of colors and textures to serve specialized high-end print needs Value Share- Premium Papers $650 million market Leading cost position with purpose-built assets Source: company estimates that are efficiently utilized Supply chain and technology tools to help customers optimize performance and grow share with Neenah Clear leader in a consolidated market 11
  • 12. Evolving & Extending Portfolio NP Fine Paper Sales Mix Evolution $375Neenah has outperformed the market by $292evolving our mix and extending our reach… $221 Leading industry consolidation Entry into growing niches (luxury packaging, 1996 2004 Today premium label, scrapbooking) Writing Text & Cover Pkg/Label/Oth Supply chain extension (Crane, envelopes, electronic consumer print applications) Customers/ Products Supply Chain New products (brights, digital) Crafts Scrapbooking Retail New channels (retail) Brights Premium Labels Crane Digital Envelopes New geographies Papers Luxury Core Packaging Writing, Text & …..while continuing to gain share in 100% PCW Cover China our core markets Packaging Europe South Durable America Papers Electronic Middle Printing East Applications Technology Geographies 12
  • 13. Creating Value Wausau Brand Purchase (Jan-12)Transaction Summary Paid ~$20 million for selected brands Acquired sales of over $100 million/yr No dilution in attractive mid-teen EBIT margins One-time 2012 cash integration costs of $7 million WPStrategic Rationale and Value Drivers New Category WP WTC (Brights) Brights 6% Increased share in core markets and provided entry 14% NP into new category (brights) and channel (retail) Other Brights WTC Ability to utilize existing assets/infrastructure to 5% 40% drive manufacturing and SG&A efficiencies Other WTC Future growth opportunities through retail 35% Compelling financial returns Premium Fine Papers Market Size & Shares (~$650 mm) Source: company estimates 13
  • 14. Retail: A New Platform for Growth Retail Represents only 15% of sales, NP Sales with meaningful positions at By Channel large customers like Office Max, Direct Merchant Staples, Michaels and Target Specialty retail papers (excluding copy paper) represents a market $60 Retail Paper of approximately $150 million $50 Niche Markets > $150 million Neenah today sells primarily $40 brights, but has capability to $30 produce other specialty retail $20 paper products $10 $0 Brights Craft Resume Stationary Other NP Source: company estimates 14
  • 15. Key Financial Objectives Consistent profitable growth  14 consecutive quarters ahead of expectations Increasing Return on Capital  Averaging over 150 bps per year since 2009 Efficient capital structure  Debt/EBITDA of approximately 2x Attractive shareholder returns  NP returns in top quartile of Russell 2000 Value in 2010 and 2011 15
  • 16. Profitable Growth Net Sales OP% $421 Currency $425 Technical Products $384 Impact $415$318 7.6% 8.0% 9.3%  Growth led by filtration, labels and other4.6% higher growth categories  Margins expanding with higher value mix, sales growth, cost efficiency and pricing2009 2010 2011 TTM Q2  Moving to targeted double-digit margins Net Sales OP% $322 Fine Paper $273 $275$256  Third consecutive year of sales growth;14.2% 13.7% 14.4% 14.7% with boost in 2012 from acquisition  Consistent and attractive profits, cash flow and return on capital2009 2010 2011 TTM Q2  Delivering promised value from WP purchase Pricing power in both business to mitigate input cost variations and deliver consistent returns 16
  • 17. Return on Capital % Return onInvested Capital 11% 9%  Primary measure to evaluate 8% investment opportunities and judge 6% business performance  Key metric in compensation plans 2009 2010 2011 Q212 TTM  Delivering improvement through:  Profitable growth/margin expansionSales/Assets 1.3 1.3  Carefully managed assets/investments 1.2 0.9  Strategic moves (divest pulp, WP purchase)  Exceeding double-digit levels 2009 2010 2011 TTM Q2 17
  • 18. Capital Structure Debt and Dec Dec June Debt/EBITDA $245$ millions 2010 2011 2012Bonds 7 3/8% $ 223 $ 158 $ 148(due Nov. 2014) 4.6x $203 $186ABL - - 43(due Nov. 2015) TargetGermany 22 28 12 2.8x 1.9x Range 1.5 – 2.5x Debt $ 245 $ 186 $ 203 Dec 10 Dec 11 June 12 Bond calls in Mar-11 and Apr-12 reducing debt and interest expense Now well within targeted capital structure range No short term liquidity events; adequate flexibility for additional borrowing Credit rating Ba3/BB 18
  • 19. Cash Deployment & Shareholder ReturnsPro Forma Cash Flow $ millions  Substantial free cash flow generationEBITDA (pre WP brand purchase) $ 95  Moderate capital spending with availableAddtl w/brands ($100 mm x 15%) 15 capacity for growthInterest Expense (15)  Favorable cash tax position (NOLs = $80 mm)Other (tax, wkg cap, pension, etc..) (20)  $10 million stock repurchase plan (May 2012) Cash From Operations $ 75Capital Expenditures (30)  Competitive dividend with room to grow Free Cash Flow $ 45 Annual Dividend $0.48 per share FCF per share ~ $3.00 $0.44 $0.40 Double-digit cash flow yields 2010 2011 2012 19
  • 20. Investment Conclusions Leading positions in profitable specialty markets with barriers to entry Momentum in sales and profits reflecting successful execution of plans Sustainable, strong cash flows to support growth and provide attractive investor returns $107 Sound capital structure and financial flexibility Consolidated EBITDA $93 Wausau brand acquisition increasing results (U$ millions) $86 and providing opportunities for future growth Strategic focus on continued expansion in $68 $70 defensible specialty markets further from historical “pulp & paper” positioning 2008 2009 2010 2011 2012 TTM 20
  • 21. ContactFor more information Investor Relationsvisit our website: www.neenah.com Bill McCarthyemail: investor@neenahpaper.com VP, Financial Planning and Analysis & Investor Relations 3460 Preston Ridge Rd. Suite 600 Alpharetta, GA 30005 Phone: (678) 518-3278 Email: bill.mccarthy@neenahpaper.com 21
  • 22. GAAP ReconciliationContinuing Operations$ millions 2009 2010 2011 1H 2012EBIT (Operating Income) $ 16.4 $ 55.1 $ 56.6 $ 38.2 Ripon Mill Closure/(Gain on Sale) 17.1 (3.4) Integration Costs 4.4 Other1 2.4 3.5Adjusted EBIT $ 33.5 $ 51.7 $ 59.0 $ 46.1Depreciation & Amortization 31.9 29.7 30.0 14.6Amort. Equity-Based Compensation 4.7 4.9 4.3 3.0EBITDA $ 70.1 $ 86.3 $ 93.3 $ 63.7Earnings (Loss) per Share $ (0.12) $ 1.61 $ 1.82 $ 1.32 Ripon Mill Closure/(Gain on Sale) 0.76 (0.14) - - Integration Costs - - - 0.17 Other1 0.12 - 0.09 0.14Adjusted Earnings per Share $ 0.76 $ 1.47 $ 1.91 $ 1.631 Includes refinancing and tax costs in 2009-11 and pension settlement charge in 2012 22
  • 23. 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 23

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