Additives & Functional Products at a glance

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2 Additives & Functional Products Additives & Functional Products at a glance Trailing 12 months sales revenue (4Q13 3Q14) Coatings ~40% Tires ~30% Other formulated products ~30% Technology platforms Cellulose esters Polyesters Olefins Insoluble sulfur PPD antidegredants Hydrocarbon resins 28

3 Additives & Functional Products Strong portfolio that leverages leadership positions in coatings and tires GDP+ core growth Leadership positions yield innovation Attractive and sustainable margins Leveraged to end markets with solid fundamentals Positioned to benefit from emerging middle class #1 global position in key technology platforms World-class application development capabilities Strategic relationships with industry leaders >70% of sales revenue derived from platforms with advantaged cost positions Small percentage of cost plus functionality critical to end use Expect annual sales revenue growth of 3%-5% and operating earnings growth of 5%-7% through

4 Additives & Functional Products Well positioned for GDP+ growth with attractive market footprint and diverse geographic profile Trailing 12 months sales revenue (4Q13 3Q14) Replacement/ remodeling 70% OEM/new construction 30% Sectoral leverage 80% 50% 16% 14% Transportation Building & construction Consumer durables 42 % 22 % Staples 9% 9% Consumables 8 % 28 % 11% Other 30

5 Additives & Functional Products Tires: Accelerating innovation to sustain leadership positions and deliver consistent growth Growth entitlement: 3%-4% Addressable market Tire additives: ~$5 B Eastman business profile 55% Commercial vehicles 80% Replacement 20% OEM 45% Cars 70% Replacement 30% OEM Market leadership Innovation Advantaged cost position Sustain global leadership in insoluble sulfur with Crystex Solidify regional leadership in antidegradants with Santoflex Extend differentiation of Crystex offerings Broaden portfolio of performance additives Transform Crystex cost position Optimize asset base via process improvements 31

6 Additives & Functional Products: Tires Transforming Crystex cost position through innovation Kuantan, Malaysia Crystex capacity expansion Making the best cost position better Next-generation technology has demonstrated ability to meet cost targets Executing project to double capacity of world s largest and lowest cost facility Expected online first half 2017 Optimizing asset base Expanded existing capacity by 10%-15% via process improvement Intent to shut down highest-cost asset Retrofitting existing sites with new next-generation technology F 2017F 32

7 Additives & Functional Products: Tires Extending our portfolio of differentiated Crystex products Innovation drivers Continuous need for lower operating costs and increased throughput of mixing operations Need for wide range of vulcanizing additives due to differences in manufacturing capabilities Value proposition Superior consistency and reliability New technology provides ability to tune properties for unique market needs Growth progress Next-generation technology: Differentiated performance Thermal stability Today s products Low quality competitors Poor thermal stability A B Dispersion Future options Nextgeneration products With Crystex Improved thermal stability Validated fitness for use of initial product targets via plant trials at alpha customers Contracts with alphas include joint commitment to validate operating cost reductions 33

8 Additives & Functional Products: Tires Breadth of hydrocarbon resins platform drives growth of performance additives Innovation drivers Tire resin sales revenue Regulatory and market trends drive need for fuel efficiency and lower rolling resistance Leading tire makers focused on differentiation ~$100 M Value proposition Resins address the natural trade-off of rolling resistance and wet grip Eastman viewed as preferred partner F 2017F 2019F Growth progress Product line extensions under development with multiple customers Next-generation resin development well underway 34

9 Additives & Functional Products: Tires Pursuing growth by improving tire performance with cellulosic additives Innovation drivers OEMs pushing for tires with better handling Tire manufacturers focused on differentiation $400 M total addressable market 700 M passenger car/light truck tires Value proposition Cellulose ester functionality yields: All season / touring High performance / ultra high performance Winter Significant handling improvement (>10%) Improved processing Enhanced sustainability profile Growth progress Multiple tire builds and road testing completed with alpha customer Commercialization targeted for

10 Additives & Functional Products Coatings: Leadership positions enable sustained growth and innovation Growth entitlement: 3%-4% Addressable market Additives & oxygenated solvents: ~$25 B Market leadership Sustain leadership in Texanol, cellulose esters, and specialty solvents 40% Transportation 50% Refinish 50% OEM 35% Architectural 65% Exterior 35% Interior 25% Industrial 80% Durables 20% Other Eastman business profile Innovation Advantaged cost position Expand portfolio of film forming additives Launch and grow new polyesters platform Leverage scale and advantaged cost position to sustain growth of solvents 36

11 Additives & Functional Products: Coatings Extending Texanol leadership into a portfolio of film-forming additives with sustained global growth Expanded portfolio of film-forming additives Sales revenue F 2015F 2016F 2017F Texanol New products World leader in film forming additives for architectural paint Extended global manufacturing footprint to serve emerging markets Expanded portfolio of filmforming additives via: Launch of Eastman Optifilm enhancer product family Acquisition of Velate coalescents & Benzoflex plasticizers product lines Investing in development of multifunctional additives 37

12 Additives & Functional Products: Coatings Expanding polyester technology into coatings Innovation drivers BPA-free polymers for packaging Drive for higher performing single-coat systems in industrial and auto Value proposition Advantaged manufacturing capabilities and superior quality TMCD monomer enabling polyesters with exceptional weathering and chemical resistance Growth progress TMCD TMCD polyesters polyesters deliver deliver exceptional exceptional weathering weathering Weathering % 20 gloss retention Months Florida exposure Total addressable market: ~$1.6 B TMCD polyester Traditional polyester Target midmolecular weight polyesters and high-performing epoxy and acrylic resins in outdoor applications Collaborating with top-tier coatings companies with commercialization beginning in 2015 Automotive Industrial Packaging 38

13 Additives & Functional Products Other formulated products: Leveraging our technology platforms to grow outside of tires and coatings 40% Consumables Growth entitlement: 2%-3% Addressable market Formulated product additives: ~$20 B Graphic arts I&I cleaners Noncontact food pkg. Eastman business profile 10% Health & wellness PC & Cosmetics ingredients Pharma 15% Other 35% Industrial Process solvents & intermediates Oil & gas Electronics Market leadership Innovation Advantaged cost position Extend cellulose esters into new markets Build niche leadership positions in care chemicals Develop new products to enable regulatory compliant formulations Leverage scale and advantaged cost position to sustain growth of solvents 39

14 Additives & Functional Products: Other formulated products Sustaining growth of cellulose esters by developing new applications Growing cellulose esters outside of coatings Sales revenue F 2015F 2016F 2017F Core business New applications World leader in cellulose ester technology Investing in application development and product line extensions Meet emerging Chinese government packaging regulations Drive substitution of nitrocellulose in select applications 40

15 Additives & Functional Products: Other formulated products Innovating to build niche leadership positions in care chemicals Innovation driver Need for VOC-exempt ingredients with excellent solvency Customer demands for safe and environmentally friendly products Value proposition Ester solvent that enables: CARB compliant, neutral-ph cleaners effective on difficult soils High performance at lower overall cost Growth opportunity Launched first quarter 2014 Early adoption exceeding expectations Regulatory clearance for direct release into the environment creating opportunities in marine cleaning and oil & gas 41 Changing the Chemistry of Clean This project is a perfect example of green chemistry in action. Margaret H. Whittaker, Ph.D. Managing Director and Chief Toxicologist ToxServices LLC

16 Additives & Functional Products A strong portfolio positioned to deliver 5%-7% earnings growth Tires Sustain global leadership in Crystex Shift portfolio towards performance additives Coatings Extend leadership in film forming additives Launch and grow new polyesters platform Other formulated products Develop new applications for cellulose esters Build niche leadership positions in care chemicals Operating earnings ($ in millions) ~$ F Core growth Market development & innovation 5%-7% CAGR F 42

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18 Advanced Materials Advanced Materials at a glance Trailing 12 months sales revenue (4Q13 3Q14) Specialty plastics 53% Interlayers 35% Performance films 12% Technology platforms Cellulose esters Olefins Polyesters PVB films Plasticizers 44

19 Advanced Materials Portfolio of differentiated materials with leadership in niche markets Strong sales revenue growth driven by favorable macro trends Global shift to BPA-free plastics Acoustic glass and heads-up displays (HUD) in autos Advanced films for electronics, autos, and buildings Improving product mix through innovation Macro trends yield significant unmet needs Niche leadership positions drive adjacent application development New products fueling growth: Tritan, Saflex Q series, Eastman Visualize materials Leveraging scale and asset base to improve operating margins Strong mix improvement on flexible manufacturing assets Excess capacity and vertical integration create leverage Expect to improve operating margins by >250 bps 45 Expect annual sales revenue growth of 5%-7% and operating earnings growth of 9%-12% through 2017 (1) (1) Includes Eastman s percentage of sales revenue and earnings joint ventures and the projected sales revenue and earnings from the acquired CLC business

20 Advanced Materials Sectoral leverage combined with diversity of end markets and geographies enable sustainable growth Trailing 12 months sales revenue (4Q13 3Q14) 27% Transportation Sectoral leverage 65% 17% 15% Building & construction Consumer durables 36 % 29 % 30 % 6% Electronics 5 % Staples 31% 21% 10% Consumables Personal care/health & wellness 4% Other 46

21 Advanced Materials Specialty plastics: Leadership in niche markets with opportunities to accelerate growth Growth entitlement: 3%-5% 18% Medical Eastman business profile 40% Consumables 28% Durable goods 10% Electronics 4% Others Addressable market Clear plastics: ~$10 B Market leadership Innovation Advantaged cost position Drive global penetration of Tritan in durables and medical Maintain share in core copolyesters and upgrade mix Expand Tritan into new markets Sustain growth in displays via next-generation product development Leverage diverse assets to support mix upgrades Build scale in Tritan via doubling capacity 47

22 Advanced Materials: Specialty plastics Core copolyesters deliver solid earnings growth by maintaining market share and moving to higher ground Consistent volume growth Volume (Kgs) Sustain leadership in key profitable markets As higher value business grows, cede low value business Upgrade mix via product and application development Eastman Eastalite copolyester: A lighter material with cleaner cutting and superior thermoforming F 2015F 2016F 2017F General-purpose packaging, sheet, & film Specialty packaging Medical & Consumer Durables 48

23 Advanced Materials: Specialty plastics Tritan delivering high margin growth underpinned by strong market adoption Record market penetration Volume Record brand adoption Tritan Other major polymer launches Tritan copolyester delivered 30% CAGR from Early growth driven by BPA-free plastics and superior product performance Expect to complete a 16 KMT capacity expansion in 4Q14 Expect 60 KMT capacity expansion to be operational in early

24 Advanced Materials: Specialty plastics Positioned to sustain double-digit growth of Tritan by leveraging superior performance to drive market penetration Superior performance = material of choice Dishwasher safe Clarity Toughness BPA-free Growth potential Global share of target applications ~23% in 2014 growing to ~30% in 2017 Market/category penetration Global penetration Asia Pacific F 2015F 2016F 2017F 50

25 Advanced Materials: Specialty plastics Market penetration of mobile displays with Visualize material products expected to sustain earnings growth LCD innovation drivers Growth progress Improved optical clarity across viewing angles Higher resolution Thinner, higher-performing devices Reduced costs With Eastman Visualize materials Without Eastman sales revenue Continued growth in TVs and launching new products for mobile devices E 2015E 2016E 2017E TV & computers Mobile 51

26 Advanced Materials Interlayers: Innovation driving strong earnings growth beyond underlying market Growth entitlement: 4%-5% Addressable market PVB interlayer films: ~$3 B Eastman business profile 55% Transportation 75% OEM 25% Replacement 45% Architectural 80% Commercial 20% Residential Market leadership Innovation Advantaged cost position Extend leadership in auto market via growth of specialty products Sustain regional leadership in architectural as markets recover Next-generation acoustic product for auto lightweighting Next-generation heads up displays Leverage excess capacity and flexible manufacturing assets to support mix upgrade Improve Asia cost position with new PVB resin Malaysia plant 52

27 Advanced Materials: Interlayers Positioned to deliver solid earnings growth as architectural markets continue to recover and specialties grow in auto Architectural PVB film market Automotive PVB film market Asia Pacific Latin America North America Europe, Middle East and Africa Asia Pacific Latin America North America Europe, Middle East and Africa Volume (million square meters) Volume (million square meters) F 2015F 2016F 2017F F 2015F 2016F 2017F 53

28 Advanced Materials: Interlayers Saflex Q series will continue to drive mix upgrade as adoption of acoustic glass continues to gain momentum Innovation driver 1 Consumers want quiet cabin for comfort and voice recognition OEMs need weight reduction Broad OEM adoption of acoustic PVB 2 Eastman global acoustic growth opportunity Volume (million square meters) F 2015F 2016F 2017F 54

29 Advanced Materials Performance films: Established leader with global footprint and industry leading brands 67% Automotive 19% Architecture 14% Industrial Growth entitlement: 5%-8% Addressable market Branded films: ~$1.3 B Eastman business profile 38% N. America 49% Asia 13% ROW Market leadership Innovation Advantaged cost position Expand adoption of window films in North America auto Grow auto share in China through channel development Targeted growth in architectural Launch next-generation product with superior clarity and performance Expand product portfolio with improved paint protection Complete CLC acquisition Optimize assets and enhance operational improvements 55

30 Advanced Materials: Performance films Well positioned to accelerate growth and penetration in world s two largest car markets Growing our core U.S. China Expand window film category Increase penetration of Eastman brands 2nd largest new car market Largest number of cars on the road Largest new car market Rest of Market 75% Eastman 25% Rest of market 94% Eastman 6% Category penetration (1) Eastman share by volume (2) Category penetration (1) Eastman share by volume (2) 56 (1) Based on surveys conducted by Eastman (2) Eastman estimates 56

31 Advanced Materials: Performance films Acquisition of Commonwealth will strengthen position in key window and protective film markets Expands channel network Auto showrooms Branded film stores Car accessory shops Expands offerings Expands product portfolio and channel network, enabling penetration of diverse market Adds leading paint protection film and enhances offering in aftermarket accessories Asset optimization targeted to lower unit costs >5% Protection films ~$135 M market in the U.S. expected to grow at >15% 57

32 Advanced Materials Portfolio of differentiated materials expected to deliver 9%-12% earnings growth Specialty plastics Sustain GDP growth of core copolyesters Drive global market penetration of Tritan Accelerate growth of displays business by extending into mobile devices Interlayers Drive growth of acoustics and heads-up display in auto market Sustain regional leadership in architectural as markets recover Improve Asia cost position with new Malaysia PVB resin plant Performance films Integrate CLC acquisition Drive development of North America film markets Increase Eastman brand penetration in China auto Operating earnings ($ in millions) $290 $ F Core growth Market development & innovation Free cash flow deployment 9%-12% CAGR F 58