2Q 2019 Earnings Presentation August 1, 2019
Forward Looking Statements 2 This presentation contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements may be identified by words like "expect," "anticipate," "estimate," “outlook”, "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should" and "believe" or other variations or similar terminology. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, and natural disasters; price fluctuations and supply of raw materials; our operations requiring substantial capital; general economic and financial conditions in the U.S. and globally; growth rates and cyclicality of the industries we serve; risks associated with our indebtedness including with respect to restrictive covenants; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties; cybersecurity and data privacy incidents; failure to maintain effective internal controls; disruptions in transportation and logistics; our inability to achieve some or all of the anticipated benefits of our spin-off including uncertainty regarding qualification for expected tax treatment; fluctuations in our stock price; and changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10- K for the year ended December 31, 2018. Non-GAAP Financial Measures This presentation includes certain non ‐ GAAP financial measures intended to supplement, not to act as substitutes for, comparable GAAP measures. Reconciliations of non ‐ GAAP financial measures to GAAP financial measures are provided in the appendix of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. Non-GAAP measures in this presentation may be calculated in a way that is not comparable to similarly-titled measures reported by other companies. 2Q 2019 Earnings Presentation – August 1, 2019
Overview 3 • 2Q19 Sales $345M, down (14%) including (9%) lower raw material pass through and (5%) volume • 2Q19 pre-tax income results include previously announced (~$12.6M) repositioning charge associated with closure of Pottsville, PA manufacturing facility; Expect ~1 year cash payback • 2Q19 Cash Flow from Operations $25M, down ($8M); Capex $32M, up $9M, with continued investment in high-return growth and cost savings projects • 2Q19 EPS $0.53, down (42%); Repurchased ~$16M of shares in 2Q19; Lower share count contributed ~$0.04 benefit vs. prior year • Targeting strong nylon plant utilization rates while navigating through soft carpet and auto end markets • Expect 3Q19 ammonium sulfate seasonal domestic price decline and higher export mix • Preliminary acetone anti-dumping duties announced for Singapore and Spain – expect remaining preliminary duty determinations by end of 3Q19 • Expect FY19 Capex to be ~$150M and continue to expect FY19 pre-tax income impact of planned plant turnarounds to be $35-$40M • Expect sufficient availability of cumene supply following Philadelphia Energy Solutions (PES) supplier fire – expect unfavorable pre-tax income impact of $6-$8M in 3Q19 and $5-$7M in 4Q19 2Q 2019 Earnings Presentation – August 1, 2019
2Q 2019 Financial Summary 4 High Plant Utilization Rates Despite Challenging Macro Environment Comments 2Q 2018 2Q 2019 ($ Millions, Except Per Share Amounts) • Sales Down (14%): Volume (5%), Price (9%) Sales $400.5 $345.2 – Raw Material Pass Through (9%), Market Pricing ~Flat • (~$12.6M) Pre-Tax Repositioning Charge Associated With EBITDA $53.0 $35.9 Closure of Pottsville, PA Manufacturing • ~$2M Insurance Proceeds Related to 1Q18 Weather Event 13.2% 10.4% Margin % Claim Offset by (~$2M) 1Q18 Phenol Force Majeure Carryover Net Income $28.4 $15.3 • 2Q19 Effective Tax Rate 25.6% • 2Q19 Share Count 29.1 Million; Lower Share Count EPS (Diluted) $0.91 $0.53 Contributed ~$0.04 Benefit vs. Prior Year • Cash Flow From Operations $25M, Down ($8M) vs. Prior Year – Unfavorable Impact of Changes in Working Capital Free Cash Flow $10.4 ($6.4) • Capex $32M, Up $9M vs. Prior Year – Continued High-Return Investments See Appendix in this presentation for a reconciliation of EBITDA, EBITDA Margin, and Free Cash Flow, which are non-GAAP measures; Free cash flow = net cash provided by operating activities less capital expenditures 2Q 2019 Earnings Presentation – August 1, 2019
Nylon Industry Outlook 5 Soft Carpet and Auto End Markets Nylon Key Industry Spreads (1) • Demand softness and customer 2Q19 YoY 2Q19 vs. 1Q19 destocking in carpet and auto Global Composite BNZ-CPL (13%) (3%) end markets What We’re Asia BNZ-CPL (20%) (3%) • Pricing/spreads more Asia CPL-Resin (22%) (31%) Seeing regionalized: China/Asia 1600 800 weakening on soft end-market CPL-Resin Spread ($/MT) BNZ-CPL Spread ($/MT) demand environment 1200 600 800 400 • Muted demand with year-over- year growth deceleration What We’re 400 200 • Continued uncertainty around Expecting global operating rates, pricing 0 0 and spreads Global Composite BNZ-CPL Spread (1) Sources: Tecnon OrbiChem and Wood Mackenzie Asia BNZ-CPL Spread Asia = Caprolactam Asia Import Contract (Taiwan & S. Korea) Asia CPL-Resin Spread Global Composite = Weighted Avg Spreads From U.S., Europe, China, Other Asia 2Q 2019 Earnings Presentation – August 1, 2019
Ammonium Sulfate (AS) Industry Outlook 6 Industry Dynamics Mixed as New ’19/’20 Season Begins Ammonium Sulfate Key Industry Prices (1) • AS price movement modest 2Q19 YoY 2Q19 vs. 1Q19 relative to recent nitrogen pricing Corn Belt Granular AS (1%) (1%) Corn Belt Urea 20% 11% What We’re • Wet weather in U.S. resulting in lower crop yields and reduced 1400 800 Seeing planted acres projections (granular $/ston N content basis) Avg Corn Belt AS price Avg Corn Belt Urea price ($/ston N content basis) • Higher corn prices 700 1200 • 3Q19 seasonal domestic price 600 decline and higher export mix; Global pricing relatively flat year- What We’re over-year Expecting 1000 500 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 • Continued demand growth for sulfur nutrition Avg Corn Belt AS price (granular $/ston N content basis) Avg Corn Belt Urea price ($/ston N content basis) (1) As reported in Green Markets 2Q 2019 Earnings Presentation – August 1, 2019
Chemical Intermediates Industry Outlook 7 Global Acetone Supply Continued to Lengthen in 2Q19 Chemical Intermediates Key Industry Prices (1) 2Q19 YoY 2Q19 vs. 1Q19 • Global acetone oversupply further lengthened in 2Q19 Acetone, Small/Medium Buyer (37%) (11%) pressuring spot market spreads Acetone, Large Buyer (28%) 1% What We’re Refinery Grade Propylene Costs (36%) 2% • U.S. acetone imports Seeing 60 moderating into 3Q19 50 • Lower phenol utilization rates Cents per Pound 40 • North America acetone 30 inventory levels to stabilize What We’re 20 • Preliminary acetone anti- dumping duties announced for Expecting 10 Singapore and Spain – expect remaining preliminary duty determinations by end of 3Q19 Acetone, Small/Medium Buyer Acetone, Large Buyer Refinery Grade Propylene Costs (1) As reported in IHS Markit 2Q 2019 Earnings Presentation – August 1, 2019
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