Innophos Holdings, Inc. | March 2019
Earnings Call August 6, 2019 9:00am ET Innophos Holdings, Inc. | - - PowerPoint PPT Presentation
Earnings Call August 6, 2019 9:00am ET Innophos Holdings, Inc. | - - PowerPoint PPT Presentation
Q2 2019 Earnings Call August 6, 2019 9:00am ET Innophos Holdings, Inc. | March 2019 Forward-Looking Statements This presentation contains or may contain forward-looking statements within the meaning of Section 27a of the Securities Act of
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Forward-Looking Statements
- This presentation contains or may contain forward-looking statements within the meaning of Section 27a of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The company intends these forward-looking statements to be covered by the safe harbor provisions for such statements.
- Statements made in this presentation that relate to our future performance or future financial results or other future events (which may be identified by such terms as “expect”,
“estimate”, “anticipate”, “assume”, “believe”, “plan”, “intend’, “may”, “will”, “should”, “outlook”, “guidance”, “target”, “opportunity”, “potential” or similar terms and variations or the negative thereof) are forward-looking statements, including the Company’s expectations regarding the business environment and the Company’s overall guidance regarding future performance and growth. These statements are based on our current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may materially differ from the expectations expressed in or implied by these forward-looking statements.
- Factors that could cause the Company’s actual results to differ materially include, but are not limited to: (1) global macroeconomic conditions and trends; (2) the behavior of financial
markets, including fluctuations in foreign currencies, interest rates and turmoil in capital markets; (3) changes in regulatory controls regarding tariffs, duties, taxes and income tax rates; (4) the Company’s ability to implement and refine its Vision 2022 strategic roadmap; (5) the Company’s ability to successfully identify and complete acquisitions in line with its Vision 2022 strategic roadmap and effectively operate and integrate acquired businesses to realize the anticipated benefits of those acquisitions; (6) the Company’s ability to realize expected cost savings and efficiencies from its performance improvement and other optimization initiatives; (7) the Company’s ability to effectively compete in its markets, and to successfully develop new and competitive products that appeal to its customers; (8) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (9) the Company’s ability to benefit from its investments in assets and human capital and the ability to complete projects successfully and on budget; (10) economic, regulatory and political risks associated with the Company’s international operations, most notably Mexico and China; (11) volatility and increases in the price of raw materials, energy and transportation, and fluctuations in the quality and availability of raw materials and process aids; (12) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (13) the Company’s ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws and (14) the Company’s ability to meet quality and regulatory standards in different jurisdictions in which it has operations or conducts business.
- We caution you to consider the important risks and other factors as set forth in the forward-looking statements section and in Item 1A Risk Factors in our most recent Annual Report on
Form 10-K, as amended by subsequent reports on Forms 10-Q and 8-K.
- We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Regulation G: Adjusted Results
- The information presented herein regarding certain unaudited adjusted results does not conform to generally accepted accounting principles in the U.S. (U.S. GAAP). Innophos has included
this non-GAAP information to assist in understanding the operating performance of the company and its reporting segments. Please see reconciliations to the most directly comparable financial measure prescribed by U.S. GAAP in the appendix. 2 Totals in this presentation may not foot due to rounding.
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Agenda
- 1. Executive Overview
- 2. Financial Review
- 3. Outlook
- 4. Q&A
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Kim Ann Mink, Ph.D.
Chairman, President and Chief Executive Officer
Mark Feuerbach
Interim Chief Financial Officer
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
- Q2 Adjusted EBITDA Margin up 129 bps YOY
- Pricing power, improved mix, cost management and lower cost
structure offset effects from discontinued low-margin nutrition sales, general weakening of demand, lost 2019 business due to Midwest flooding and continued “indirect” tariff effects
- $26m cash from operations and $20m Free Cash Flow
- Continued success Advancing Vison 2022 roadmap and
Strategic Pillars initiatives
- Resetting 2019 Revenue guidance, maintaining 2019 Adjusted
EBITDA guidance
- On track to achieve Vision 2022 goals
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$185m
SALES
$1m
GAAP NET INCOME
$30m
ADJUSTED EBITDA
16%
ADJUSTED EBITDA MARGIN
Q2 2019 RESULTS
Pricing Power, Cost Actions and Mix Shift Offset Topline Pressures
Q2 2019: Margin Growth & Strong Cash Performance
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Executing Against Strategic Pillars to Realize Vision 2022 Goals
Operational Excellence
- Achieved initial sequential savings from
new value chain structure
- Continued to advance our supply plan with
the successful setup of 3rd party sourced MGA for Geismar PWA plant
- On track to deliver GAAP and adjusted
diluted EPS improvement of $0.25 to $0.27 per share annual run rate by end of 2019
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Commercial Excellence
- Pricing actions nearly offset effects
- f volume declines
- Leveraging value-selling model to
capture pricing power
- Recently announced 6th consecutive
quarterly price increase which will take effect August 15th Strategic Growth
- SPARC program shifting portfolio mix to
support future organic growth
- Selectively evaluating M&A to strengthen
FHN platform consistent with strategic and financial criteria
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Performance Highlights
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- Sales below prior year as selling price increases were predominantly offset by the planned discontinuation of low-margin nutrition trading
business, as well as a general weakening of demand including customer destocking, lost 2019 business due to Midwest flooding and continued “indirect” tariff effects
- Net Income down due primarily to a $6.6 million one-off tax charge
- Adjusted EBITDA flat sequentially and down slightly YOY due to lower volumes that were mostly offset by price increases; Adjusted EBITDA
margin was up YOY reflecting improved mix and continued benefits of price and cost actions
- FCF was up significantly due to improved working capital and lower capital expenditures
($ Millions)
Q2 $m Variance vs PY Sales 185 (22)
- 10%
Gross Profit Gross Margin 36 — —% 20% 207 bps Net Income 1 (5)
- 78%
- Adj. Net Income
9 (2)
- 22%
- Adj. EBITDA
- Adj. EBITDA%
30 (1)
- 3%
16% 129 bps Diluted EPS 0.07 (0.24)
- 78%
- Adj. Diluted EPS
0.43 (0.12)
- 22%
OCF 26 18 BIG FCF 20 24 711%
2018A Vol/Mix Price INP Cost Mfg SG&A FX 2019A
$(1)m $0m
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Sales Revenue And Gross Margin
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Sales Revenue Bridge Q2 YTD $m % $m % 2018 207 412 Volume/Mix (28)
- 13%
(49)
- 12%
Price 6 3% 14 3% 2019 185 376 Variance (22)
- 10%
(36)
- 9%
- Sales were 10% below prior year as 3% selling price increases were offset by a 13% volume
decline from discontinued low-margin nutrition trading business, as well as a general weakening
- f demand including customer destocking, lost 2019 business from Midwest flooding and
continued “indirect” tariff impacts
- FHN: down 15% year over year (price +3%, volume -18%) as strong price increases were offset
by lower volumes due to the Company’s decision to discontinue a portion of low-margin nutrition trading business and softer demand including customer destocking
- IS: up slightly year over year (price +3%, volume -2%) with volumes affected by Midwest
flooding and indirect tariff effects
- Other down 25% (price -1%, volume -23%) due to reduced co-product and low grade acid sales
- Gross margin at highest level since Q1 2018
Quarterly Comments
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Earnings
8 *Excludes $8.1m in Q2 2018, $6.2m in Q3 2018, $6.3m in Q4 2018, $4.5m in Q1 2019 and $3.5m in Q2 2019
- Net income down YOY primarily due to a $6.6 million one-off tax charge
- Adjusted EBITDA down slightly YOY due to lower volumes that were mostly
- ffset by higher selling prices; margin up 129 bps YOY due to improved sales
pricing and mix combined with improvements in cost structure
- Selling price increases mostly covered lower volume effects
- Input costs improved YOY from initial benefits in the value chain optimization
program
- Manufacturing fixed costs increase mostly offset by SG&A decrease
- Adj. EBITDA Bridge
Q2 YTD $m % $m % 2018 31 63 Volume/Mix (7)
- 22%
(13)
- 21%
Price 6 20% 14 22% Input costs 1 2% (3)
- 5%
Manufacturing (4)
- 12%
(5)
- 9%
SG&A 3 8% 5 8% FX — —% — —% 2019 30 60 Variance (1)
- 3%
(3) (5)%
Quarterly Comments
Adjusted EBITDA margin (% of Sales)
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Performance by Segment
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Q2 Sales Bridge FHN IS Other Total 2018 126 100% 67 100% 14 100% 207 100% Volume/Mix (23)
- 18%
(1)
- 2%
(3)
- 23%
(28)
- 13%
Price 4 3% 2 3% —
- 1%
6 3% 2019 107 85% 68 101% 11 75% 185 90% YOY Variance (19)
- 15%
1 1% (4)
- 25%
(22)
- 10%
Sales Revenue ($m)
- Adj. EBITDA % of Sales
Q2 2019 Sales $185m
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Other Items
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Item Q2 2019 Q2 2018 Comment
Net interest expense $4m $3m Up due to higher market interest rates Effective tax rate 88% 24% High ETR in current period due to a $6.6 million one-
- ff tax charge related to Dutch tax regulations
enacted in the current quarter retroactive to 1/1/2018. Excluding the impact of one-off charge, ETR was 30% Capital expenditures $6m $11m Down significantly due to timing of value chain
- ptimization as some of the larger Geismar utilities
projects are scheduled for the second half of 2019 Dividends $9m $9m $1.92/sh. annual dividend rate maintained Net Debt $298m $318m Down $20m or 6% YOY due to improved free cash flow Net Debt / LTM Adjusted EBITDA 2.4x 2.5x Decrease due to lower net debt
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Earnings Per Share
11 Volume/mix (0.33) (0.66) Price 0.30 0.69 Costs (0.06) (0.21) FX — — Operational items (0.09) (0.18) Financing (0.03) (0.08) Tax (0.01) 0.01 Shares outstanding — — Other 0.01 0.09 Other items (0.04) 0.03 Earnings per share
Q2 YTD 2018 Diluted 0.31 0.87 Adjustments 0.23 0.29 2018 Adj. Diluted 0.55 1.15 YOY Variance (0.12) (0.15) 2019 Adj. Diluted 0.43 1.00 Adjustments 0.36 0.49 2019 Diluted 0.07 0.51
YOY Variance Breakdown (Adj. Diluted)
Diluted EPS ($ per share) Adjusted Diluted EPS ($ per share)
*Excludes pre-tax costs of $6.1m in Q2 2018, $5.1m in Q3 2018, $7.5m in Q4 2018, $3.7m in Q1 2019 and $0.8m in Q2 2019. Also excludes tax reform income of $6.0m in Q3 2018, tax reform expense of $0.7m in Q4 2018 and a one-
- ff Dutch tax charge of $6.6m in Q2 2019
2018 2019
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Q2 2019 Cash Delivery
12
*Includes cash spent on acquisition of businesses
- FCF improved significantly YOY due to working capital
improvements and lower capex
Quarterly Comments
Cash Flow Bridge Q2 YTD $m Variance $m Variance
- Adj. EBITDA
30 (1)
- 3%
60 (3)
- 5%
Working Cap 10 11 BIG (28) 5 16% Tax (7) 3 29% (9) 4 27% Interest (4) —
- 5%
(8) (1)
- 10%
Other (3) 5 60% 1 2 183% OCF 26 18 225% 17 7 75% Capex (6) 5 48% (16) 11 40% FCF 20 24 711% 1 18 106%
Opening
41 12 23 20 21
FCF
(3) 4 52 (19) 20
Financing*
(25) 6 (55) 20 (9)
Closing
12 23 20 21 32 ($ Millions) ($ Millions)
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
2019 Outlook
13
Metric Current Guidance Prior Guidance Key Assumptions Revenue (6% to 7%) YOY (1% to 2%) YOY
- YOY volume decline from discontinued low margin nutrition business to
impact comps through end of 2019, easing up in Q4
- US fertilizer sales impacted by Midwest flooding not expected to rebound in
2019, as previously projected
- Overall market softness to continue to impact both FHN and IS volumes
- IS pricing & volumes to continue to be affected indirectly by tariffs
- Above factors will be partially offset by positive year-over-year revenue
contribution from price increases and new product wins Adjusted EBITDA 1% to 3% YOY Same as current
- Reflects impacts of pricing and cost actions more than offsetting impacts
from volume declines Costs (GAAP & Cash Flow basis) 2H’ 19 < 1H’19 Same as current
- Reflects wind down of non-recurring expenses adjusted for non-GAAP
reporting purposes, including value chain transition expense and Mexico natural gas supply adjustment charges Capital Investment 15% to 20% Below 2018 In-line with 2018
- Reflects more efficient spending to finalize the optimization of the value
chain and manufacturing program Effective Tax Rate 28% to 32% Same as current
- Excludes the second quarter $6.6 million one-time Dutch tax charge
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Executing on Strategic Priorities to Drive Sustained Value
- Leveraging new low-cost supply structure
to reduce cost basis
- Proactively pursuing pricing efforts
supported by value proposition
- Accelerating mix shift momentum with
SPARC and inorganic growth opportunities
14
Strategic Pillars
On Track to Deliver Margin Growth in 2019 and Achieve Vision 2022 Goals
Innophos Holdings, Inc. | March 2019
Q2 2019 Earnings Call
Q&A
Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Non-GAAP Reconciliations
Long Term Targets Innophos is not able to provide a reconciliation of its expectation for adjusted earnings to 2019 GAAP net income given the dynamic nature of the strategic value chain repositioning program expenses and potential Mexico energy charges that may be incurred. In addition, Innophos is not able to provide a reconciliation of its 2022 expectation for adjusted EBITDA margin to GAAP net income due to the number of variables in the projected EBITDA margin for 2022. As a result we are currently unable to quantify accurately certain amounts that would be required to be included in GAAP net income for 2019 or 2022 or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. Additional Information Free cash flow is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes free cash flow is helpful in analyzing the cash flow generating capability of the business and as a performance measure for purposes of presentation in this investor presentation. The Company defines free cash flow as net cash provided from operating activities plus cash used for capital expenditures plus cash received from sale leaseback transactions. EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are supplemental financial measures that are not required by, or presented in accordance with, US
- GAAP. The Company believes EBITDA and adjusted EBITDA are helpful in analyzing the cash flow generating capability of the business and as performance measures for
purposes of presentation in this investor presentation. Net Working Capital and Operating Working Capital are supplemental financial measures that are not required by, or presented in accordance with, US GAAP. The Company believes net working capital and operating working capital are helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this investor presentation. The Company defines net working capital as total current assets less cash and cash equivalents less total current liabilities plus current portion of capital leases, and defines operating working capital as net working capital less taxes less interest.
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Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Non-GAAP Reconciliations
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Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Non-GAAP Reconciliations
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Innophos Holdings, Inc. | March 2019
Innophos Holdings, Inc. | Earnings Conference Call Second-Quarter 2019 | August 6, 2019
Non-GAAP Reconciliations
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Innophos Holdings, Inc. | March 2019
ABOUT THE COMPANY Innophos is a leading international producer of essential
- ingredients. We partner with world-leading health &
nutrition, food & beverage and industrial brands to create science-based solutions that improve quality of life. Our knowledgeable teams apply science to unlock the potential that lies within the blends and formulations that we deliver. Forward thinking and people centric at heart, we execute with purpose and efficiency to create value in everything we do. Headquartered in Cranbury, New Jersey, Innophos has manufacturing operations across the United States, in Canada, Mexico and China. For more information, please visit www.innophos.com 'IPHS-G' CONTACT Investors: Mark Feuerbach, 609-366-1204 or investor.relations@innophos.com Media: Ryan Flaim, Sharon Merrill Associates, 617-542-5300
- r iphs@investorrelations.com