Earnings Summary Fourth Quarter 2016 Conference Call Wednesday, - - PowerPoint PPT Presentation

Earnings Summary

Fourth Quarter 2016

Conference Call

Wednesday, February 15, 2017 10:00 a.m. ET U.S. Participants: (888) 713–4209 International Participants: (617) 213–4863 Passcode: 20741841# Webcast: ir.huntsman.com

1

This presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical

• information. When used in this presentation, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,”

“intends,” “believes,” “forecasts,” or future or conditional verbs, such as “will,” “should,” “could” or “may,” and variations

• f such words or similar expressions are intended to identify forward-looking statements. All forward-looking

statements, including, without limitation, management’s examination of historical operating trends and data, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved. The forward-looking statements in this release are subject to uncertainty and changes in circumstances and involve risks and uncertainties that may affect the company's operations, markets, products, services, prices and other factors as discussed in the Huntsman companies' filings with the U.S. Securities and Exchange Commission. Significant risks and uncertainties may relate to, but are not limited to, volatile global economic conditions, cyclical and volatile product markets, disruptions in production at manufacturing facilities, reorganization or restructuring of Huntsman’s operations, including any delay of, or other negative developments affecting, the spin-off of Venator Materials Corporation, the ability to implement cost reductions and manufacturing optimization improvements in Huntsman businesses and realize anticipated cost savings, and other financial, economic, competitive, environmental, political, legal, regulatory and technological factors. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this presentation. We undertake no

• bligation to update or revise forward-looking statements which may be made to reflect events or circumstances that

arise after the date made or to reflect the occurrence of unanticipated events. This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the U.S. ("GAAP"), including EBITDA, adjusted EBITDA, adjusted EBITDA from discontinued operations, normalized EBITDA, adjusted net income (loss), adjusted diluted income (loss) per share, free cash flow and net debt. The Company has provided reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures in the Appendix to this presentation.

Forward Looking Statements

2

See Appendix for reconciliations and important explanatory notes

($ in millions, except per share amounts) 4Q16 4Q15 3Q16 2016 2015 Revenues $2,395 $2,332 $2,363 $ 9,657 $10,299 Net income $ 137 $ 9 $ 64 $ 357 $ 126 Adjusted net income $ 72 $ 124 $ 91 $ 377 $ 492 Diluted income per share $ 0.53 $ 0.02 $ 0.23 $ 1.36 $ 0.38 Adjusted diluted income per share $ 0.30 $ 0.51 $ 0.38 $ 1.57 $ 2.00 Adjusted EBITDA $ 256 $ 240 $ 272 $ 1,127 $ 1,221 Net cash provided by operating activties $ 240 $ 188 $ 405 $ 1,088 $ 575 Free cash flow $ 117 $ (29) $ 300 $ 686 $ (30)

Highlights

3

Polyurethanes

Fourth Quarter 2016

Price: Local(1) Price: FX(1) Mix & Other Volume(2) Y/Y 4% 1%

• 3%

Y/Y(3) 4% 1%

• 9%

Q/Q 7% 1% 1% 3% Q/Q(3) 7% 1% 1% 2%

$130 $141 $137

13% 16% 15%

• 5%

4Q16 4Q15 3Q16 MDI Urethanes MTBE $964 $909 $891 4Q16 4Q15 3Q16 MDI Urethanes MTBE

$ in millions $ in millions

Current Quarter

+ Differentiated MDI sales volume growth of 6% globally for full year + Strong MDI demand growth in N. America – Low MTBE margins

Outlook

+ Continued focus on downstream MDI differentiation + MDI demand growth + 2017 EBITDA improvement – Low MTBE margins Planned maintenance at Rotterdam production facility

(1) Excludes sales from tolling, by-products and raw materials (2) Excludes sales volumes of by-products and raw materials (3) Excludes volume impact from weather related and other outages in 2H16

Adjusted EBITDA Revenues Sales Factors Highlights

Y/Y 6% Q/Q 8% Y/Y 8% Q/Q 5%

Adjusted EBITDA Margin

4

Performance Products

Fourth Quarter 2016

Price: Local(1) Price: FX(1) Mix & Other Volume(2) Y/Y 5%

• 3%

1% Y/Y(3) 5%

• 3%

6% Q/Q

• 1%
• Q/Q(3)
• 1%

1%

$68 $76 $70

13% 14% 14%

4Q16 4Q15 3Q16 $515 $552 $509 4Q16 4Q15 3Q16

$ in millions $ in millions

Current Quarter

+ Q/Q EBITDA benefit from intermediate chemicals and self-help business improvement + Sale of European surfactants business at enterprise value of $225 mm – Soft demand in wind, agrochemicals and oilfield applications

Outlook

+ 2017 EBITDA improvement + Amines and Maleic showing signs of recovery – Margins lower than historical norms – 2H17 EO maintenance: $50mm cash, $15mm EBITDA

Adjusted EBITDA Revenues Sales Factors Highlights

Y/Y 7% Q/Q 1% Y/Y 11% Q/Q 3%

Adjusted EBITDA Margin (1) Excludes sales from tolling, by-products and raw materials (2) Excludes sales volumes of by-products and raw materials (3) Excludes volume impact from weather related and other outages in 2H16

5

Advanced Materials

Fourth Quarter 2016

Price: Local(1) Price: FX(1) Mix & Other Volume(2) Y/Y 2%

• 1%

3% Q/Q 1% 1% 1% 1%

$50 $48 $55

20% 19% 22%

4Q16 4Q15 3Q16 $246 $256 $247 4Q16 4Q15 3Q16

$ in millions $ in millions

Current Quarter

+ EBITDA margin improvement + Aerospace market remains strong + Strong volume growth in Electronic and Electricals markets – Soft demand in low value wind, coatings and construction markets

Outlook

+ Strong aerospace market > 1/3 of earnings + 2017 Modest EBITDA improvement – Slow start in 2017, 1Q17 EBITDA similar to 4Q16

(1) Excludes sales from tolling, by-products and raw materials (2) Excludes sales volumes of by-products and raw materials

Adjusted EBITDA Revenues Sales Factors Highlights

Y/Y 4% Q/Q

• Y/Y

4% Q/Q 9%

Adjusted EBITDA Margin

6

Textile Effects

Fourth Quarter 2016

Price: Local(1) Price: FX(1) Mix & Other Volume(2) Y/Y 8% 1%

• 8%

Q/Q 1% 1% 1% 1%

$14 $13 $17

8% 7% 9%

4Q16 4Q15 3Q16 $184 $186 $184 4Q16 4Q15 3Q16

$ in millions $ in millions

Current Quarter

+ 8% sales volume growth + Full year 2016 RONA 13%

Outlook

+ 2017 EBITDA increase

(1) Excludes sales from tolling, by-products and raw materials (2) Excludes sales volumes of by-products and raw materials

Adjusted EBITDA Revenues Sales Factors Highlights

Y/Y 1% Q/Q

• Y/Y

8% Q/Q 18%

Adjusted EBITDA Margin

7

Pigments & Additives

Fourth Quarter 2016

$46 $0 $38

9% 0% 7%

4Q16 4Q15 3Q16 $491 $453 $532 4Q16 4Q15 3Q16

Price: Local(1) Price: FX(1) Mix & Other Volume(2) Y/Y 7% 1% 3% 5% Q/Q 3% 1% 2% 8%

$ in millions $ in millions

Adjusted EBITDA Revenues Sales Factors Highlights

Y/Y 8% Q/Q 8% Y/Y n/m Q/Q 21% Current Quarter

+ 2016 EBITDA double that of 2015 + Seasonal demand slowdown less than typical + Improved TiO2 selling prices

Outlook

+ Increasing TiO2 selling prices + 2017 meaningful EBITDA improvement – Impact of Pori fire Lawsuit against Rockwood and Albemarle for fraud and breach of contract related to Augusta facility

(1) Excludes sales from tolling, by-products and raw materials (2) Excludes sales volumes of by-products and raw materials

8

Adjusted EBITDA Bridge

Year / Year Quarter / Quarter

Fourth Quarter 2016

$ in millions $ in millions

$240 $256

$20 $25 $46 $14 $1 4Q15 Adjusted EBITDA Volume Price Direct Costs Weather related and

• ther plant
• utages

SG&A, Indirect Costs, FX, Other 4Q16 Adjusted EBITDA

$272 $256 $21 $78 $6 $89

3Q16 Adjusted EBITDA Volume Price Direct Costs SG&A, Indirect Costs, FX, Other 4Q16 Adjusted EBITDA

9

Finance and Cash Considerations

Free Cash Flow Liquidity & Debt Considerations Primary Working Capital Trends

• Liquidity

– $1,208mm combined cash and unused borrowing capacity

• Proceeds from sale to Innospec

– $199mm cash payment received on December 30, 2016

• Debt

– Net debt / 2016 adj. EBITDA = 3.3x – $260mm of early debt repayment on December 30, 2016 – $560mm of total debt repaid in 2016

• Adjusted effective income tax rate

– 2016 at 22% – Long term rate ~30% – Near term rate slightly <30%

• Cash taxes

– ~$90mm US tax refund expected in 1H17

• One-time separation costs

– 2017 Costs associated with the expected separation of our Pigments & Additives business (Venator) ~100mm $(225) $(125) $(25) $75 $175 $275 Q1 Q2 Q3 Q4 2012-2015 range Average 2016

Cash Flow Impact from Changes in Working Capital

$ in millions 2015 2016 2017E

(a)

Adjusted EBITDA 1,221 $ 1,127 $ Capital expenditures (663) (421) ~(400) Capital reimbursements 15 31 ~20 Cash interest (225) (205) ~(200) Cash income taxes (126) (40) ~0 Primary working capital change 143 304 Restructuring (198) (103) ~(75) Pension (118) (87) ~(150) Maintenance & other (79) 80 Free Cash Flow

(b)

(30) $ 686 $ >$350

(a) Not proforma for pending separation of Pigments & Additives business (b) Excluding one-time separation costs

10 10 10

4Q15 1Q16 2Q16 3Q16 4Q16 TZMI 4Q17F ~$300 per tonne improvement in 2016

Tax Free Spin-off Process

Expected Timeline TiO2 Pricing Momentum >$75mm in annual EBITDA improvements

Initial Form 10 filing IRS private letter ruling Form 10 Amendments

• Updated Financials
• Capitalization
• Additional pro forma

information

Marketing

• Rating agencies
• Debt roadshow
• Equity roadshow

Expected Spin-off

October 2016 First Quarter 2017 Second Quarter 2017 (subject to market conditions)

2017 2018 2019

Appendix

12 12 12

Reconciliation of U.S. GAAP to Non-GAAP Measures

Income Tax Diluted Income EBITDA (Expense) Benefit Net Income Per Share Three months ended Three months ended Three months ended Three months ended December 31, December 31, December 31, December 31,

In millions, except per share amounts

2016 2015 2016 2015 2016 2015 2016 2015 Net income 137 $ 9 $ 137 $ 9 $ 0.57 $ 0.04 $ Net income attributable to noncontrolling interests (9) (5) (9) (5) (0.04) (0.02) Net income attributable to Huntsman Corporation 128 4 128 4 0.53 0.02 Interest expense 50 47 Income tax expense (benefit) from continuing operations 29 (39) (29) 39 Income tax benefit from discontinued operations (1) (3) Depreciation and amortization 110 102 Acquisition and integration expenses, purchase accounting adjustments 2 22

• (6)

2 16 0.01 0.07 Loss from discontinued operations, net of tax 2 3 N/A N/A 1

• (Gain) loss on disposition of businesses/assets

(97) 1 14

• (83)

1 (0.34)

• Loss on early extinguishment of debt
• Certain legal settlements and related expenses

2 1 (1)

• 1

1

• Plant incident remediation costs, net

3 1 (1)

• 2

1 0.01

• Business separation costs

18

• (5)
• 13
• 0.05
• Amortization of pension and postretirement actuarial losses

16 18 (2) (3) 14 15 0.06 0.06 Restructuring, impairment, plant closing and transition (credits) costs (6) 83

• 3

(6) 86 (0.02) 0.36 Adjusted 256 $ 240 $ (24) $ 33 $ 72 $ 124 $ 0.30 $ 0.51 $ Adjusted income tax expense (benefit) 24 $ (33) $ Net income attributable to noncontrolling interests, net of tax 9 5 Adjusted pre-tax income 105 $ 96 $ Adjusted effective tax rate 23%

• 34%

13 13 13

Reconciliation of U.S. GAAP to Non-GAAP Measures

Income Tax Diluted Income EBITDA (Expense) Benefit Net Income Per Share Three months ended Three months ended Three months ended Three months ended September 30, September 30, September 30, September 30,

In millions, except per share amounts

2016 2016 2016 2016 Net income 64 $ 64 $ 0.27 $ Net income attributable to noncontrolling interests (9) (9) (0.04) Net income attributable to Huntsman Corporation 55 55 0.23 Interest expense 52 Income tax benefit from continuing operations (1) 1 Depreciation and amortization 113 Acquisition and integration expenses, purchase accounting adjustments 8 (4) 4 0.02 Loss from discontinued operations, net of tax 1 N/A 1

• Gain on disposition of businesses/assets

(22) 2 (20) (0.08) Loss on early extinguishment of debt 1

• 1
• Certain legal settlements and related expenses
• Plant incident remediation costs, net

4

• 4

0.02 Amortization of pension and postretirement actuarial losses 16 (4) 12 0.05 Restructuring, impairment, plant closing and transition costs 45 (11) 34 0.14 Adjusted 272 $ (16) $ 91 $ 0.38 $ Adjusted income tax expense 16 $ Net income attributable to noncontrolling interests, net of tax 9 Adjusted pre-tax income 116 $ Adjusted effective tax rate 14%

14 14 14

Reconciliation of U.S. GAAP to Non-GAAP Measures

Income Tax Diluted Income EBITDA (Expense) Benefit Net Income Per Share Twelve months ended Twelve months ended Twelve months ended Twelve months ended December 31, December 31, December 31, December 31,

In millions, except per share amounts

2016 2015 2016 2015 2016 2015 2016 2015 Net income 357 $ 126 $ 357 $ 126 $ 1.49 $ 0.51 $ Net income attributable to noncontrolling interests (31) (33) (31) (33) (0.13) (0.13) Net income attributable to Huntsman Corporation 326 93 326 93 1.36 0.38 Interest expense 202 205 Income tax expense from continuing operations 87 46 (87) (46) Income tax benefit from discontinued operations (2) (2) Depreciation and amortization 432 399 Acquisition and integration expenses, purchase accounting adjustments 23 53 (7) (13) 16 40 0.07 0.16 Loss from discontinued operations, net of tax 6 6 N/A N/A 4 4 0.02 0.02 (Gain) loss on disposition of businesses/assets (119) 2 16

• (103)

2 (0.43) 0.01 Loss on early extinguishment of debt 3 31 (1) (11) 2 20 0.01 0.08 Certain legal settlements and related expenses 3 4 (1) (1) 2 3 0.01 0.01 Plant incident remediation costs, net 1 4

• (1)

1 3

• 0.01

Business separation costs 18

• (5)
• 13
• 0.05
• Amortization of pension and postretirement actuarial losses

65 74 (12) (17) 53 57 0.22 0.23 Restructuring, impairment, plant closing and transition costs 82 306 (19) (36) 63 270 0.26 1.10 Adjusted 1,127 $ 1,221 $ (116) $ (125) $ 377 $ 492 $ 1.57 $ 2.00 $ Adjusted income tax expense 116 $ 125 $ Net income attributable to noncontrolling interests, net of tax 31 33 Adjusted pre-tax income 524 $ 650 $ Adjusted effective tax rate 22% 19%

15 15 15

Reconciliation of U.S. GAAP to Non-GAAP Measures

Free Cash Flow

Three months ended Twelve months ended December 31, December 31, 2016 2016 2015 Free cash flow: Net cash provided by operating activities $ 240 $ 1,088 $ 575 Capital expenditures (131) (421) (663) All other investing activities excluding acquisition and disposition activities

(a)

• 11

58 Non recurring separation costs

(b)

8 8

• Total free cash flow

$ 117 $ 686 $ (30) Adjusted EBITDA $ 256 $ 1,127 $ 1,221 Capital expenditures (131) (421) (663) Capital reimbursements 3 31 15 Interest (66) (205) (225) Income taxes (11) (40) (126) Primary working capital change 80 304 143 Restructuring (18) (103) (198) Pensions (24) (87) (114) Maintenance & other 28 80 (83) Total free cash flow $ 117 $ 686 $ (30)

(a) Represents "Acquisition of business, net of cash acquired", "Cash received from purchase price adjustment for business acquired", and "Proceeds from sale of business/assets". (b) Represents payments associated with one-time costs of the proposed spin-off of our Pigments & Additives business.

16 16 16

Adjusted EBITDA Reconciliation

($ in millions)

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Net Income (35) $ 15 $ 39 $ 63 $ 9 $ 62 $ 94 $ 64 $ 146 $ Net income attributable to noncontrolling interests (3) (10) (10) (8) (5) (6) (7) (9) (9) Net income (loss) attributable to Huntsman Corporation (38) $ 5 $ 29 $ 55 $ 4 $ 56 87 $ 55 $ 137 $ Interest expense, net 57 56 53 49 47 50 50 52 50 Income tax expense (benefit) 12 2 34 49 (39) 27 32 (1) 29 Depreciation and amortization 110 95 99 103 102 100 109 113 110 Income taxes, depreciation and amortization in discontinued operations

• 1

1 (1) (3) (1)

• (1)

Acquisition and integration expenses, purchase accounting adjustments 40 9 12 10 22 9 4 8 2 EBITDA from discontinued operations 1 1 1 1 3 2 1 1 2 (Gain) loss on disposition of businesses/assets (1)

• 1
• 1
• (22)

(106) Loss on early extinguishment of debt 28 3 20 8

• 2

1

• Certain legal settlements and related expense (income)
• 1

1 1 1 1

• 2

Plant incident remediation costs (credits), net

• 3

1 1 (7) 4 3 Amortization of pension and postretirement actuarial losses 14 18 19 19 18 16 17 16 16 Business separation costs

• 18

Restructuring, impairment, plant closing and transition costs 69 94 115 14 83 13 30 45 (6) Adjusted EBITDA 292 285 385 311 240 274 325 272 256 Acquisition - ROC Performance Additives & TiO2

(1)

8

• Pro forma adjusted EBITDA

300 $ 285 $ 385 $ 311 $ 240 $ 274 $ 325 $ 272 $ 256 $ 2011 2012 2013 2014 2015 2016 Net Income 254 $ 373 $ 149 $ 345 $ 126 $ 366 $ Net income attributable to noncontrolling interests (7) (10) (21) (22) (33) (31) Net income attributable to Huntsman Corporation 247 $ 363 $ 128 $ 323 $ 93 $ 335 $ Interest expense, net 249 226 190 205 205 202 Income tax expense 109 169 125 51 46 87 Depreciation and amortization 439 427 446 445 399 432 Income taxes, depreciation and amortization in discontinued operations (5) 2

• (2)

(2) (2) Acquisition and integration expenses, purchase accounting adjustments 5 5 21 67 53 23 (Gain) loss on initial consolidation of subsidiaries (12) 4

• EBITDA from discontinued operations

6 5 5 10 6 6 (Gain) loss on disposition of businesses/assets (40) (3)

• (3)

2 (128) Loss on early extinguishment of debt 7 80 51 28 31 3 Extraordinary gain on the acquisition of a business (4) (2)

• Certain legal settlements and related expense

46 11 9 3 4 3 Plant incident remediation costs (credits), net

• 4

1 Amortization of pension and postretirement actuarial losses 31 43 74 51 74 65 Business separation costs

• 18

Restructuring, impairment, plant closing and transition costs 167 109 164 162 306 82 Adjusted EBITDA 1,245 1,439 1,213 1,340 1,221 1,127 Acquisition - ROC Performance Additives & TiO2

(1)

306 168 110 155

• Pro forma adjusted EBITDA

1,551 $ 1,607 $ 1,323 $ 1,495 $ 1,221 $ 1,127 $

(1) Pro forma adjusted to include the October 1, 2014 aquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood Holdings,

• Inc. as if consummated at the beginning of

the period; exclude the related sale of our TR52 product line to Henan Billions Chemicals Co., Ltd. in December 2014; and exclude the allocation of general corporate overhead by Rockwood.

17 17 17

Revenue, Adjusted EBITDA & Margin by Segment

($ in millions) Pro Forma(2)

Revenue 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Polyurethanes 1,201 $ 890 $ 995 $ 1,017 $ 909 $ 836 $ 976 $ 891 $ 964 $ Performance Products 712 656 675 618 552 536 566 509 515 Advanced Materials 295 290 282 275 256 266 261 247 246 Textile Effects 203 206 216 196 186 185 198 184 184 Pigments & Additives 559 572 592 543 453 540 576 532 491 Corporate, LIFO and other (33) (25) (20) (11) (24) (8) (33)

• (5)

Total 2,937 $ 2,589 $ 2,740 $ 2,638 $ 2,332 $ 2,355 $ 2,544 $ 2,363 $ 2,395 $

Pro Forma(2) Pro Forma(2) Pro Forma(2) Pro Forma(2)

Revenue 2011 2012 2013 2014 2015 2016 Polyurethanes 4,456 $ 4,915 $ 4,991 $ 5,053 $ 3,811 $ 3,667 $ Performance Products 3,301 3,065 3,019 3,072 2,501 2,126 Advanced Materials 1,372 1,325 1,267 1,248 1,103 1,020 Textile Effects 737 752 811 896 804 751 Pigments & Additives 3,032 2,756 2,761 2,673 2,160 2,139 Corporate, LIFO and other (265) (285) (251) (219) (80) (46) Total 12,633 $ 12,528 $ 12,598 $ 12,723 $ 10,299 $ 9,657 $

($ in millions) Pro Forma(2)

Adjusted EBITDA

(1)

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Polyurethanes 171 $ 105 $ 159 $ 168 $ 141 $ 131 $ 171 $ 137 $ 130 $ Performance Products 111 121 141 122 76 92 86 70 68 Advanced Materials 43 58 58 56 48 60 58 55 50 Textile Effects 6 17 23 10 13 18 24 17 14 Pigments & Additives 17 21 35 5

• 15

31 38 46 Corporate, LIFO and other (48) (37) (31) (50) (38) (42) (45) (45) (52) Total 300 $ 285 $ 385 $ 311 $ 240 $ 274 $ 325 $ 272 $ 256 $

Pro Forma(2) Pro Forma(2) Pro Forma(2) Pro Forma(2)

Adjusted EBITDA

(1)

2011 2012 2013 2014 2015 2016 Polyurethanes 495 $ 793 $ 746 $ 728 $ 573 $ 569 $ Performance Products 381 369 403 473 460 316 Advanced Materials 114 98 131 199 220 223 Textile Effects (64) (20) 16 58 63 73 Pigments & Additives 818 538 215 225 61 130 Corporate, LIFO and other (193) (171) (188) (188) (156) (184) Total 1,551 $ 1,607 $ 1,323 $ 1,495 $ 1,221 $ 1,127 $

Pro Forma(2)

• Adj. EBITDA Margin

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Polyurethanes 14% 12% 16% 17% 16% 16% 18% 15% 13% Performance Products 16% 18% 21% 20% 14% 17% 15% 14% 13% Advanced Materials 15% 20% 21% 20% 19% 23% 22% 22% 20% Textile Effects 3% 8% 11% 5% 7% 10% 12% 9% 8% Pigments & Additives 3% 4% 6% 1% 0% 3% 5% 7% 9% Total 10% 11% 14% 12% 10% 12% 13% 12% 11%

Pro Forma(2) Pro Forma(2) Pro Forma(2) Pro Forma(2)

• Adj. EBITDA Margin

2011 2012 2013 2014 2015 2016 Polyurethanes 11% 16% 15% 14% 15% 16% Performance Products 12% 12% 13% 15% 18% 15% Advanced Materials 8% 7% 10% 16% 20% 22% Textile Effects

• 9%
• 3%

2% 6% 8% 10% Pigments & Additives 27% 20% 8% 8% 3% 6% Total 12% 13% 11% 12% 12% 12%

(1) For a reconciliation see previous page. (2) Pro forma adjusted to include the October 1, 2014 acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood Holdings, Inc. as if consummated at the beginning of the period; exclude the related sale of our TR52 product line to Henan Billions Chemicals Co., Ltd. in December 2014; and exclude the allocation of general corporate overhead by Rockwood.

18 18 18

We use adjusted EBITDA to measure the operating performance of our business and for planning and evaluating the performance of our business segment. We provide adjusted net income because we feel it provides meaningful insight for the investment community into the performance of our business. We believe that net income (loss) is the performance measure calculated and presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”) that is most directly comparable to adjusted EBITDA and adjusted net income. Additional information with respect to our use of each of these financial measures follows: Adjusted EBITDA, adjusted net income (loss) and adjusted diluted income (loss) per share, as used herein, are not necessarily comparable to other similarly titled measures of other companies. Adjusted EBITDA is computed by eliminating the following from net income (loss) : (a) net income attributable to non controlling interest, net

• f tax; (b) interest; (c) income taxes; (d) depreciation and amortization; (e) acquisition and integration expenses, purchase accounting

adjustments; (f) EBITDA from discontinued operations; (g) loss (gain) on disposition of businesses/assets; (h) loss on early extinguishment of debt; (i) certain legal settlements and related expenses; (j) plant incident remediation costs (credits), net; (k) amortization of pension and postretirement actuarial losses (gains); (l) business separation costs and (m) restructuring, impairment, plant closing and transition costs (credits). The reconciliation of adjusted EBITDA to net income (loss) is set forth in this appendix. Adjusted net income (loss) and adjusted diluted income (loss) per share are computed by eliminating the after tax impact of the following items from net income (loss: (a) net income attributable to non controlling interest; (b) acquisition and integration expenses, purchase accounting adjustments; (c) impact of certain foreign tax credit elections; (d) loss (income) from discontinued operations; (e) discount amortization on settlement financing associated with the terminated merger; (f) loss (gain) on disposition of businesses/assets; (g) loss on early extinguishment of debt; (h) certain legal settlements and related expenses; (i) plant incident remediation costs (credits); (j) amortization

• f pension and postretirement actuarial losses (gains); (k) business separation costs and (l) restructuring, impairment, plant closing and

transition costs (credits). The income tax impacts, if any, of each adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach. We do not adjust for changes in tax valuation allowances because we do not believe it provides more meaningful information than is provided under GAAP. The reconciliation of adjusted net income (loss) to net income (loss) is set forth in this appendix. Management internally uses a free cash flow measure: (a) to evaluate the Company's liquidity, (b) to evaluate strategic investments, (c) to plan stock buyback and dividend levels and (d) to evaluate the Company's ability to incur and service debt. Free cash flow is not a defined term under U.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow as cash flow provided by operating activities less cash flow used in investing activities, excluding merger and acquisition activities. Free cash flow is typically derived directly from the Company's condensed consolidated statement of cash flows; however, it may be adjusted for items that affect comparability between periods.

Explanatory Notes