Investor Presentation February 2020 Neenah is a global specialty - - PowerPoint PPT Presentation

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Investor Presentation

February 2020

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Neenah is a global specialty materials company focused on high value niche markets

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Image-oriented

FINE PAPER & PACKAGING

Performance-based

TECHNICAL PRODUCTS Net Sales ~$1 bn

Neenah’s position in value chain

▪

Focused in the intermediate stage of the value chain, taking various raw materials and manufacturing, coating/saturating to develop customized, higher-value products typically sold to customers for final processing

▪

Multiple technologies to combine and/or align fibers with polymers and resins to impart performance characteristics or quality requirements

▪

Products are critical to end-use performance, but a small portion of end-product cost

Manufacturing Final Converting End Product Raw Materials Value-add Processing

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Proven strategies to create long-term value

Drive organic growth in core businesses where we have defensible, leading market positions, supplemented by value-adding M&A Deliver meaningful cash flow with balanced capital deployment to maintain a high ROIC, strong balance sheet, and attractive dividend Protect or enhance margins through cost and pricing initiatives and relentless focus on

• ptimizing operational efficiencies

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Filtration Digital Print Media Pkg & Design

Filtration Digital Media Pkg & Design

3-5% 5-7% 3-4%

✓ Margins now recovering as pricing and cost actions overcome unprecedented run-up in input costs ✓ Weaker global economies impacting demand near term; addressing through cost management, asset optimization and focus on cash flow generation ✓ Added US filtration capacity ramping up (though cost inefficiencies remain due to smaller run sizes and underutilization during initial years)

Emerging from recent challenges

…with growth catalysts in place

Targeted markets provide growth opportunities w/out significant capital

✓ US transportation filtration capacity to provide profitable ~$70-80 mm EOC sales ✓ Leading global position in a fast growing digital transfer media market, with recent breakthrough technology doubling addressable market size ✓ Premium packaging products capitalizing on demand for plastic alternatives ✓ Industrial filtration markets in air/water offer additional opportunities to expand

Geographic expansion (80+% of TP sales currently in No. America/Europe) Strong financial position to support value-adding investments

Target Market Size ($3bn) Market Growth Rates

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$124 $116 $110 $115 $122

12% 11% 11% 12% 13%

LTM Q418 LTM Q119 LTM Q219 LTM Q319 LTM Q419

EBITDA Margin

✓ Long tenures with blue-chip customers ✓ Sustainable cash flows/low leverage and established track record of performance through cycle

Why we have been successful

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✓ Leading positions in end markets with portfolio of highly recognized brands ✓ Defensible niche / hard to replicate products with clear barriers to entry ✓ Variety of best in class manufacturing capabilities with well-capitalized assets ✓ Experienced management team

Performance Materials (~55%) Filtration (~45%)

~ $600MM Net Sales

TECHNICAL PRODUCTS

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Strong customer relationships with long qualification periods Leading Positions in Defensible Niche Markets Broad Range of Technical Abilities ▪ Innovative offerings from a global footprint ▪ Long-term joint development relationships ▪ Strong technical support and service ▪ High value, growing specialty markets ▪ Long customer qualifications - strong barrier ▪ Our media is a key performance driver, but a small part of product cost ▪ Multiple technologies and chemistries ▪ Proprietary formulations & strong “dark” IP ▪ Leading performance and innovation

Technical Products - Why we are successful

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35 55 75 95 115 135 155 175

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Europe NAFTA Asia RoW

Other Neenah H&V Ahlstrom

Transportation filtration media

 Market growth ~3+% /yr, with tight capacity and only 3

global players

 Media used for air, fuel, oil and cabin air in cars and

trucks/heavy duty equipment, with > 80% of sales recurring (after-market)

 Leaders in Europe, with recent entry into US  Trend towards more demanding engines that require higher

performing filters. Electrification growing, but studies show limited impact on demand during next 10-15 years

Other filtration markets

 Present in fast-growing markets including water, industrial

and beverage filter media

 Planned small capital investment in 2020 to increase

capacity for fast-growing water filtration media Neenah Transp. Filtration Net Sales Organic CAGR 7% Global Transportation Filtration Market/Shares

~ US $1.3 billion

Runway for growth

 Investment in first US plant completed in 2016

and provides capacity to maintain historic 7% annual growth rate with best in class capabilities and costs

 ~$70-80 million EOC sales at attractive margins lead to

meaningful profit growth (from losses during start up)

#1

FILTRATION: A key growth platform

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▪ Focused on performance niches with value

added through downstream applications (saturation and coating)

▪ Backings the most sizeable global category

with media primarily used in specialty performance tapes and abrasives

▪ Markets generally grow with GDP ▪ Other specialty markets include digital

transfer media, labels, security and others

▪ Markets generally grow at GDP+ ▪ Innovation pipeline and R&D enabling faster

growth in digital printing, labeling and other categories

Abrasive backings Tape backings Digital transfer media Medical packaging Performance labels Security covers

PERFORMANCE MATERIALS: A collection of growing niche businesses

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$324 $352 $336 $353 $404 $429 $466 $502 $583 $542 9% 9% 10% 11% 12% 13% 14% 11% 8% 8%

• 3%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net Sales Adjusted EBIT %

*

Technical Products: Financial Trends

CAGR 6%/yr

Growing markets; recent margins reflect US filtration asset start-up

▪ Markets growing GDP+ ▪ Organic investments supplemented with M&A lead to volume and share gains through performance, innovation and geographic expansion ▪ 2019 top line pressured by lower sales to China and currency ▪ Opportunity to expand margins through:

 Mix enhancement, led by profitable and

faster growing filtration products

 Leveraging cost efficiencies and scale  Managing pricing and costs to offset inputs  R&D-driven new or improved products

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* includes ~$16 mm for products previously in “Other” segment includes US filtration start up costs

FINE PAPER & PACKAGING

Premium Packaging (~20%) Graphic Imaging (~80%)

~ $400MM Net Sales

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Fine Paper & Packaging: Why we are successful

Leading Brands Go To Market Innovation Best in Class Manufacturing Capabilities ▪ Leading brand equity pulls demand ▪ Pricing ability to recoup input costs ▪ Selective distribution ▪ Specialty colors, textures and coatings allow creation of unique and customized product portfolio ▪ Unique purpose-built assets provide fast, flexible and low cost offerings at highest quality ▪ Design and rapid prototyping, provides customers a more holistic solution and create barriers for competitors ▪ Able to replicate short lead times with outstanding service

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Neenah 60%

Mohawk Fine Papers 20% Others 20%

▪ Neenah is the clear market leader in both commercial and consumer channels with our well-known brands ▪ Consolidated niche market of unique papers used for high-end commercial printing and consumer applications ▪ Market faces secular pressures from electronic substitution. Opportunistic volume opportunities in lower value premium opaque and other grades

GRAPHIC IMAGING

Premium market $575 MM & shares

14 Opportunistic volume adjacencies

PREMIUM PACKAGING

▪ Targeted addressable market of $450 MM of high value items in small packages. ▪ Growing 3-5%/yr. Neenah growth target =2x market ▪ Products include spirit & wine labels, premium folding board, luxury box wrap, and plastic- substitute gift cards and others ▪ Efficiently uses fine paper assets and texture & color capabilities

Beauty 49% Alcohol 29% Retail/ Other 22%

Targeted End Markets

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$273 $275 $402 $428 $436 $443 $452 $455 $446 $397 15% 14% 14% 14% 14% 16% 16% 15% 12% 15%

• 1.0%

• 4

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net Sales

• Adj. EBIT %

Fine Paper & Packaging: Financial Trends

CAGR > 4%/yr

Stable mid-teen EBIT margins provide strong cash flows for redeployment

▪ Commercial print secular market pressures partly mitigated through growth in premium packaging, digital and wide format, M&A, and other actions ▪ Mid-teen EBIT margins supported by pricing with strong brands and careful management

• f costs

▪ High return on capital ▪ Substantial cash generation

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✓ Consistent profitable growth ✓ Capital Efficiency/ROIC ✓ Strong balance sheet ✓ Shareholder returns, including an attractive dividend

Financial Principles

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Value-adding capital deployment

✓ Mid-single digit top line growth ✓ Attractive Return on Capital ✓ Strong balance sheet and cash flows ✓ Total shareholder returns of almost 2x the R2000 index

Return to Shareholders $177 MM Value-Adding Organic Capital $150 MM Acquisitions $169 MM

Substantial cash flows and balanced capital deployment has resulted in:

Five-year cash deployment

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$3.70 $4.54 $4.32 $3.50 $3.47 2015 2016 2017 2018 2019 Adjusted E.P.S.

Consistent profitable growth…

✓ Top-line growth driven by share gains, new products, price/mix improvement and acquisitions ✓ Recent earnings reflecting costs

• f filtration asset ramp-up and

timing of input cost recovery

$888 $942 $980 $1,035 $939

12% 13% 11% 8% 9%

• 3.0%

2015 2016 2017 2018 2019

Net Sales Adjusted EBIT %

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12% 13% 10% 9% 9% 2015 2016 2017 2018 2019

% ROIC

…while generating attractive ROIC

✓ Continual focus on asset efficiency and returns ✓ Disciplined organic investments and history of value-adding acquisitions, as well as divestitures

• f non-returning assets

✓ Return to double-digits expected as US filtration capacity continues to ramp up

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175 175 175 175 175 54 46 80 64 26

1.6x 1.4x 1.8x 1.9x 1.6x

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

Bonds S-T Debt

$229 $221

$255

✓ Cash generation has kept debt to EBITDA ratio below 2 times ✓ Ample borrowing capacity and flexibility to act on future

• pportunities

▪ $175 million bond due 2021; 5.25% Ba3/BB ▪ Short-term debt through ABL revolver (sized $200 MM)

Debt

($ millions)

….and a strong balance sheet

Debt/ EBITDA

21 $239 $201

Cash Uses ▪Prioritize highest returns

(organic, value-adding M&A, debt reduction)

▪Track record of growing dividend with attractive yield ▪$25MM opportunistic buyback plan Cash Generation ▪ Sizeable cash flow generation ▪ Efficient assets; capital spend 2- 4% of sales (maintenance ~ $15 MM) ▪ Low cash tax rate supported by prior period R&D tax credits

$1.32 $1.48 $1.64 $1.80 $1.88

2016 2017 2018 2019 2020 Dividends per share

Disciplined capital deployment

$63 $47 $57 $55 $76 7% 5% 6% 5% 8%

0% 5% 10% 15% 20% 25%

2015 2016 2017 2018 2019

Free Cash Flow

FCF FCF % NS

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Compensation philosophy

▪ Performance-based pay important for both salary and hourly personnel ▪ Bulk of executive team pay is performance-based (CEO = 70%) ▪ Management also required to hold a multiple of base salary in stock (4-6 times)

Return on Capital Shareholder Return (vs. Russell 2000) Revenue Growth

Performance Share Metrics

Free Cash Flow Efficiency

Performance-based and aligned with shareholders

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▪ Active and disciplined process with dedicated resources and ideas from a robust network of sources ▪ Focused on growing, profitable and defensible niche markets, strong bias to technical products categories ▪ Most targets $50 - $250 MM of sales ▪ Look for strategic fit and touch points to unlock synergies

Strategic Touch Points

Geographies Technologies Products/ End Markets Customers 2014 Crane (TP) 2015 FiberMark (TP/FPP) 2017 Hazen (FPP) 2017 Coldenhove (TP) 2013 Southworth (FPP)

Track record of value-adding M&A to accelerate growth rate

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Take-Aways

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▪ Strong core business, with leading positions in defensible and profitable core categories with mid-teen EBIT margins ▪ Overcome recent challenges and with catalysts in place to drive organic growth without significant capital required

▪ US filtration ramp up and share gains ▪ Expanded presence in digital transfer ▪ Premium packaging

▪ Sizeable base cash flow and a strong balance sheet ▪ Track record of value-adding capital deployment and prudent management

Fine Paper & Packaging Technical Products

Neenah Today

Packaging & Fine Paper

Technical Products

Neenah Future

Contact Us

For more information

Visit Our Website: www.neenah.com Email: investors@neenah.com

Investor Relations

Bill McCarthy

Vice President- Investor Relations 3460 Preston Ridge Road Suite 600 Alpharetta, GA 30005 Phone: (678) 518-3278 Email: bill.mccarthy@neenah.com

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Appendix

Forward Looking Statements

Statements in this presentation which are not statements of historical fact are “forward- looking statements” within the “safe harbor”' provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Neenah, Inc. at the time this presentation was made. Although Neenah believes that the assumptions underlying such statements are reasonable, it can give no assurance that they will be

• attained. Factors that could cause actual results to differ materially from expectations

include the risks detailed in the section “Risk Factors” in the Company’s most recent 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 directly comparable GAAP measures would be included as an appendix to this presentation and posted on the company’s web site at www.neenah.com

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GAAP Reconciliation

Results for the year ended December 31, 2015, include integration and restructuring costs of $6.5MM. Results for the year ended December 31, 2016, include integration and restructuring costs of $7.0MM and a pension plan settlement charge of $0.8MM. Results for the year ended December 31, 2017, include integration and restructuring costs of $1.3MM, a pension plan settlement charge of $0.6MM and Insurance Settlement of ($3.2MM) Results for the year ended December 31, 2018, include an impairment loss of $31.1MM, acquisition-related adjustments, integration and restructuring costs of ($1.8MM) a pension plan settlement charge of $1.8MM and Insurance Settlement of ($0.4MM). Results for the year ended December 31, 2019, include Idled costs $4.7M, tax audits $0.7MM, restructuring costs $0.8MM and pension plan settlement charge ($1.4MM).

29 Continuing Operations $ millions 2015 2016 2017 2018 2019 GAAP Operating Income $ 101.4 $ 114.1 $ 104.3 $54.1 $78.3 Impairment loss 31.1 Idled paper machine costs 4.7 2012-15 indirect tax audit costs 0.7 Restructuring, Integration and Other Costs 6.5 7.0 1.3 (1.8) 0.8 Pension/Insurance Settlement/Other 0.8 (2.6) 1.4 (1.4) Adjusted Operating Income $ 107.9 $ 121.9 $ 103.0 $ 84.8 $83.1 Depreciation & Amortization 27.5 30.1 32.1 35.0 33.7

• Amort. Equity-Based Compensation

6.5 5.8 6.4 4.0 5.6 Adjusted EBITDA $ 141.9 $ 157.8 $ 141.5 $123.8 $122.4 Earnings (Loss) per Share $ 3.53 $ 4.26 $ 4.68 $2.17 $3.26 Impairment loss 1.37 Idled paper machine costs 0.21 2012-15 indirect tax audit costs 0.03 Restructuring, Integration and Other Costs 0.24 0.25 0.06 (0.11) 0.03 Pension/Insurance Settlement/Other 0.03 (0.10) 0.06 (0.6) Tax Adjustments (0.07) (0.32) 0.01 Adjusted Earnings per Share $ 3.70 $ 4.54 $ 4.32 $3.50 $3.47