Adhesives & Plasticizers at a glance

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2 Adhesives & Plasticizers Adhesives & Plasticizers at a glance Trailing 12 months sales revenue (4Q13 3Q14) Adhesives 53% Plasticizers 47% Technology platforms Hydrocarbon resins Olefins Polyesters 60

3 Adhesives & Plasticizers Solid revenue and earnings growth from favorable competitive positions Sales revenue growth driven by strong trends in key markets Hygiene product growth in developing markets Continued switching to nonphthalate plasticizers Improving building & construction market Solid margins support earnings growth Lower operating costs Value-creating spreads generated in current competitive environment Solid volume growth at attractive margin levels Advantaged costs with modest capital requirements Leading cost positions and feedstock flexibility for adhesives resins Plasticizer growth supported by low-cost debottlenecks and shale gas-based integration China adhesives resins JV expected to have first quartile cost position Expect annual sales revenue growth of 3%-5% and operating earnings growth of 5%-7% through

4 Adhesives & Plasticizers Leading positions in geographically focused end markets Trailing 12 months sales revenue (4Q13 3Q14) 28% Building & construction Sectoral leverage 44% 8% 6% 1% Industrial chemicals & processing Consumer durables Energy, fuels, & water 55 % 30 % 9 % 1% Transportation 6 % Staples 56% 41% 10% Consumables Health & wellness 5% Other 62

5 Adhesives & Plasticizers Adhesives: Focusing on attractive end markets supported by advantaged cost position Growth entitlement: ~4% Global adhesives resins market:~$3 B Eastman business profile 65% Consumables Advantaged market position Innovation Hygiene applications in fastexpanding regions Olefin-based packaging systems Well positioned with marketleading customers New product offerings address customer quality needs Improved process efficiency 20% B&C 15% Other Advantaged cost position Geographically advantaged to serve customer base China JV expected to have firstquartile cost position 63

6 Adhesives & Plasticizers: Adhesives Hygiene growth driven by growing middle class and rising quality requirements Strong market growth drivers Disposable diaper potential by region (1) Consumer desire for odorless hygiene products drives global brand owners to specify hydrogenated hydrocarbon resins Increased disposable income and changing lifestyles in urban areas enable penetration of disposable diaper use in fast-growing economies (Billion units) Developed countries Mexico, South, and Eastern Europe, Middle China Rest of Asia India Africa Current Potential 64 Global hygiene volume projected to grow at 5%-7% (1) John R. Starr, Inc study. Developed countries include North America, Canada, Western Europe, and Japan

7 Adhesives & Plasticizers: Adhesives Several raw material markets affect resin availability and cost Rosins are a sizable part of the global market Global trend towards lighter olefins cracker feedstocks Global consumption of heavy feeds has declined by ~12% from 2008 to % Hydrocarbon resins Rosins 80% 60% 40% 20% 0% Heavy Light Rosin supply is large and naturally variable Rosin pricing affects resin pricing due to substitutability in certain applications Shift to lighter olefin feedstocks restricts availability of hydrocarbon raw materials for resins 65

8 Adhesives & Plasticizers: Adhesives Addressing variability to enable profitable growth Resins and rosins actions and capabilities: Feedstock flexibility provides advantage to meet demand in tight raw material environment Improved rosin market intelligence providing visibility to feedstock availability, pricing, and impact on industry capacity China JV resin plant expected to provide first quartile global cost position in fast-growing market Eastman-specific actions expected to yield $15 million of annual cost savings starting in second half

9 Adhesives & Plasticizers Plasticizers: Leadership position in preferred products supports strong growth rates Growth entitlement: ~4% Global plasticizers market: ~$14 B Eastman business profile 45% B&C 15% Medical 40% Consumables & other Advantaged market position Innovation Advantaged cost positions Continued switching to non-phthalate plasticizers North America and Europe regulatory requirements and customer preference driving change New products further enable customer switching Innovation enabling low-cost capacity additions Integration into large-scale upstream manufacturing assets and low-cost feedstocks Low delivered costs to target markets 67

10 Adhesives & Plasticizers: Plasticizers Leadership position in preferred products supports strong growth rates Room to grow Strong demand continues Asia & ROW NA & Europe Non-phthalate Phthalate 35% 65% Switching driven by regulations and customer preferences, mainly in North America and Europe Market still predominantly phthalate-based Customer on-shoring in North America is growing addressable market Industry non-phthalates plasticizer volume growth (NA & EU) (1) Eastman well-positioned to profitably grow Kgs Regulatory requirements have increased significantly since 2012 Major brand owners actively deselecting phthalates Uniquely positioned to serve target customers Integrated cost position and low-cost capacity additions enable growth at attractive margins (1) Source: Eastman estimates 68

11 Adhesives & Plasticizers: Plasticizers Advantaged cost position enables profitable growth in competitive environment Unit costs per MT North America-landed costs (2013 average) Eastman 168 vs. competitive products (1) Eastman North America average market price Eastman advantaged from integration into large-scale upstream manufacturing assets and low-cost feedstocks Value-creating spreads generated in current competitive environment Eastman low-cost capacity additions enable growth at still attractive margins Industry capacity (1) Source: Eastman estimates 69

12 Adhesives & Plasticizers Expect 5%-7% earnings growth driven by solid positions in attractive end markets and favorable costs Adhesives resins Hygiene market growing in fastexpanding regions Eastman has preferred offerings for differentiated packaging systems China JV expected to provide first quartile cost position in fast-growing market Plasticizers Operating earnings ($ in millions) ~$190 5%-7% CAGR Earnings growth driven by continued switching to non-phthalate plasticizers Integration into large-scale upstream assets and low-cost feedstocks Innovation enables low-cost capacity additions 2014F(1) Core growth Market development & innovation 2017F(1) (1) 2014 and 2017 estimated operating earnings and free cash flow includes unconsolidated JV operating earnings 70

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14 Fibers Well positioned for continued solid cash and earnings to fund corporate growth Stable sales revenue on relatively flat global demand Acetate tow margins support solid earnings Strong cash generation funds corporate growth Global acetate tow volume growth has flattened Sales revenue stability supported by leading position in industry with specialty-like customer requirements Large, vertically integrated Kingsport site provides strong cost position Cost improvements to further enhance earnings stability Wood pulp prices expected to moderate Continued high capacity utilization and solid margins drive strong cash generation Capacity investments complete Expect stable sales revenue and operating earnings through

15 Fibers Balanced dynamics of acetate tow volume Global acetate tow demand F (1) Thousand metric tons F China Rest of the world Europe Americas Short term impacts from country-level actions, such as: Chinese austerity measures Inventory management Midterm demand expected to be net-stable as growth drivers roughly offset growth barriers Growth drivers include a growing global population and increasing disposable income (1) Global Acetate Tow Manufacturers Associations; 2014 is Eastman estimate 73

16 Fibers Acetate tow market is served by large, long-established participants Acetate tow global capacities (1) Eastman 28% China capacity Competitor A Competitor B 26% 18% Competitor C 14% 14% (1) Morgan Stanley research, Eastman estimates; all China JV capacity totals for Eastman and competitors included in China capacity 74

17 Fibers Acetate tow market is structurally stable Global acetate tow capacity utilization F (1) 100% 90% 80% 70% 60% 50% 40% 30% Customer requirements are specialty in nature Acetate tow noticeable, essential component of end product Acetate tow small percentage of end-product cost Reliability and flexibility of supply are highly valued Technical support highly valued 20% 10% 0% F (1) F Global Acetate Manufacturers Association and Eastman estimates 75 75

18 Fibers Eastman has strong competitive position Integrated technology platforms in Kingsport, TN enable low-cost production of acetate tow Coal-based acetyl source Large-scale cellulose ester capacity Operational excellence globally ensures broad range of high quality products and reliable supply Acetate tow production located worldwide to serve customers Flexible production to enable broad range of product mix Highly effective and responsive technical support 76

19 Fibers Fibers: Consistent, long-term earnings base Operating earnings ($ in millions) $462 ~$480 $490 $450 Factors impacting earnings Expect stable acetate tow demand midterm Near-term impacts due to country-level actions in China Raw material cost fluctuation Potential capacity changes F 2017F 77

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21 Specialty Fluids & Intermediates Specialty Fluids & Intermediates at a glance Trailing 12 months sales revenue (4Q13 3Q14) Chemical intermediates 48% Other intermediates 39% Specialty fluids 13% Technology platforms Oxo Acetyl Benzene & derivatives Polyester 79

22 Specialty Fluids & Intermediates Leveraging special positions to grow in select markets while driving corporate asset utilization Growth from key chemical intermediates and specialty fluids Advantaged market positions in key intermediates Aviation turbine oil acquisition supports aviation fluids growth Market recovery enables growth of market leading Therminol heat transfer fluids Margin improvement by leveraging capacity and improved costs Integrated cost positions from olefin cracking operations Feedstock hedging reduces margin volatility Intermediates and fluids volume growth results in fixed cost leverage Asset optimization supports higher corporate earnings Flexible market outlets improve utilization Monetize excess commodity positions through mix improvement or other options Expect annual sales revenue growth of 2%-4% and operating earnings growth of 5%-7% through

23 Specialty Fluids & Intermediates Diverse end-markets, with special position focus in North America Trailing 12 months sales revenue (4Q13 3Q14) Sectoral leverage 71% 37% 18% 9% 4% 2% Industrial chemicals & processing Building & construction Energy, fuels, & water Transportation Electronics 69 % 10 % 1% Consumer durables 17 % Staples 24% 9% 8% Personal care/health & wellness Food, feed, & agriculture 4 % 7% Consumables Flat 1% 1% Tobacco 4% Other 81

24 Specialty Fluids & Intermediates Specialty fluids: Attractive businesses with solid underlying growth Core growth entitlement: GDP+ Eastman business profile Advantaged market position Therminol and Skydrol market leadership driven by sales, service, and product performance Good macro trends (e.g., air travel) 62% Industrial chemicals & processing 24% Energy 14% Transportation Innovation Product development supports market-leading position in high-performance turbine oil Emerging middle class Sustainability Advantaged cost positions Large-scale assets Highly efficient operations 82

25 Specialty Fluids & Intermediates: Specialty fluids Leveraging market leadership, product performance, and service model for growth in a recovering market Therminol heat transfer fluid is the strongest brand in a niche specialty market Broad and deep customer connect Broad product portfolio Total Lifecycle Care model creates demonstrable value Heat Transfer Fluids by Eastman Heat transfer fluid market demand recovery beginning in 2016 Growth in industrial demand is expected to absorb overbuild Next wave renewable energy projects Positioning for a strengthened value proposition and further growth Capacity Optimizing products across assets Market development 83

26 Specialty Fluids & Intermediates: Specialty fluids Expanding our presence in an attractive market Robust market with favorable growth profile and established customers Skydrol most recognized brand in aviation fluids market Acquired BP aviation turbine oil business expands fluids product portfolio in a growing, global market Strategic focus on high-performance turbine oils Acquisition expected to be accretive to 2015 earnings after acquisition and integration costs, with operating margins well above segment average Offers our customers a more complete suite of solutions 84

27 Specialty Fluids & Intermediates Chemical intermediates: A portfolio of special positions Growth entitlement: ~3% Eastman business profile Advantaged market position Strong market connect in solid, diverse, regional markets 25% Industrial chemicals & processing 21% B&C 18% Health & wellness Innovation Creative approaches to capacity expansions low cost, timed and sized to avoid overbuild 20% Other 16% Agriculture North America 71% Rest of world 29% Advantaged cost positions Scale + integration Low-cost raw material position 85

28 Specialty Fluids & Intermediates: Chemical intermediates Strong portfolio yields steady margins Historical operating margins (%) Customer demand that is diverse, low cost to serve, and values supplier reliability 25% 20% 15% Deep, strong market connect #1 market position in acetic anhydride, oxo alcohols, acetaldehyde in Americas 10% 5% Large-scale, highly integrated, and reliable manufacturing assets 0% F Capacity added in-line with market growth and at low cost 86

29 Specialty Fluids & Intermediates Other intermediates: Significant integrated corporate manufacturing assets Special position products sold by SFI Coal Ethane/Propane Paraxylene Acetic acid Ethylene/Propylene PTA Downstream processing Specialty derivatives in other segments Other Intermediates sales to drive utilization Manufacturing stream optimization serves diverse internal demands and external markets High utilization of integrated manufacturing streams improves downstream margins Providing competitive, low-cost intermediates to grow specialty derivatives 87

30 Specialty Fluids & Intermediates: Other intermediates Asset reliability provides fixed cost leverage and creates value for our customers Olefins stream: Texas cracker operations percentage production of stated capacity (1) Acetyls stream: Kingsport coal gasification percentage uptime (1) 100% 100% 95% 90% 75% 85% 80% F Advantaged debottlenecks providing returns >25% Utilizing change in U.S. feedstock cost position 50% Leader in coal gasification on-stream reliability Continue to increase capacity through technology projects and debottlenecks (1) Adjusted for planned downtime 88

31 Specialty Fluids & Intermediates: Other intermediates Corporate actions to reduce costs and volatility Key actions contributing to projected earnings improvement Key actions contributing to projected earnings improvement Impact to Eastman operating earnings ($) Feedstock mix improvement Capacity additions Enterprise PDH Continue to increase percentage of ethane feedstock relative to propane Low-cost capacity additions provide attractive returns Enterprise propane dehydrogenation (PDH) unit operational in 2016 Expected to provide ~1/3 of Eastman s propylene need Improved propylene market contract Potential sale of nonstrategic olefins position to reduce volatility would be earnings dilutive 89

32 Specialty Fluids & Intermediates Well-positioned to deliver 5%-7% earnings growth Specialty fluids Heat transfer fluid demand recovering with industrial expansion and alternative energy Market-leading position in highperformance turbine oil Chemical intermediates Special positions with solid margin profile Leading regional market positions Disciplined, smart approach to capacity addition Other intermediates Drive high utilization rates by serving diverse external markets Competitive, low-cost intermediates increase margins for specialty derivatives Operating earnings ($ in millions) $300 $ E Core growth Market development & innovation 5%-7% CAGR E 90